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Friday, June 7

7th Jun - Weekender: Best of the Week

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

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Austerity, like a B-movie monster, will keep coming backFT
Wolfgang Münchau: Despite its debt crisis, the eurozone behaves like a regular large, closed economy. The trouble is that it is run, and often analysed, as no more than the sum of its parts. The tragic error of the eurozone’s policy makers is to repeat this fallacy of composition again and again. It is the same with austerity. That, too, will return.

The Macroeconomics of European DisunionKrugman / NYT
Every once in a while it’s worth backing up and thinking about the fundamental craziness of aggregate European policy.

Is the euro a foreign currency to member states?
Spain and Britain have similar debt problems. So why does Spain face far higher sovereign-interest rates? Is this only about Eurozone membership? This column argues that Eurozone membership does not fully explain this discrepancy and that, in fact, it is central banks which cannot provide an effective backstop to national debt that are the root cause of high sovereign-interest rates. Eurozone members are more vulnerable to debt crises to the extent that the ECB cannot count on the joint support of national fiscal authorities.

The urgent need to recapitalise Europe’s
Europe has been postponing the recapitalisation of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalisation, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.

The euro: An inconvenient truthTradingFloor
Juhani Huopainen: Political parties that still believe that the euro is a success story, that Greece will pay its debts and that the burden will have to be shared, are not credible or rational. Honesty instead would be a good foundation for co-operation and a new era.

Yes, Europe really is in the throes of austerityWonkblog / WP

Regional transfers in Europe: Do we need fewer of them or different ones?
The EU encourages regional cohesion through transfers for structural changes and development. This column presents new research suggesting that some poorer countries don't benefit as well as we might expect. This is likely to be because of worse technological and institutional absorptive capacity. Structural transfers need reform, and policymakers would do well to focus on recipients’ absorptive capacity.

Ignored Many Flawsalphaville / FT
So, the IMF (effectively) wishes to apologise to all concerned for that little thing where it turned into Dominique Strauss-Kahn’s presidential election campaign a few years back. Sorry if a country got broken along the way:

IMF Concedes It Made Mistakes on GreeceWSJ
Fund Says It Bent Rules on Debt Relief, but Argues That Bought Time for Europe to Limit the Fallout

Ignored Many Flaws — the reportalphaville / FT
Click for the IMF’s “ex post evaluation” of its role in the Greek bailout. Its mea culpa. And if you thought we were being harsh here, parts of the real thing are excoriating.

Abenomics Won’t Be ’Magic Bullet’ for Japan, Says Johnson of MITBB

The Yen’s Abenomics Ride Seems OverWSJ
Japan’s stock market, which had staged the largest six-month rally in its history, started to collapse two weeks ago, with the Nikkei index losing nearly 20% of its value from the peak since then. And now it looks like that slide in the yen, which has been so key to the success of Mr. Abe’s policies, may also now be over.

Has BIS Found the Solution to Too Big to Fail?WSJ
It’s a refrain you will hear from politicians, regulators, even bankers. Nearly five years after the collapse of Lehman Brothers, there is still no answer to the problem of banks that are Too-Big-To-Fail.

Investment Outlook June 2013: ​Wounded HeartPIMCO

Näin Kreikka-vakuuksien sopimusmiina laukeaaJan Hurri / TalSa
Valtiovarainministeriö vahvistaa, että Kreikka-vakuudet eivät turvaa Suomea Kreikan hätäluottojen huojennuksista koituvilta tappioilta. Velka-armahdus on kuitenkin VM:n mukaan kuvitteellinen tilanne, jonka Suomi voi lisäksi estää. Valuuttarahasto IMF on eri mieltä: sen mukaan Kreikan velka-armahdukset eivät ole kuvitelmaa vaan välttämättömiä. Jos euromaat noudattavat IMF:n neuvoa, Suomen sopimusmiina laukeaa.

Umpikujassa? – Aika on ajamassa ammattiyhdistysliikkeen ohitseLibera (pdf)
Ajatuspaja Liberan tänään julkaisemassa Umpikujassa? -raportissa vuorineuvos Gustav von Hertzen, pitkän linjan yrittäjä Jalo Paananen ja EK:n entinen johtaja Seppo Riski pohtivat ammattiyhdistysliikkeen tulevaisuutta.