Here are
the best links from my ending week’s posts. Next up the US Open post, come back later for the usual weekend specials.
Previously
on MoreLiver’s:
EUROPE
Philip
Aldrick: Tensions within the eurozone over how to resolve the debt crisis are
turning countries against each other and threatening to rip Europe apart, Italian Prime Minister Mario
Monti has warned.
Euro elites should say if they could ever view single currency as a
failure – The
Telegraph
Roger
Bootle: What conditions could convince
the euro elites that the euro was a failure and if they can imagine such
conditions, then what stops them from concluding that they exist now?
A fragmented territory controlled by local
potentates with a weak central government that is not taken seriously by the
rest of the world: the EU now resembles Japan in 1860s, argues a
Swedish journalist. But the construction of a real European political power
could prove to be counter-productive.
Eurogeddon: The first two and a half years of the euro crisis – Thomson
Reuters
A new e-book from Reuters Breakingviews edited
by Hugo Dixon. Find out which countries were fit for the single monetary policy, if
it might be better to abandon the single currency, whether the euro zone can
solve its troubles.
Also full
pdf
September Will be a Doozy Again this Year – Economist
Meg
For the second September in a row, developments
in the EZ have the potential to be highly dramatic, and this time not just in
the weaker, peripheral countries.
EUROPE: PIIGS
Citigroup’s
long note. Spain and Italy require 700bn for a two-year
program.
Instead, the official sector, which holds about
three quarters of Greek debt, needs to participate in some fashion IF Greece's debt profile is
going to change substantially. And the IMF appears to be reaching the point
that Greece's debt profile must change substantially IF it is to continue to
participate in assistance programs.
EUROPE: GERMANY
Morning Briefing: The ties that bind – BNY
Mellon
Germany is inextricably linked to those whom it would have linger on the
cliff-edge
Investors may not have liked what European
Central Bank head Mario Draghi had to say on Thursday, but it was the clearest
indication yet that a plan is finally taking shape to reduce borrowing costs
for Spain and Italy. Germany remains wary, though, and commentators say the outcome could
be disastrous.
In 1975 the
German central bank was buying government bonds because of low growth. So why
does the Bundesbank oppose it now?
Tempted, Angela? – The Economist
A controlled break-up of the euro would be
hugely risky and expensive. So is waiting for a solution to turn up
Breaking up the euro area: The Merkel memorandum – The Economist
Angela Merkel, the German chancellor—and also,
in effect, the euro area’s boss—has always insisted that she wants to preserve
the euro area in its current form.
EUROPE: ECB
Ambrose
Evans-Pritchard: So we enter the
treacherous market month of August with Europe in limbo. The actors wait upon each
other. World finance held hostage to a fiendishly complicated game of
diplomatic chess.
Draghi breaks the ultimate euro taboo – Gavyn
Davies / FT
Mr Draghi could simply have repeated the old
line that the operation of the Target 2 system is enough to ensure that the
euro can never fall apart. By admitting the reality that the system is no
longer 100 per cent credible in the eyes of the market, the ECB president has
invited investors to ask whether his proposed interventions are powerful enough
to deal with problem he has raised.
Mario Draghi Cannot Save the Euro – View
/ BB
A broader question is what, if anything, Draghi might achieve with a looser monetary policy. The euro area has many problems, including a lack of competitiveness in the periphery, chronically poor growth in countries such as Portugal and Italy, deeply damaged public finances in Greece and Spain, and a labor force that’s not mobile enough to go where the jobs are. Which of these could be resolved by reducing interest rates across the board?
A broader question is what, if anything, Draghi might achieve with a looser monetary policy. The euro area has many problems, including a lack of competitiveness in the periphery, chronically poor growth in countries such as Portugal and Italy, deeply damaged public finances in Greece and Spain, and a labor force that’s not mobile enough to go where the jobs are. Which of these could be resolved by reducing interest rates across the board?
The above measures if implemented (likely), as
proposed by Draghi, are bullish. Yes, there are risks, but…Indeed, I could
argue that Draghi’s plan is even more important that his previous LTRO
programme on behalf of European banks.
Draghi’s plan
– The Economist
A lot of things have to go right for the ECB’s
bond-buying plan to succeed
EUROPE: BANKS
All roads point to September, once the German
constitutional court has presumably cleared the way for the bloc’s ESM bailout
fund to come into being. At some point after that, Spain could ask for help
from the fund to lower its borrowing costs rather than seek a sovereign bailout
and, from what Draghi has said, the ECB could pile in behind. If that joint
action turned the tide in Madrid’s favour it’s possible that Italy, which after all is
running a primary surplus, would be taken out of the firing line.
Segmentation of the Euro interbank market is
significant
Fitch: As a percentage of funded banking assets,
encumbrance is highest in parts of the peripheral eurozone, Scandinavia and specialist property lenders.
Across a sample of major European banks, Fitch estimates median encumbrance to
be around 28% of funded banking assets.
media request following the ECB press
conference on 2 August 2012 (4 pages)
OTHER
Wall Street used to bet on companies that build
things. Now it just bets on technologies that make faster and faster trades.
Things that make you go hmmm – Grant
Williams / ZH
Excellent
newsletter, plenty on ECB (or download the pdf)