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Sunday, March 3

3rd Mar - Weekender: The World

 Longer thoughts on Europe, US and Asia.

Previously on MoreLiver’s:

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Brussels blog weekly roundupeuropp / LSE
Beppe Grillo shocks Berlin and Brussels, Putin’s Eurasian Union ambitions, and should bankers’ bonuses be capped?

The Euro’s House DividedProject Syndicate
The European Commission’s latest economic outlook paints a disheartening picture of a deep and persistent economic and social divide within the eurozone. Such a gulf within a monetary union cannot be sustained for very long.

Disastrous Predictions and Predictable DisastersKrugman / NYT
As Jonathan Portes points out, it is now more than two years since Olli Rehn declared that Europe’s recovery in the real economy has taken hold and is becoming self-sustaining.

Winners of a European banking
So far, discussions around Europe’s prospective banking union have focused only on the supervision of banks. This column argues that policymakers must also think about the resolution of banks in distress. While national governments confine themselves to the domestic effects of a banking failure, a European Resolution Authority could incorporate domestic and cross-border effects. A cost-benefit analysis of a hypothetical resolution of the top 25 European banks shows that the UK, Spain, Sweden, and the Netherlands would be the main winners.

Austerity needed to start, now we need a fiscal unionbruegel
The main driver of public debt increases in the last 4 years has been high public deficits, not austerity. Budget consolidation is necessary to avoid excessive increases in debt levels. The central question is about the best moment to pursue the adjustment. I provide a simple scenario analysis, which suggests that fiscal adjustment should be gradual in order to balance risks. Arguably, adjustment has been gradual in some though not all countries considered.  The simulations suggest that significant recessions are still ahead of us. This calls for a Marshall plan for Southern Europe and a more forceful use of restructuring and resolution tools. Contracts could be a good way of providing fiscal support in exchange for reforms.

Another look at Ricardian equivalence: the case of the European
Can European countries share their debts? This column argues that higher government indebtedness means larger household net financial assets. Thus, any pooling of European legacy debt would be considered unacceptable by countries with less government debt unless it also involved the pooling of households’ financial assets. Yet, this would be legally and technically insurmountable. The EU must face forced Ricardian equivalence: the countries with the largest legacy-debt burdens must reduce them by increasing the tax burden or, alternatively, reduce their budget expenditure.

A new direction for euro-area macro policiesbruegel
In this post I would like to assess the aggregate fiscal stance of the euro-area and the rationale for reconsidering austerity policies in fiscally sound (‘North’) and weak (‘South’) countries. I’ll also briefly discuss growth policies and monetary policy issues.

The sad record of fiscal austerityFT
Martin Wolf: The ECB could have prevented the panic. Tens of millions are now suffering unnecessarily

Biggest banking losses in Europe – graphic of the dayThomson Reuters
Bankia has been the focal point of Spain’s banking crisis since requesting a massive state bailout in mid-2012. Writedowns on rotten property assets led it to post Spain’s biggest ever corporate loss for 2012. Today’s graphic looks at some of the biggest banking losses in Europe.

France’s economy: Austerity stakesThe Economist

Sterling: Weaker still and weakerThe Economist

The Bank of England: Negative responseThe Economist
Why talk of an implausible policy is welcome

Britain to oppose EU bank bonus ruleseuobserver
Britain plans to oppose new EU bank bonus rules when finance ministers meet in Brussels next week.

Italy's election: Send in the clowns The Economist

The Economist vs Italy's "Clowns"ZH

Italy’s election: Ungovernability winsThe Economist

The Five Star Movement: The crickets come outThe Economist

Charlemagne: Rome’s bad spellThe Economist

What Paul Krugman got wrong about Italy’s economyQZ

ITB: What now for the euro?BBC (mp3)
Andrew Walker and his guests discuss the aftermath of the Italian election. What does the inconclusive result mean for the future of the eurozone? More integration or disintegration? And Colm O'Regan muses on whether comedians make good politicians. What lessons can we draw from the electoral success of a former comedian, Beppe Grillo? Perhaps all politicians would benefit from being able to tell a good joke

Want to Know What the Fed Is Reading? Read ThisWSJ

Bernanke’s Credibility on ‘Too Big to Fail’Economix / NYT

Premature Fed pullback could "short-circuit" recovery: BernankeReuters
Bernanke said on Friday that pulling back on aggressive policy measures too soon would pose a real risk of damaging a still-fragile recovery.

The Past and Future of Monetary Policy FED
Chairman Ben S. Bernanke at the Annual Monetary/Macroeconomics Conference:, sponsored by Federal Reserve Bank of San Francisco, San Francisco, Californiaslides (pdf)

Fifty Trades of Grey The Big Picture
JPMorgan’s Michael Cembalest walks us through the changes in his attitude toward the Fed, from the heady days of early 2009

The US economy: Waiting for the chop The Economist

If Not For That Pesky SequesterTim Duy’s Fed Watch

Wonkbook: Everything you need to know for today's sequesterWonkblog / WP

US fiscal policy – timeline of key eventsNordea
The US federal government has entered a new controversial phase of deficit cutting today, as the automatic across-the-board spending cuts begin slicing budgets.

The final sequester breakdown, from the Air Force to ZoosWonkblog / WP
Now that the sequester is in effect, the OMB has released its final account-by-account cut numbers. It released a similar report in September that was soon rendered out-of-date by the changes to the sequester passed as part of the fiscal cliff deal.

Sequester, Day 1CFR

Weekend Lecture: Economics of AbenomicsGlobal Macromonitor

Lee Kuan Yew’s ChinaProject Syndicate
On the question of how the evolving relationship between the US and China will influence the international order, there are few individuals whose observations receive equal attention on both sides of the Pacific. That is why the views of Singapore’s founding father, Lee Kuan Yew, deserve careful consideration.

Looming Challenge for JapanMarc to Market
1) Deflationary forces have tightened their grip on the world's third largest economy 2) The weekly portfolio flows that warn that the old recycling problem may be back.