Google Analytics

Saturday, March 16

16th Mar - Weekender: The World

This week's 'The World' has plenty on the bailout of Cyprus and IMF's latest assesment of the EU. Interesting compromise on Cyprus: small haircut on deposits, with bank stocks offered in return to the depositors. 

Personally I believe a simple gift of EUR 5bn of free money would have been a better choice. The lending of 10bn raises the debt/GDP, lowers the growth prospects, forces austerity and has the danger of creating a negative spiral that could turn the island into a second Greece: a continuous source of headaches and disappointment to the EU. The haircut is small and Rehn states this is a one-off. Whether depositors in e.g. Spain believe this remains to be seen. If not, the bank jog could start again. That could push Spain to eventually apply  for the ECB's OMT-program, and perhaps that is what the Brussels and ECB actually want.

Previously on MoreLiver’s:

Follow ‘MoreLiver’ on Twitter or Facebook

Brussels blog round-up for 9 – 15 Marcheuropp / LSE
The European Parliament ponders absinthe, Germany set for a balanced budget, and is the Netherlands heading for an EU referendum?

Germany’s prudence is Europe’s poisonThe Telegraph
The spending cuts planned in Berlin by finance minister Wolfgang Schäuble to balance the budget a year early will make it impossible for others to grow

Economic Crisis Risk For EuroWSJ
The euro-zone debt crisis may be over, but the euro itself is still at risk from the economic crisis that is being left behind.

Delusions at the European CommissionKrugman / NYT
They have made a desert and called it a "delicate balance".

Germany’s labour market: WunderreformThe Economist

European bank bondholders: How many one-offs make a trend?The Economist

Criminals exploiting EU travel freedoms, Dutch data showseuobserver

Draghi lectures euro zone leaders about labor costsReuters
ECB President Mario Draghi gave EU leaders a crash course in macroeconomics late on Thursday, emphasizing his concerns about low productivity and high labor costs hurting the euro zone's prospects, officials said (presentation from ECB).

ECB bond-buying may be moving from deterrence to stand-byReuters
One of the biggest questions facing financial markets is the will-they or won't-they hovering over the European Central Bank's bond-buy program.

IMF tells EU to act boldly and fix the banksReuters
The EU must be bold in putting its banks on a stabler footing, starting with a tougher health check for lenders this year, the IMF said.

If it’s not labeled, did it really happen?A Fistful of Euros
It blacks out two of the labels on the chart. But the imperfect blackout allows through various simple means to determine that the two dates that dare not speak their name are that for the Greek debt exchange and the Outright Monetary Transactions announcement.

IMF Assessment of Financial Stability in EuropeIMF
Much achieved to address the crisis but vulnerabilities remain and intensified efforts needed

EU Financial System Stability Assessment 2013 – IMF
European Banking Authority – IMF
Cross-Border Issues, Central Counterparties, and Central Securities Depositories – IMF
European Insurance and Occupational Pensions Authority Assessment – IMF
European Securities and Markets Authority – IMF
Progress with Bank Restructuring and Resolution in EuropeIMF
Financial Sector Stability Assessment – IMF
Stress Testing of Banks – IMF

Cyprus: Make a model of it, not a messThe Economist

Bailing out Cyprus: Slow, slow, quickThe Economist

Merkel Demands Cyprus Action Amid Clashes on HaircutsBB
Merkel said Europe must act to support Cyprus as euro-area officials scrambled to overcome differences on losses for investors and the role of the IMF in a bid to end nine months of bailout talks.

Cypriot bank deposits hit in €10bn bailout dealBrussels blog / FT

IMF Statement on Cyprus at the Eurogroup MeetingIMF

Euro Area Takes Aim at Depositors in Cyprus BailoutBB
Euro-area finance ministers agreed to tax bank deposits in Cyprus in an unprecedented measure to forge a 10 billion-euro ($13 billion) rescue plan. Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros -- the ceiling for European Union account insurance -- and 9.9 percent above that.

Savers forced to bear costs in Cyprus bailoutReuters
The euro zone struck a deal on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion), but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risks of a wider bank run.

Cyprus Says Deposit Levy to Involve Bank-Share CompensationBB
Cypriot Finance Minister Michael Sarris said a planned levy on bank accounts in the country to help shore up its finances will involve compensation for depositors in the form of shares in the financial institutions.

Rehn Rules Out Future ‘Stability Fees’ on Euro Bank DepositorsBB
European Union Economic and Monetary Commissioner Olli Rehn said there won’t be a repeat of the tax on bank deposits that was imposed as part of Cyprus’s aid program. Asked whether a future EU-mandated bank levy can be categorically ruled out, Rehn said that “it can and there is no concrete case where it should be considered.”

Italy’s Electoral Impasse: Q&AWSJ
Christopher Emsden provides a Q&A on the steps required to form a fresh government in Italy.

Italian Austerity in the Polls: The ResultsEconoMonitor
In my previous post before Italy’s general elections, I argued that the economic legacy of the Monti government was problematic, not so much in reason of the doses of austerity inflicted on the country as to the poor deliverables regarding the promises of “more equity and growth” and a reasonable perspective of recovery. Now we have seen the astonishing response of voters. But was it really unpredictable?

Green Facism: Beppe Grillo Is the Most Dangerous Man in EuropeSpiegel
Beppe Grillo, leader of the populist Five Star Movement in Italy, prides himself on his ridicule of the parliamentary system. Yet while his anti-establishment rhetoric sounds appealing, at heart it's actually anti-democratic. And very similar to that of an infamous Italian from the past.

Unpleasantness in Belgium, Silence in IrelandGolem XIV
Back in 2010 I wrote an article about the way German banks used Ireland as a dark pit for doing deals they could not do elsewhere. It was called Ireland was Germany’s Off-shore Tart. It seems she was Belgium’s tart too.

Euro Finance Ministers Grant Ireland, Portugal Eased Debt TermsBB
Euro-area finance ministers agreed to extend maturities on rescue loans to Ireland and Portugal, easing the terms on two recipients of European bailout aid in a show of support for their commitment to austerity.

Financial Repression For DummiesView from the Blueridge

The Economist’s StoneProject Syndicate
This year marks the 100th anniversaries of two distinct institutional innovations in American economic policy: the introduction of the federal income tax and the establishment of the Federal Reserve. They are worth commemorating, if only because we are at risk of forgetting what we have learned since then.

Fed to signal no let-up in easing yetNordea (pdf)
We expect the Fed’s policy and forward guidance to remain unchanged after next week’s two-day FOMC meeting, which concludes on Wednesday (summary).

  Friday data

CPI +0.7% , Core CPI 0.2%, NY Fed Manufacturing indicates expansion – Calculated Risk
Feb Inflation Rises By Most In One Year; Empire Fed Misses– ZH
Consumer Sentiment Misses By Most Ever, Slumps To 15 Month Lows – ZH
Preliminary March Consumer Sentiment declines to 71.8 – Calculated Risk
Fed: Industrial Production increased 0.7% in February – Calculated Risk

FT column: Prepare for endgame in North KoreaFT

Can China Get Tough on North Korea?The Diplomat

BizDaily: Challenges for ChinaBBC (mp3)

Does China need to change its business model to compete in the global economy? The BBC's Ritula Shah visits Shenzhen, China's first Special Economic Zone. George Magnus from UBS and Dr Qian Lu of the Economist Intelligence Unit discuss the rise of the Chinese middle class. And Tim Harford tells the story of Bill Phillips, known as the Indiana Jones of Economics.
The Deeply Odd Lives of Chinese BureaucratsWSJ
As a bureaucrat, author Wang Xiaofang says he came across a rogue’s gallery of real-life characters. As a writer, he figured out that you can talk about Chinese officialdom – as long as you make it fiction.

Japan: Front-Runner Of Outright MonetizationZH
Ryutaro Kono of BNP Paribas: Japan: The challenges facing a Kuroda-led BoJ