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Friday, October 25

26th Oct - Best of the Week

Best article links selected from the ending week’s posts. Last week’s edition here.

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Paper by EU Economist Backs Austerity’s CriticsWSJ
The mystery of EU economic study criticising BerlinBrussels blog / FT
Did tight-fisted budget policies in Germany help make the eurozone crisis deeper and more difficult for struggling bailout countries like Greece and Portugal? That appears to be the conclusions of a study by a top European Commission economist that was published online Monday – but then quickly taken down by EU officials.

Germany's SPD leaders list key demands of Merkel for coalitionReuters
A nationwide minimum wage of 8.50 euros, equal pay for men and women, a financial transaction tax, greater investment in infrastructure and education, and a strategy to boost growth and employment in the euro zone. No mention of the tax increases for Germany's wealthiest which the SPD had campaigned for during the election but which the chancellor has absolutely ruled out.

Possible overvaluation of residential property in German citiesBundesbank

Blogs review: The structural balance controversyBruegel
The implausible results of the European Commission's production function method to estimate potential output and structural deficits

Towards a Euro UnionBruegel
Eleven German economists, political scientists and jurists – the Glienicker Group – develop proposals for a deeper Europe. 

Europe's vision hits troubleReuters
Barely a year after European leaders set out an ambitious vision for the euro zone's future, progress has all but stalled and pressure is building for what may amount to a 'make or break' moment for the union.

EZ crisis and historical
The Eurozone’s tangle of conflicting goals – a series of ‘trilemmas’ – is not without precedent. This column argues that it is reminiscent of the interwar situation. The interwar slump was so intractable not just due to financial issues, but also a crisis of democracy, of social stability, and of the international political system. The big difference in the EZ is that nations cannot go off the euro as they went off the gold standard. That is why the initial EZ crisis may not have been so acute as some of the gold standard sudden stops, but the recovery or bounce back is painfully slow and protracted.

Europe Breakup Forces Mount as Union Relevance FadesBB
What the EU’s founders in the 1950s intended as “ever closer union” now risks going in the opposite direction: Britain is threatening to secede; the euro, battered by the four-year debt crisis, remains at risk of splintering; anti-euro forces are advancing in France, the EU’s heartland; separatists are pushing to burst the U.K., Belgium and Spain.

Banking Nationalism and the European CrisisBruegel
Explaining both the build-up of risk in European banks in the run-up to the crisis, and the difficulty to resolve the crisis and restore trust since the inception of market turmoil in mid-2007. It concludes by identifying banking union as a potential game-changer, even though whether this will result in a positive outcome for Europe remains to be seen. 

The Man Who’ll Do Triage on Europe’s BanksNYT
Ignazio Angeloni, a top ECB official, has a leading role in reviewing euro zone banks to determine which are sound and which are not.

ECB, on new mission, sets out tougher bank health testsReuters
Highlights: ECB's financial stability chief on bank health testsReuters
Factbox: Details of health check of euro zone banksReuters
Eurozone bank shares fall after ECB outlines health check planFT
ECB Says Bank Review to Be More Credible Than BeforeBB

Can Europe's Banks Handle Draghi's Exams?View / BB
How Europe Can Save Its BanksView / BB

ECB Sheds Light on Emergency Lending ProgramWSJ
Europe’s not so secret liquidity. Not any more.alphaville / FT
ECB published important data on its emergency liquidity assistance, or ELA. Notable: EUR two billion upper limit before the governing council reviews the situation.

German Court Decision Looms as Next Potential Global CrisisWSJ
Verdict looms on legality of  ECB bond purchase programmeTradingFloor

Economic activity during the shutdown and brinkmanshipCEA
…consistent with a 0.25 percentage point reduction in the annualized GDP growth rate in the fourth quarter and a reduction of about 120,000 private-sector jobs in the first two weeks of October…could understate the full economic effects of the episode to the degree it continues to have an effect past October 12th.

Q&As on next episodes of the US fiscal soap operaNordea
Once again Congress has merely kicked the can down the road for a few months. However, despite the recent reckless behaviour in Congress we believe that the next episodes of the US fiscal saga will prove much less disruptive than the drama that just ended (summary).

Fed QE Taper Seen Delayed to March as Shutdown Bites BB
The Fed will delay the first reduction in its bond purchases until March after the government shutdown slowed fourth-quarter growth and interrupted the flow of data, economists said. Policy makers will pare the monthly pace of asset buying to $70 billion from $85 billion at their March 18-19 meeting. The 16-day budget impasse in Washington reduced growth by 0.3 percentage point this quarter.

Worth The Wait?Tim Duy’s Fed Watch
Incoming data are not exactly consistent with the definition of "stronger and sustainable."  And even if the data shift upward in the next few months, it will take another three months to confirm that it is sustainable.  That pushes any decision on asset purchases out to March at the earliest.

How Much Has the Fed Opened Up?WSJ
It’s no secret the Federal Reserve has gotten a lot chattier in recent years.

The IMF revisits sovereign bankruptcy  Felix Salmon / Reuters

Historical Global Yields & Defaults, 1800 – Present The Big Picture

HeSarin mukaan kriisimaat ovat jatkossa kilttejä – mutta ei ymmärrä mistä kehitys johtuuTyhmyri

Harmaa valtaSuomi 2017

Saksalaisten makromiesten laskelmaJuhani Huopainen

Korkman: Toiveajattelulle rakennettu euro oli rohkea hyppy tuntemattomaanVerkkouutiset
Wahlroos: Euroopan talous elpyisi EKP:n valtion velkakirjaostoillaYLE
Korkman: Vain pankkiunioni pelastaa EuroopanTalSa
Korkman Wahlroosin EKP-analyysistä: Ei osu asian ytimeenVerkkouutiset

Tämän takia myös EKP:n stressitestit lässähtävätTalSa
Jan Hurri: Eurovaltiot eivät hevin pääse sopuun, kuka vastaa suurpankkien tappioista ja kenen on pantava uutta pääomaa pankkien taseiden tilkkeeksi. Niin kauan kuin maksajasta ei ole tietoa, tuskin edes EKP uskaltaa toteuttaa pankeille niin tiukkaa kuntotestiä kuin näiden todellisen tilan selvittämiseksi olisi tarvis. Niinpä seuraavakin pankkitesti lässähtää.