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Sunday, June 29

29th Jun - W/E: Europe, US, Asia links

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Austria Falls Out With Bavaria Over Zombie BanksForbes
There’s a nice little storm brewing in the Eurozone core. Reuters reports that the German province of Bavaria is considering legal action against Austria. And it is seeking support for its action not only from the German federal government, but also from the EU.

Hard Truths About Europe’s Soft PowerProject Syndicate
Europeans may be “postmodern,” but the rest of the world is not. Even a cursory glance at Europe’s neighborhood demonstrates the limitations of “soft” power and dispel hopes that emerging powers can be house-trained as “responsible stakeholders” in a Western-designed international system.

Two Years Ago, Banking Union Was Euro Crisis Turning PointPIIE
Banking union is no panacea. The ECB could still be less than rigorous in its bank review this year, which would squander the opportunity to restore trust. Several countries face disquieting medium-term economic, social, and fiscal prospects. Perhaps the wildest card now that perceived sovereign credit risk has abated is that EU institutions remain in a state of flux. As the center gains increasing discretionary authority, new channels of democratic accountability must develop.

Only 8% of banks says they will need to raise capital after AQRBruegel
Ernst and Young has published this week their European Banking Barometer for the first half of 2014, which gives a very interesting snapshot of the banking sector’s perceptions about macroeconomic outlook as well as an indication of their priorities for the next moths. Among other issues, it also includes interesting insights on banks perception of the capital needs that will result from the ECB’s assessment. Findings confirm that uncertainty still prevails.

Europe has wasted a good crisisBruegel
In a crisis, when Europe stumbles, it gets up to move forward. Not this time.

Lagarde's Error Could Be Costly For The Euro AreaForbes
Frances Coppola: Although the IMF’s Article IV findings were grim, the recommendations, if implemented, would help to generate recovery. But they seem likely to be ignored.

Brussels round upEuropp / LSE
EU happiness ratings, Juncker’s triumph and Poland’s bugging scandal

Euro Debt Constraining GrowthFT
Ralph Atkins, the FT’s capital markets editor, discusses high private sector debt levels in the eurozone with Moritz Kraemer, S&P’s chief sovereign ratings officer. Mr Kramer says Europe is ‘in for the long haul’ on debt deleveraging.

Spain’s economic recovery, largely export-drivenThe Economist

France and economic reforms: stagnant economy and hard to improveThe Economist

The accidental presidentThe Economist
Jean-Claude Juncker will be the next commission boss, even though nobody wants him

7Juncker nominated for top EU jobFT
Former Luxembourg PM gets backing of 26 heads of states

Britain takes dramatic step towards EU exit door as Jean-Claude Juncker elected Commission president, leaving Cameron humiliatedDaily Mail

Cameron: I've lost the battle over Juncker, but not the warThe Telegraph
David Cameron has told the EU leaders they 'could live to regret' naming Jean-Claude Juncker as the European Commission president

Looking Beyond JunckerProject Syndicate
Howard Davies: Though the European Commission presidency is an important job, proposing new legislation is something of a luxury for Europe these days. Rather than contemplating new directives on the desirable characteristics of, say, lawnmowers sold in the EU, Europe’s leaders must complete three urgent and interlinked tasks.

The summit that will go down in historyFT
The EU’s other large countries – France, Germany, Italy, Poland and Spain – have sided against Mr Cameron on this occasion. But in private their leaders will be wondering if, one day, Friday’s precedent will rebound on a different big country, causing it to be outvoted on an issue it regards of fundamental importance.

The BOE’s Imprudent PoliciesWSJ
The BoE Tuesday outlined measures to limit the U.K.’s housing boom and prevent a dangerous bubble. But the subtext of its message was rather different: keep borrowing.

Carney’s (old) new normalFT
Interest rates would be materially lower in future than the 5 per cent rate widely seen as normal before the crisis. The Bank of England governor’s words have been widely reported as a big new statement of policy. Is this a new policy? No.

ECB’s Uncomfortable Waiting GameWSJ
The ECB has two big concerns. One is the state of the euro zone’s second largest economy, France. The second is a continued downward inflationary trend across the region.

ECB preview: Don’t postpone your holiday for thisNordea
After all the excitement the ECB offered in June, the July meeting is set to be far less eventful. No new signals or easing measures are in store, nor are likely to be under consideration for several months. Considering how far rates and yields have fallen already, risks are tilted towards a small rebound higher in long yields and euro and a steeper curve.

Benoît Cœuré Interview with Süddeutsche ZeitungECB
Interview with Benoît Cœuré, Member of the Executive Board of the ECB, and Werner Rätz and Mischa Aschmoneit of Blockupy, 28 June 2014

EU economic sentiment takes a summer breakTradingFloor
The European Commission's Business & Consumer Survey for June showed the Eurozone's overall sentiment falling against expectations of a small improvement. While this is temporary as Asia is turning around, France's difficulties are real and Spain is looking better than Italy.

German inflation higher than expected in JuneDanske Bank
Based on the German HICP figure, we revise our euro inflation forecast up to 0.7% y/y from an initial forecast of 0.5%.

German Inflation Ticks Up: Implications for EMU and ECBMarc to Market
This immediately indicates risk that the preliminary euro area figure, to be reported on Monday, is on the upside.  The consensus had been for a 0.5% rise of the year-over-year rate.  Now it is reasonable to expect a 0.6% or even 0.7%. 

US inflation has climbed. Now what?FT

Observations on Alternative Measures of Inflation (Part 3)Macroblog

Excess reserves and inflation riskMacroMania

After Tax Increase, Signs of Recovery in Japan ConsumptionWSJ

Reform in Japan: The third arrowThe Economist
Shinzo Abe has the best chance in decades of changing Japan for the better. He seems poised to take it

Abenomics picks up speed: The battle for JapanThe Economist
Shinzo Abe’s fight to reshape Japan’s economy and society is entering a new phase