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Saturday, September 29

29th Sep - Weekender: Europe, US, Asia

Stay tuned for more Weekender-madness soon!

Previously on MoreLiver’s
29.9. Weekender: Weekly Support (week in review, next one previewed)

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Dad, you were rightFT
The structural foundations of the eurozone project were indeed flawed and the current crisis is forcing leaders to correct them

Europe’s Austerity MadnessKrugman / NYT
Suddenly, Spain and Greece are being racked by strikes and huge demonstrations. The public in these countries is, in effect, saying that it has reached its limit: With unemployment at Great Depression levels and with erstwhile middle-class workers reduced to picking through garbage in search of food, austerity has already gone too far. And this means that there may not be a deal after all.

Federalism or death!Le Point / presseurop
For French philosopher Bernard-Henri Lévy, Europe has no option but advance towards the simple goal of political union. If not, the euro will die.

Wynne Godley and the Eurozone’s Eventual Sovereign CrisisEconoMonitor
Steve Keen dug up a 1992 post by Wynne Godley on the London Review of Books that offers sharp insight into the fundamental problems with the euro. “Godley’s remarks, no doubt seen as extremist when he uttered them,” Keen writes, “have proven to be utterly prophetic.”

What Remains: On the European UnionThe Nation
This essay is adapted from Mark Mazower’s Governing the World: The History of an Idea, coming this month from the Penguin Press.

BizDaily: The EU and DemocracyBBC (mp3)
European governments have become unpopular - exceptionally so in some cases - as they pursue austerity policies. Can we reconcile policies that face widespread opposition with democratic political principles? Indeed are democratic systems themselves in any kind of danger? Andrew Walker debates with Manuel de la Rocha, an economic analyst at the Fudación Alternativas in Madrid, Philippe Maniere, CEO of Footprint Consulting and author of a book 'Le pays où la vie est plus dure' which looks at how how France has to open up to globalisation and in London Dr Sabine Selchow from the London School of Economics. (25 min)

Greek Bad Loans Climb To Record 25% Of TotalZH

Dutch housing market declines, high household indebtedness, and rising unemployment could spark bankruptciesSober Look

External Imbalances in the Euro Area IMF
The paper examines the extent to which current account imbalances of euro area countries are related to intra-euro area factors and to external trade shocks. We argue that the traditional explanations for the rising imbalances are correct, but are incomplete. We uncover a large impact of declines in export competitiveness and asymmetric trade developments vis-à-vis the rest of the world –in particular vis-à-vis China, Central and Eastern Europe, and oil exporters—on the external balance of euro area debtor countries. While current account imbalances of euro area deficit countries vis-à-vis the rest of the world increased, they were financed mostly by intra-euro area capital inflows (in particular by the purchase of government and financial institutions’ securities, and cross-border interbank lending) which permitted external imbalances to grow over time.

How can financial crises be avoided in Sweden?BIS (pdf)
Karolina Ekholm, Deputy Governor of the Sveriges Riksbank, at a meeting at Handelsbanken, Stockholm, 27 September 2012.

Euro-zone inflation still stubbornly highNordea

France Piles €20 Billion in Tax Hikes on Businesses and WealthyMish’s
French budget relying too much on tax increases and economic growthNordea

Capital shortages, Basel III, and credit crunches Free exchange / The Economist
The European Banking Authority (EBA) released its second report monitoring compliance with Basel III regulations on September 27. The big finding is that the aggregate European banking sector needs about 338 billion euros of additional equity capital to comply with the rules. While firms have several more years to adjust their balance sheets and raise funds, this seems like a tall order, especially given what has happened to bank share prices:

European repo is on the risealphaville / FT
US money market funds are still cautious about building up exposure to European banks. However, according to Fitch’s latest Macro Credit Research report on Friday, they seem much more confident about building up exposure on secured terms.

Meet the World's Worst Central BankerThe Atlantic
Bundesbank chief Jens Weidmann gets basic facts wrong and thinks his colleagues are the devil.

The ECB’s Magic Wandbruegel
Criticism towards OTM program is missing the EFSF / ESM program requirement, which has to be accepted by all the member countries. Thus, ECB is not stepping over national parliamentary process.

ECB move weakens impact of ratings agencies for banksReuters
A little-noticed move by the ECB is likely to encourage Spain to apply for a bailout and lessen the impact of ratings agency downgrades on euro zone debt.

Accorinti and others v ECBalphaville / FT
Italian retail investors in Greek sovereign bonds filed a case way back in May to take the European Central Bank to court over its seniority in March’s debt restructuring. We don’t know what their chances are.

Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment , by IRC Expert Group of the ESCBECB (pdf)

ECB publishes the results of the Euro Money Market Survey 2012ECB
Publication Euro Money Market Survey 2012ECB (pdf)

Will Catalonia Become Independent Soon?Place du Luxembourg
My answer to the question is no. Eventually I think it will, but not soon. Here’s why:

Spanish Banks Beat ExpectationsWSJ
Bailout Costs Seen Less Than Feared As Audit Sets Stage for Europe Funds

A week of Spain-related excitement is not over just yetalphaville / FT
UBS strategist Justin Knight rightly points out “the areas of concern are now becoming numerous” and it’s making the question of when Spain might request aid increasingly complex.

Those Spanish stress test resultsalphaville / FT
Seven (many already nationalised) lenders, comprising 37 per cent of Spanish banks’ loan portfolios, failed and need more capital. Seven lenders passed. It’s almost €60bn, as initial estimates had suggested in June.

Spanish banks need €59bn Nordea

Spanish Bank Capital Shortfall As "Good" As ExpectedZH
The macroeconomic scenarios were laughable (stocks in 2013 -0.4%, -5% worst case. Home prices 2013 -2.8%, -4.5% worst case). As a reminder in August, the ECB provided Spanish banks with €412 billion in funding. That is 7 times as much as the adverse case liquidity needs.

How Oliver Wyman Manipulated The Spanish Bank Bailout AnalysisZH

Spain’s 2013 budget – graphic of the dayThomson Reuters

Spain loses capital in July for 13th monthReuters
Spain lost billions of euros in capital for a 13th consecutive month in July amid investor fears about its troubled and shrinking economy, although the rate of outflows slowed from the previous month.

U.S. Economic Trend UpdateThe Capital Spectator

Long-term real yields hit another record low, punishing US saversSober Look

The Data Don’t Support That The U.S. Bank Bailouts Were Better Than the Swedish Modelnaked capitalism

HSBC: Don’t say printing!alphaville / FT
The Global fixed income strategy team at HSBC *believe* they’ve come up with a non-consensus view on the effects of QEternity

The expectations bluffalphaville / FT
“What’s he thinking with QEternity? It’s so inflationary. AGHH!” But what if, as Dario Perkins at Lombard Street Research wonders this week, that’s exactly the reaction Bernanke was hoping for?

Winners and Losers Since QE3ZH
Silver and Gold are the big winners from the 9/12 (pre-Bernanke) close… While Treasuries did well, the real winner in bond-land was the MBS market…QE-sensitive stock sectors have been sold.

Attempting to measure what QE3 will and won’t doMacroScope / Reuters
Deutsche Bank economists have tried to quantify what effect QE3 is likely to have on the U.S. economy.

The Housing Market: For Real or Fakeout?Cognitive Concord

Housing Was at the Root of the Great Depression, TooView / BB

The Emerging Headache of QE3Caixin Online
The Fed's latest quantitative easing may cause problems for countries grappling with inflation and should prompt China to press ahead with economic reforms

World Should Expect A More Open China Under New LeadershipForbes
That mission is to turn China into a consumer society, rather than an export-driven one. It is also to turn China from a mere manufacturer and producer nation, to a creator nation. And in a close third, they will oversea a new China, one that is becoming more open to the world.

Why A Soft-Landing Is Bad For ChinaZH

HSBC/Markit China manufacturing PMI shows weakness in SeptemberASA

Shanghai composite and PMI’s new orders less inventory (Chart)ASA

China’s stock market and political cycles: coincidences to be ignoredASA

Coy Chinese elephant reveals ever slimming anklealphaville / FT

Japan PMI: Output and New Orders Contract FurtherMish’s

China New Export New Orders Decline At Fastest Pace in 42 Months; China's Precarious Rebalancing ActMish’s