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Friday, May 3

3rd May - Weekender: Best of the Week

The best articles from the ending week. Last week’s ‘best’ here.


Special: ECB Watch MoreLiver’s Daily

Margaret Thatcher: European.A Fistful of Euros
So why isn’t this more obvious? I think the answer is that the European Union has not turned out to be the nice alternative to Thatcherism it was sold as in the 1990s. Ask a Spaniard. No, go ahead.

German Poll Shows Merkel Losing MajorityZH
Given that the mainstream parties have excluded a coalition with the Left party, such results would allow only coalitions of Merkel's CDU/CSU with the SPD or the Greens. This raises the question of whether Merkel becomes more hard-nosed in her treatment of European bailouts

The great Spanish nation can end its crucifixion at will by leaving EMUThe Telegraph
The course of events demands a lifting of the taboo surrounding the dissolution of the euro zone. If solidarity cannot be achieved through a progressive reform of Europe’s economic institutions, then perhaps it is time to consider taking them apart. Perhaps the only way to save the Union is to ditch the euro.

Spain Update: Running from the Bulls?Marc to Market
There have been three recent developments in Spain: the new record high unemployment, the earnings reports of several large banks, and the government's new fiscal forecasts and strategy. 

A European QE Disconnect to Come?PragCap
Japan’s Yen strategy is inherently zero-sum.  That is, if the lower Yen boosts Japanese growth then it’s essentially stealing from someone else’s growth. We’ve seen this most clearly in Europe in recent years where the weak Euro has benefited Germany and not the periphery nations (who are all current account deficit nations).  So it’s interesting to note that the decline in the Yen is hurting…Germany!

Research Bulletin No. 18ECB (pdf)
Heterogeneous transmission mechanism and the credit channel in the euro area * Firms’ adjustment during times of crisis * Macroeconomic effets of large-scale asset purchase programs

Insight: Why did Cypriot banks keep buying Greek bonds?Reuters
Cypriots want to know who decided to plough their savings into the doomed public accounts of their bigger neighbor, Greece, and why. But answers are proving elusive, not helped by the mysterious wiping of data at Bank of Cyprus.


Special: FED WatchMoreLiver’s Daily

This Is What Passes For A Good Earnings Season In The "New Normal"ZH
While one can easily game expectations and quiet cut forecasts the night before earnings just to "allow" the company to beat them easier, one thing that can not be fudged are trends in time, in either revenue or EPS.
Global austerity: a primerThe World / FT
Austerity appears to be an increasingly dirty word in Europe. The past week alone has seen European Commission President José Manuel Barroso, Bill Gross of Pimco and Italy’s new prime minister Enrico Letta calling for an easing of austerity. Spain’s surpassing of the 6m unemployed mark on Thursday added fuel to the debate. But even in Germany, the austerity police of the eurozone, cracks are beginning to show ahead of the elections with the emergence of an anti-euro party.

The era of austerity is over (for now)Wonkblog / WP
The era of austerity began on February 5, 2010. That was when the finance ministers and central bankers of the seven major industrialized powers flew to the remote Arctic village of Iqaluit, Canada. That meeting of the Group of Seven came at a time when the extraordinary financial rescues and fiscal and monetary stimulus of the crisis seemed to have done their job and the world economy was on the mend.

Investment Outlook May 2013: There Will Be HaircutsPIMCO
Yet if there are no spending cuts or asset price write-offs, then it’s hard to see how deficits and outstanding debt as a percentage of GDP can ever be reduced…These haircuts are hidden forms of taxes that reduce an investor’s purchasing power as manipulated interest rates lag inflation. In the process, governments and their central banks theoretically reduce real debt levels as well as the excessive liabilities of levered corporations and households. But they represent a hidden wealth transfer that belies the vaunted phrase “good as money.”

Monetary stimulus vs financial stability is a false trade-offWorthwhile
There's an idea floating around out there that I fear may be influential. And that idea is horribly wrong. Which makes it dangerous. And I want to try to kill it. But macro is hard. And it's not easy to explain clearly and simply. I can only try.

Austerity is not the only answer to a debt problemFT
Policy makers must use all the tools available, write Kenneth Rogoff and Carmen Reinhart (short summary here)

Undoing central bank balance sheet expansionsFatasmihov
While it might not be an example for all advanced economies it is useful to point out that some central banks, such as Japan and Sweden have seen large declines in the size of their balance sheet in recent episodes (Japan in the mid-2000a, Sweden in the Fall of 2010) without any disturbance to the financial sector or interest rates.

Weekend Developments: Signal and NoiseMarc to Market
Five talking points: 1) leaked French Socialist draft document that was critical of Germany and the UK 2) Bundesbank's letter to the German Constitutional Court objecting to the ECB's Outright Market Transactions – no news or influence, 3) The Iceland election 4) Formation of a new Italian government 5) An Austrian weekly claims that national central bank estimates that to wind down a nationalized bank by the end of this year as the EU is demanding would cost the government 14 bln euros or ~4.5% of GDP.

Investors earn handsome paychecks by handling Buffett's businessOmaha
Interviews of people working for ‘The Sage’.

EU puuhaa jo liittovaltiota – Suomi seuraa tuppisuunaJan Hurri / TalSa
Kriisi ei pääty eikä euro pelastu ennen kuin euromaat muuttavat rahaliittonsa liittovaltioksi. Tätä "Bryssel" ja "markkinat" hokevat vuoron perään. Ne hyötyisivät tulonsiirto- ja velkaunionista – mutta eivät osallistuisi kustannuksiin. Suomi taas kuuluisi maksajiin – mutta seuraa tuppisuuna sivusta.

Vappupuhe MoreLiver’s Daily

Dramaattinen käänne uusissa asuntolainoissaTE
Uusien asuntolainojen määrä on kääntynyt reippaaseen laskuun, paljastaa OP-Pohjolan maanantaina julkistama osavuosikatsaus.

Suomalaisen työn hinnan loppusuoraPauli Vahtera / IL Blogit

Joko Saksa sai eurokriisistä tarpeekseen?Jan Hurri / TalSa
Saksa alkaa saada tarpeekseen kriisitoimien yhä suuremmista riskeistä ja kustannuksista. Tämä voi enteillä kriisin uutta kärjistymistä tai äärimmillään jopa nykyeuron loppua. Mitan täyttyminen on syytä ottaa vakavasti, sillä saksalaisen eurokritiikin uusi aalto on lähtöisin virallisen Saksan ytimestä.

Kattamattomat vastuut EuroopassaHenri Myllyniemi / Piksu
Näin vapunpäivänä lienee hyvä kirjoittaa muutama sananen aina yhtä takuupiristävällä tavallani. Kun me eurooppalaiset kansat täydessä harmoniassa olemme päättäneet liittovaltioitua ja keskittää talouspolitiikan Brysselin erehtymättömille henkilöille, niin voisi olla ihan hyvä katsastella yhteisvastuusta aiheutuvia numeraaleja.

Pohjoismaisen hyvinvointimallin hintalappu Euroopan tasollaHenri Myllyniemi / US Puheenvuoro
Suomella on sangen poikkeuksellinen asema eurovaltioiden saralla. Suomella on toki julkista velkaa (valtio ja kunnat), mutta valtiovelan määrä on pienempi kuin Suomen tekemien sijoitustn määrä. Suomen nettopositio on velan suhteen negatiivinen. Voimme jonkinlaisella varmuudella sanoa, että tämä nykyinenkin kriisi päättyy joskus ja taloustilanteessa koittaa paremmat ajat.