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Tuesday, January 21

21st Jan - Banking union trouble, EM nervousness

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Euro and Non-Euro Countries and Fiscal PolicyEconbrowser
Contractionary fiscal policy is ... contractionary

In France, les poulets are coming home to roostThe Telegraph
France’s charmed life falls prey to excessive state spending and regulation

Europe Divides Over More Ambitious Pollution LimitsBB
European Commission’s leaked paper: industrial electricity prices in the EU are more than double than in the US and 20% higher than those in China.

Europe’s ‘structural reform’ agenda is little more than a fairytaleEuropp / LSE
Sructural reform agenda’ has been defined in exceptionally vague terms, and that it is still unclear precisely which reforms would lead to tangible economic improvements in European countries. With the European Parliament due to hold elections in May, there may be an opportunity for opposition parties to politicise the issue and subject prevailing policies to proper scrutiny.

Nordic Government Debt HandbookNordea
An overview of the government debt markets of the four Nordic countries: Finland, Denmark, Sweden and Norway. We offer details on the structure of the market, instruments, outstanding volumes, marketplace, auctions, issuance plans, important dates and ownership.

As Banking Union Stalls, Schäuble Makes Flying Visit to BrusselsWSJ
Germany’s finance minister made a lightning visit to Brussels on Monday in an unusual attempt to end a stalemate with European lawmakers on banking union.

Banking union hits another bump in the road Open Europe
The concerns focuses on the agreement to use an intergovernmental treaty to set up the resolution fund – a move demanded by Germany to provide additional legal safeguards against the pooling of risk and resources… this dispute could delay the adoption of the SRM until after the European elections – a delay which could increase market uncertainty, especially around the bank stress tests.

ECB Fails To Sterilize Bond Purchases In 4th Failure Of Last 6 Attempts: Harbinger Of Upcoming Unsterilized QE?ZH

Peculiarities and aberrations in FX and FISHTradingFloor
Irish and Portuguese bond plans raise pan-Eurozone health questions * Have Eurozone risk assets been mispriced? * Rate curve's sharp front-end rise may trigger more monetary easing

In Greece, Elites Are Starting to Feel the PainNYT
Greek court could find wage cuts to certain public servants unconstitutional - Kathimerini

Strong ZEW reading in JanuaryMerkelnomics

The QE Weakness That Might Just Bode Well for UnwindingWSJ
One possible upshot of their findings is that unwinding QE—selling the huge portfolios of assets accumulated in the past few years—might not be as disruptive as many expect now that financial markets are more or less back to normal.

Next Cut in Fed Bond Buys LoomsWSJ
Reduction to $65 Billion Could Be Announced on Jan. 29

The Week That WasTim Duy’s Fed Watch
Policymakers are generally comfortable with the pace of tapering at $10 billion per meeting.  That could be reconsidered if we see sustained weakness in future data, but I don't think that should be the base case… I think it is reasonable to believe the primary conflict at the next FOMC meeting is not over asset purchases, but on the communications strategy.  The direction and nature of "enhanced forward guidance" is becoming a contentious issue now that the unemployment rate is just a breath away from the 6.5% threshold.

China's GDP questioned; monetary conditions tighten once again Sober Look

Crunch Escalates as Money Funds Rival Shadow Banks: China CreditBB

China Liquidity Fears Ease As PBOC Injects 255 Billion CNY - Most Since Feb 2013ZH

Why Japan’s debt hasn’t wreaked havoc
Robust domestic saving and a temporary inflow of foreign capital caused by the Global Crisis have prevented a crisis thus far. As both of these factors become less applicable the government faces pressure to reduce debt-to-GDP ratio can be brought under control quickly.

China’s GDP Growth Says LittleThe Diplomat
GDP figures – particularly China’s – are a flawed measure of economic performance.

Is China’s Slower Growth Good or Bad News?WSJ

The PBOC’s big testalphaville / FT

Thai Default Risk Soars as Funds Pull $4 Billion: Southeast AsiaBB
Thailand Likely to Cut Rates as Crisis PersistsWSJ

New Financial ForecastsNordea
Fed: The Fed is expected to stick to the course set for tapering, reducing its monthly asset purchases by USD 10bn per FOMC meeting. QE is expected to end in October. Riksbanken: We expect no new rate cuts after the December surprise. The growth outlook has improved and we do not expect inflation to surprise the Riksbank on the downside again. Rates: We expect 10-year USD yields to remain in a trading range of 2.70% - 3.05% in the near term, but we have lifted our year-end forecast by 25bp to 3.5%. EUR money market rates are seeing upward pressure. Thus, we have lifted the short-end of the EUR curve just a bit. FX: We keep our 3-month EUR/USD forecast of 1.33 unchanged, but still see upward pressure in the near term. We have moved a big part of the expected GBP strengthening forward and now see GBP/USD at 1.66 on a 3-month’s horizon. Longer out, we see most GBP potential vs the EUR. 8.70 is our new 3-month’s forecast for EUR/SEK (from 8.90) and 8.45 for mid-year. A few more months of convincing hard data will be sufficient to reprice short rates. We think the recent move in EUR/NOK is overdone and expect a return to 8.10 in 3-month’s time. We have updated our EUR/TRY forecast to reflect the recent negative developments in the political arena in Turkey. And, USD/CNY projections are revised modestly. Commodities: We see downside risks to our oil prices forecast for Q1 of USD 108/brl as the physical market is set to weaken as we move into the refinery maintenance season

Bloomberg Global Investor PollBB
Calling 2014 ahead of the World Economic Forum at Davos.

‘Emerging Markets? Never Heard of ‘Em’ and Other Nuggets from BAML PollWSJ

Tapering and emerging-market capital
This column presents the results of recent World Bank research into these effects. In the baseline scenario, the unwinding of QE is predicted to reduce capital inflows by about 10%, or 0.6% of developing-country GDP by 2016. However, if markets react abruptly, capital flows could decline by as much as 80% for several months.

Secular Stagnation Heads SouthProject Syndicate
An extraordinarily benevolent external environment sustained rapid GDP growth in Latin America in the years following the 2008-2009 global economic crisis. But now, as commodity prices fall and the Fed’s gradual exit from quantitative easing boosts US interest rates, the region’s economies could be facing a long-term slowdown.

JapanCanada and Australia Bear Brunt of US Dollar StrengthMarc to Market

The 85 Richest People Have The Same Wealth As Half The World's PopulationZH

Bubbles as a deflationary escape chutealphaville / FT
In other words bubbles result from society’s attempt to distribute increasing national wealth in a way that preserves incentives but still benefits everyone, and old wealth attempting to escape that distribution out of fear of the social hierarchal loss that can lead to.

Facts we should rememberFrances Coppola / Pieria
The Zero Lower Bound (ZLB) does not mean rates are necessarily zero * People consume out of income not wealth * Supply depends on demand in a financial crisis * Reliance on exports does not equal a vibrant economy

Kiinan luotonanto ja kasvu hidastuvatHandelsbanken
Kiinan vuoden 2013 talouskasvu yllätti odotukset positiivisesti ollen 7,8 prosenttia. Maan teollisuuden aktiviteetti vakautui vuoden loppua kohti, mutta palveluiden aktiviteetti hidastui. Kiinan keskushallinto pyrkii tosissaan hidastamaan luotonannon kasvua, erityisesti paikallishallinnon luottoja. Tämä, kuten muutkin reformit, todennäköisesti hidastaa BKT:n kasvua vuonna 2014.

Lainakatto voisi vaikeuttaa tuhansien asunnonhankintaaTalSa
Taloussanomien arvion mukaan yli 30 000 asuntokauppaa olisi jäänyt tekemättä ilman lisävakuuksia tai omaa rahaa vuonna 2012, jos asuntolainakatto olisi ollut tuolloin käytössä. Lue, minkälaisia vaikutuksia lainakatolla olisi.

Yli 3 miljoonaa italialaista on lyönyt hanskat tiskiinVerkkouutiset
Määrä vastaa 13 prosenttia maan työvoimasta. Se on yli kolme kertaa koko EU:n keskiarvoa suurempi, joka on 4,1 prosenttia työvoimasta. Syyksi työn etsinnän lopettamiselle puolet luovuttaneista ilmoittaa, ettei työtä kuitenkaan löydy.

EIT: Vastuu nettikirjoittelusta on julkaisijallaHS
Lähes 70 mediayhtiötä ja kansalaisjärjestöä vaatii virolaistapausta uudelleen oikeuteen

Antti Rinne uhkaa perussuomalaisiaVerkkouutiset

Jyrki Katainen: Soini piirtää väärän asetelmanVerkkouutiset

Ajaako verottaja yritykset pois Suomesta?Janne Juusela / Mielipide HS

Verohallinto turvaa Suomen verotulotJari Salokoski / Mielipide HS

Joulukuun työttömyysaste 7,9 prosenttia – Tilastokeskus
Finland Unemployment rate kept rising in December – Handelsbanken