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Saturday, March 29

29th Mar - W/E: Best of the Week

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

EUROPE: The divergence between France and Germany becoming smaller, expectations remain positive but inflation remains very low and looks weakish. ECB has gone extra-dovish in its comments, but Germans are sending fiscally tight messages and promising further integration - more iron maidens and "one size fits all"-policies, I guess. The IMF agreed on a big bailout of Ukraine, but the geopolitical situation remains open to further trouble.

US: Fed continues sounding hawkish, and no serious attempt to downplay the "six months after QE is over"-line that Yellen presented at the last FOMC meeting. The Fed is also being tight against the big banks, and probably thinks or at least is scared that the easy money has created an opportunity for another leverage-fest to build within the big banks.

ASIA: China's bad news continue, in fact the newsflow has been so bad that there have been speculation that easier monetary and/or fiscal policy would soon be announced to ease the pressures.

FINLAND: New austerity measures were launched to keep the country within the Maastricht criteria. The far left party Vasemmistoliitto left the government as a result. 

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Fritz W. Scharpf : No Exit from the Euro-Rescuing Trap?Max Planck Institute
The euro is a democratic disasterWaPo
Scharpf describes Europe’s single currency as a “non-military attempt at imperial unification,” and suggests that there is a “disturbing continuity of Nazi visions of European unity and the ideas of some prominent promoters of European integration in postwar Germany.” These are very strong words for a German political scientist of Scharpf’s stature (he is an extremely well-known public intellectual).

Deconstructing the EuroProject Syndicate
The eurozone’s current travails stem from the fact that the euro’s exchange rate does not align with member countries' economic positions – a problem that cannot be resolved within the currency union. The only way to restore balance to Europe is to pursue a controlled segmentation of the eurozone, led by Germany and France.

German Finance Minister: EU Treaty changes back on table after European electionsReuters
Schäuble revives push for eurozone integrationFT
UK and Germany say EU reform must be fair to non-euro membersReuters

Get your finances in order and stop blaming GermanyFT
Otmar Issing: The countries now in trouble have caused their own problems

Peripheral countries: A scorecard after six years of crisisNatixis
Production capacity has decreased by 25% in Spain, by nearly 17% in Greece and Italy and by around 13% in Portugal

The ECB should do QE via forex
The ECB should buy US treasury securities, lowering the foreign exchange value of the euro. That would be the best way to restore the export sector of the periphery countries.

Euro falls as ECB steps up rhetoric about currency's strengthReuters
Jens Weidmann said negative interest rates were an option the bank could use to counter strong gains in the single currency. Weidmann also said it was not out of the question for the ECB to buy assets from banks to fight deflation, marking a radical softening of the German central bank's strict stance on
quantitative easing.

More Thoughts about Potential for QE from the ECBMarc to Market
There seems to be a stepped effort by ECB officials to talk the euro down.

ECB Talk Not Making Predicting Policy Moves EasierWSJ
April’s meeting will be the third straight with dovish expectations and the marginal impact of the dovish comments is decreasing.

The Message from the BundesbankMarc to Market
Officials may be more relaxed than Draghi's recent comments or the spin put on Weidmann's comments would seem to have suggested. 

Partiam, partiamo or the ECB communication Money Matters
The new pitch of the choir is creating some market expectations. If these expectations will be, again, disappointed, whatever calming effect was obtained on the exchange rate will be lost and we could see further strengthening of the €, with the ensuing, undesired result of downward pressure on inflation.

Special: March Markit PMI – MoreLiver’s
Euro area deflation monitor – Danske Bank
Spanish CPI shock flags euro deflation risksReuters
Threat of Deflation sends Euro to Three Week LowsMarc to Market
German CPI data brings no relief for ECBMerkelnomics

Gazprom: The Most Important Company In EuropeZH
Can Europe survive without Russian gas?Bruegel
Replacing 130 bcm of natural gas imports from Russia within a year would be a significant challenge, but not impossible

IMF Reaches Deal to Provide up to $18 Billion to UkraineWSJ
Too Much, Too SoonForeign Policy
The IMF is giving billions of dollars to Ukraine's cash-strapped government. Will that make the country's new rulers even weaker?

FAQ: Washington’s Battle Over the IMFWSJ

Post-FOMC FedspeakTim Duy’s Fed Speak
 The Fed is pushing back on the dots because they don't want quantitative guidance, and they forgot they were giving it.  Expectations that Yellen will push for a more dovish reaction function are being disappointed.

Fed: Big banks do get all the breaksWaPo
“This insensitivity of financing costs to risk will encourage too-big-to-fail banks to take on greater risk,” Joao Santos, a vice president at the New York Fed, wrote in the study. It “will drive the smaller banks that compete with them to also take on additional risk.” Why should banks whose risky behavior helped cripple the economy be given any advantages, especially ones that could encourage more risk taking?

Fed Stresses Over Foreign BanksWSJ
The Federal Reserve began flexing its muscle as the de facto global financial regulator on Wednesday, rejecting the capital plans for the U.S. units of three foreign banks.

China's Economy Under Mounting StressWSJ
Bad news is piling up for China’s economy, raising fears Beijing’s financial power may not be sufficient this time around to keep the economic engine ticking over and stave off market instability. Signs of economic stress are mounting as companies report disappointing profits and state-owned banks take large debt write-offs.

Random Charts & CommentsMoreLiver’s

Global summary: post-crisis recovery firming in 2014Berenberg
Presentation – Outlook 2014: The sweet spot of the cycleBerenberg
US: Underlying strength * China: Resilient * Japan: Abenomics fading * UK: Strong recovery * Eurozone: Firmer growth * Germany: Powering on * France: Reform laggard * Italy: Politics matter * Spain: Reform success * Portugal: Turn-around

New Financial ForecastsNordea
12 March we released a new Economic Outlook with updated real-economic forecasts for 2014 and 2015. We also updated our longer-term financial forecasts for central banks, rates, FX and commodities. We have made no changes since then, but this slide set is intended to give a quick overview of our main financial forecasts.

Did Hyman Minsky find the secret behind financial crashes?BBC
American economist Hyman Minsky, who died in 1996, grew up during the Great Depression, an event which shaped his views and set him on a crusade to explain how it happened and how a repeat could be prevented, writes Duncan Weldon.

EM FX Monocle – DifferentiationNordea
Emerging Market FX remains vulnerable to bouts of risk aversion as global financial conditions tighten and fears of a hard landing in China resurface. However, vulnerabilities differ across the EM universe.

Euro & talous 1/2014: Rahapolitiikka ja kansainvälinen talousSuomen Pankki

Special: Suomi / Kehysriihi -. MoreLiver’s

Suomella outo hinku maksaa muiden velkojaJan Hurri / TalSa
Suomen sanavalta euroalueen pankkiunionissa jäänee luultua pienemmäksi ja velvoite yhteisen kassan kartuttamiseksi voi koittaa luultua aiemmin. Suomi päätynee maksamaan muiden velkoja ja kantamaan muiden pankkiriskejä. Jostakin syystä kiire on silti kova, vaikka kaavailtu pankkiunioni ei lopeta tätä kriisiä eikä estä seuraavaa.

Euro on politiikkaa ja talouttaThe Ulkopolitist.

Tietoisuus talous- ja rahaliiton riskeistä 2014VM
VM:n selvitys: Tässä ovat kaikki euron 28 virhettäTE

Valuuttakurssiregiimi, ennakointivaikutukset ja finanssipolitiikan tehokkuus pienessä avotaloudessaETLA

Talousennuste 2014–2015: Euroopassa vihdoin käänne ylöspäinPT

Euroalueen taantuma ohi, Suomen BKT tänä vuonna +0.7%ETLA