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Friday, April 12

12th Apr - Weekender: Best of the Week

Best of the ending week, previous ‘Best’ here.

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Who’s the eurozone’s poorest, really?alphaville / FT

Leaked eurogroup paper: trouble ahead for Portugal?Brussels blog / FT
Although Cyprus has pushed its way back into the news, the main event at Friday’s meeting of eurozone finance ministers in Dublin is expected to be a decision on whether to give Ireland and Portugal more time to pay off their EU bailout loans.

EU ministers to tackle Cyprus fallout, banking union at Dublin talksReuters
Fallout from the messy bailout of Cyprus will top the agenda of a two-day EU finance ministers meeting in Dublin beginning on Friday, with focus also on growing German reluctance over euro zone banking reform.

EU mulls bank law to impose losses on depositorsReuters
European Union ministers will consider a proposal this week to impose losses on interbank deposits of lenders in dire financial trouble as they shape a draft EU law introducing powers that would also penalize those with big savings.

The ECB’s non-standard monetary policy measures: the role of institutional factors and financial structureECB (pdf)
Working paper no. 1528 by Philippine Cour-Thimann and Bernhard Winkler

Catching up on the LTRO flowalphaville / FT
Barclays’ forecast puts the breach of the ‘psychological level’ of €200bn, below which Eonia may start to be sensitive to changes in liquidity conditions, in Q3/Q4 if the pace of weekly repayments remains at around €6bn (the average weekly payback, excluding the two big repayments on the first day of the exit option window for each operation).

Liquidity regulation and monetary policy implementationECB (pdf)

Statistics Pocket Book, April 2013ECB (pdf)

Monthly Bulletin, April 2013ECB (pdf)

Germany’s ChoiceProject Syndicate
George Soros: Contrary to popular opinion in Germany and elsewhere, the euro crisis – for which Germany is disproportionately responsible, owing to its dominant position – is far from over. Despite the complex political and economic origins of Europe’s current malaise, the solution can be summed up in one word: Eurobonds.

Kohl confesses to euro's undemocratic beginningseuobserver
Former German Chancellor Helmut Kohl admitted he would never have won a referendum on the adoption of the euro in his country and said he acted "like a dictator" to see the common currency introduced.

Eurointelligence Founder Wolfgang Münchau, Once a Staunch Euro Supporter, Now Welcomes the Anti-Euro Party "Alternative for Germany"Mish’s

It's not a question of if, but only when Merkel grasps the nettle of eurozone debt mutualisationThe Telegraph

Eurozone Math; One Size Fits Germany; Door Number Two Mish’s

Spain, and the threat from Portugal and CyprusThe World / FT
Gideon Rachman: The refusal of the Portuguese courts to authorise the full version of the latest round of austerity cuts will be watched closely in neighbouring Spain – which is, of course, a bigger and more systemically important economy. The Spanish fear that, economically and politically, Portugal offers a vision of their future.

The Commission on Portugal: Is This for Real?fsaraceno
To summarize, the Commission is happy that the Portuguese government chose to ignore a ruling of its constitutional court (“welcomes that…”); it threatens to cut funding if the Portuguese government does not follow its prescriptions (“it is a precondition for a decision…”); it is in a state of denial on confidence (“the growing investor confidence…”); it recommends that democratic discussion does not take place (“it is essential that key political institutions are united in their support…”) This goes beyond my wildest thoughts.

Portugal must stick to agreed budget targets to get loan extension -EU execReuters
Portugal must stick to targets agreed with international lenders if it wants more time to repay bailout loans, the European Commission said in a statement on Sunday.

TMM Translate the Euro Commission Statement on PortugalMacro Man

Portugal must stick to agreed budget targets to get loan extension -EU execReuters
Portugal must stick to targets agreed with international lenders if it wants more time to repay bailout loans, the European Commission said in a statement on Sunday.

Cyprus: Of Course It’s A TemplatePawel Morski

Who’s next in line in the eurozone crisis?Open Europe
Portugal and Slovenia are the prime candidates (full pdf)

Of political power and dual-currencies in Cyprus alphaville / FT
Some post-Cyprus thoughts from Citi’s Buiter et al… first on rolling capital controls and the chances of a new Cypriot pound being forced into existence (full paper)

Cyprus: Oddities in leaked bailout documentsBrussels blog / FT

Report on macroeconomic imbalances EC (pdf)
Malta is safe, at least :D

Euro or Drachma, or Both? A Temporary Parallel Currency ConceptEconoMonitor
Only our suggestion of a parallel currency combines the advantages inherent in the internal devaluation and exit policies: it provides instant devaluation while staying within the euro community with a defined schedule for full reintroduction of the euro as the sole legal tender

BizDaily: The Euro sick listBBC (mp3)
In Business Daily, with Cyprus sorted for now, who's next on the euro-sick-list? Spain and Slovenia are currently in the doctor's waiting room - both with chronic banking problems. Will this ever end? We ask the European Commissioner, Ollie Rehn. And we meet the man who says he's got all the numbers you need to know to understand China.

6 things you need to know about Slovenia, perhaps the next euro-zone dominoMarketWatch

Slovenia, Spain Warned of Excessive Economy Imbalances by EUBB
The European Commission warned of “excessive” risks to the economic health of Slovenia and Spain, calling on both governments to take urgent action to stem the spread of the euro crisis.

Which Dominoes Are Next to Fall in Europe?of two minds
Correspondent David P. provides a list based on a simple but powerful precept: follow the smart money… Slovenia, Portugal, Malta, and then Spain. Though Spain and Italy are considered core E.U. nations, we should probably differentiate between political and financial cores and peripheries. Should a self-reinforcing crisis of liquidity, solvency and loss of trust gather momentum, Italy's debt situation could reach critical mass, regardless of its political status as a core nation. Similar political and financial crises could arise in The Netherlands and France, too, though these crises will probably not be triggered by an exit of core-EU mobile capital.

Handicapping Labor DataTim Duy’s Fed Watch
I had expected that the data flow would argue for the Fed to postpone tapering off QE purchases until late this year.  The Fed seems to have a different view, thinking that the data flow argues for ending QE by the end of this year.  My expectation is that the Fed is being overly optimistic and will find that summer is too early to being tapering off QE.  That seems to be the message from the bond market as well; yields aren't exactly soaring.

Minutes Signal End to QE Tim Duy’s Fed Watch
The Fed seems content with the current pace of activity.  Content enough to believe they can pull the plug on quantitative easing this year.  I remain concerned that ending QE will slow forward momentum, thus the Fed is running the risk that they the economy will not achieve sufficient velocity to escape the zero bound. The actual timing is still data dependent, but I am wondering if we should change our framework from "how good does the data need to be end QE" to "how bad does the data need to be to continue QE?" 

Front-Running Markets Get Carried Away By Bank of JapanWSJ
“For every Japanese investor seeking yield, there is a foreign one searching for returns from Japanese equities”

Mr Soros Trumps Mrs WatanabeZH
The bulk of JPY selling pressure has come during non-Tokyo trading hours,

Interview with George SorosSCMP
Complete transcript of an interview with George Soros in Hong Kong on April 4, 2013.

Bail-In vs. BailoutDavid Kotok / The BigPicture

(Fun) Post BoJ New World QuizMacro Man

Tämähän on jo kuin teuraskarjan rauhoitteluaJan Hurri / TalSa
Europäättäjät hokevat, että Kyproksen pankkien saneeraus on poikkeus eikä kriisitoimien uusi malli. Hokemat ovat kuin teuraskarjan rauhoittelua. Kyproksen saneeraus sujuu prikulleen niin kuin valmisteilla olevan EU-direktiivin mukaan pitääkin. Rauhoittelu vihjaa, että päättäjät pelkäävät toden teolla uutta pankkipaniikkia.

Pysyvätkö keskuspankkien raharuiskut hallinnassa?Jan Hurri / TalSa
Japanin keskuspankki lisää raharuiskujensa tehoa päästäkseen maata vaivanneesta deflaatiosta ja saadakseen inflaatiota tilalle. Onnistuuko rahakoe ja pysyykö se hallinnassa, selviää aikanaan. Nyt tiedossa on vain, että liikkeelle lähtee rutosti uunituoretta rahaa – ja se, että aiemmin tällaisia raharuiskuja on ollut perin vaikea sammuttaa.

Puuttuva pätkä putkeaHannu Visti
Esitän tässä suomalaisen julkisen sektorin ongelman, mutta asia on yleistettävissä valtaosaan muistakin länsimaista. Esityksen taiteellinen taso ei päätä huimaa, mutta emme anna sen häiritä.

Säkillä valoa Kreikan pimeyteenJanne Saarikko / Navi Group