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Saturday, December 21

21st Dec - Weekender: Best of the Week

Here are the ”best” from my posts of the ending week. Last week’s edition here.

Key issues:
Europe managed to agree on the second pillar of the banking union: who and how manages what to do with the failed banks, and more importantly, who pays for them. The deal is deemed to be complex, limited in scale and scope and thus ineffective.

In US, the Federal Reserve announced it will begin tapering its monthly asset purchases in January. Market reactions were muted, meaning that this time around the Fed had managed to guide the expectations and provide softer forward guidance in exchange.

Many institutions have published their monthly and annual reports, which take a look at the 2013 in review and try to preview the next year ahead. It looks like the current year is now over, with only limited “further reactions to taper” on the agenda. Time for holidays, then.

Can we move beyond the Maastricht orthodoxy?
The Eurozone must be reformed to avoid the risk that the EU itself could be destroyed by political conflict among the winners and losers. 2014 is a window of opportunity for seriously re-considering the Eurozone's functioning and for moving away from the 'Maastricht orthodoxy'.

The EU’s soft power and the big carrot John Lloyd / Reuters
Europe uses “soft power,” defined as the power to influence other countries without force or money by drawing people to it who, by “admiring its values, emulating its example, aspiring to its level of prosperity and openness -- want to follow it.”

Merkel urges EU treaty change in first speech of new term – Reuters
Merkel sees progress in overcoming Europe's crisis – Reuters
Merkel Speech: Chancellor Urges Reforms to Preserve Euro – Spiegel
EU summit: Will anyone be signing contracts?Brussels blog / FT
Merkel's reform contracts pushed back until October – euobserver

Each stage of the euro crisis has increased the risks Germany facesThe Independent
Satyajit Das: The German-led strategy shows little progress and is unlikely to resolve the crisis

Germany: Companies end the year in festive mood – Nordea
IFO: Lift-off for Germany and the DAX – TradingFloor
Germany's December business sentiment exudes welcome cheer – TradingFloor

EU Banks Shed $1.1 Trillion in Assets as Debt Rules BiteBB
Lenders reduced assets weighted for risk by 817 billion euros ($1.1 trillion) between December 2011 and June 2013, the European Banking Authority, the bloc’s top banking regulator, said in a report. From EBA: EU-wide transparency exercise and Risk dashboard.

Europe faces moment of truth on banks, with flawed defences Reuters
Sharp rise in banks buying own governments' bonds * Cheap ECB loans gives banks windfall profit on state debt * Politicians' attempts to break "doom loop" faltering

Europe’s Cypriot Solution for Failing BanksPIIE
The new rules—known as the Bank Recovery and Resolution Directive (BRRD)—make clear that the treatment of Cypriot banks earlier in 2013 set a precedent.

The German banking unionOpen Europe
A deal is positive and necessary. That said, the process remains incredibly complex and still seems highly national or intergovernmental. If there was a serious failure of a large cross border bank, such as we saw with Dexia, would the process really be any smoother or simpler than last time around?

Banking union: the limits of the backstops deal – Brussels blog / FT
The European banking union is a disappointmentThe A-list / FT
A Helpful Guide to Banking UnionWSJ

Voting rights at the ECB: New club rules The Economist
Germans will soon have another reason to fume about the euro

Euro area deflation monitorDanske Bank
Some differences between countries. However, all countries except Germany are placed below zero in the deflation index, which follows as the low inflation is broad based. For Germany the ranking above zero should be temporary as inflation is set to fall in December.

Italy’s president fears violent insurrection in 2014 but offers no remedyThe Telegraph

Spanish Bad Loans Jump To New Record As Banks Come Clean Over Mortgage DefaultsZH

Fed WatchMoreLiver’s

Special: After Fed's TaperMoreLiver’s

Trade Ideas for 2014Global Macro Trading

Goldman's Top 100 Charts Of 2013 - Part 1ZH
Goldman's Top 100 Charts Of 2013 - Part 2ZH

Global Update - Happy New Year 2014Nordea

FX Forecast Update DecemberDanske Bank
ECB deposit cut to weigh on EUR in 2014

Emerging Markets Briefer - December 2013 Danske Bank
Further monetary policy divergence in 2014

Nordic Outlook December 2013Danske Bank

Cyclical Outlook for EuropePIMCO
Cyclical Outlook: Synchronized Optimism – PIMCO
Cyclical Outlook for Asia: Growth Is Stabilizing but Not Stellar – PIMCO
UK Perspectives: A Much Better Dilemma – PIMCO
Australia Perspectives: Australia Inc. – PIMCO
European Perspectives: Muddling Through – PIMCO
Global Central Bank Focus: Coal in the Fed’s Stock-ing – PIMCO
Global Credit Perspectives: Settling In – PIMCO
Long/Short Equity Strategy: Pick Your Spots – PIMCO

US deflation to again top FOMC agenda – TradingFloor
Nasty hangover for tech's ‘Fat Five’ – TradingFloor
Soviet-style economy makes a comeback – TradingFloor
Brent crude to drop to USD 80/barrel – TradingFloor
CAC 40 drops 40% on French malaise – TradingFloor

Tämän takia Suomeakin hoputetaan pankkiunioniinJan Hurri / TalSa
EU-komissio, EKP ja finanssikeskusten suurpankit haluavat euromaiden pankkiunionin valmiiksi mahdollisimman pian. Ne haluavat, että yhteinen tukipiikki on valmiina avattavaksi, kun pankkien pääomia on taas paikattava. Mutta miksi Suomi hosuu pankkiliittoa euromaiden eikä Pohjoismaiden kanssa?

Suhdannekatsaus joulukuu 2013 – Danske Bank
Suomi elpyy rakenteellisten ongelmien varjossa – Handelsbanken
Suhdannekatsaus 2/2013 – Valtiovarainministeriö