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Saturday, September 27

27th Sep - W/E: Best of the Week

Here are the best picks from my ending week’s posts. Bottom line & summary: Ukrainian crisis not going anywhere, growth outlook in Europe remains terrible, ECB's QE doubted.

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Germany’s Economic Mirage Project Syndicate
Philippe Legrain: For 60 years, successive German governments sought a more European Germany. But now, Chancellor Angela Merkel’s administration wants to reshape Europe’s economies in Germany’s image. This is politically unwise and economically dangerous.

Europe’s Single Supervisory MechanismBruegel
A closer look at the ECB’s list shows that the smaller banks are concentrated in a limited number of countries, much more so than larger ones. Most small banks are German (and Austrian and Italian).

Who’s afraid of the AQR?Bruegel
Banks have incentives to recapitalize in socially undesirable ways and to hide losses on their balance sheets. Will the comprehensive assessment solve these issues by forcing significant European banks to recognize losses and to recapitalize by issuing new equity instead of deleveraging?

ECB's test may not be final word on health of Europe's banksReuters
It has been billed as a make or break moment for Europe's banks: the publication of rigorous industry-wide health checks next month after three previous tests failed to spot problem lenders.

ECB: Market exerting pressure through inflation expectationsNordea
Medium term inflation expectations in the form of the 5Y5Y HICPxT EUR inflation swap level are now just marginally above its all-time low (in oct 2010), and puts the ECB in an awkward position not made any better by the TLTROs getting off to a bad start yesterday. The Draghi-induced rebound in the measure after Jackson Hole has disappeared and we’re now below the late August values. Will this combination eventually and inevitably lead to QE?

Why Europe needs to give up on QETradingFloor
In our view, there are two factors behind the euro's continued weakness. Firstly, it is not really all that weak...the dollar is just on a tear. Secondly, markets have been pricing in expectations of an ECB-led QE programme for a long time, but this does not look ready to materialize. In light of all this, could the euro have finally hit bottom?

Europe should fear German retreat: Ambrose Evans-PritchardTradingFloor
European hopes for central bank-led quantitative easing have retreated even further with the success of Germany's anti-euro Alternative für Deutschland party.

Weidmann Says Governments Must Take Lead Amid ECB Policy Limits – BB
TLTRO effect is the ECB’s Waiting for Godot – Reuters
European QE is Not a Given — BlackRock – WSJ
Germany's Schaeuble unhappy at debate on ECB buying ABS, bonds – Reuters
Former German top judge says ECB could face more legal challengesReuters

China Getting Used to the ‘New Normal’ of Slower GrowthWSJ
The years of double-digit economic growth are over in China, say government officials who are starting to use a phrase familiar to Americans and Europeans: “the new normal.”

Xi Jinping’s Pure PartyProject Syndicate
George Magnus: While the Chinese authorities' efforts to root out corruption within the Communist Party are a welcome development, the Party itself is part of the problem.
Australia’s Central Bank Makes Pre-Emptive Move on House Prices - WSJ
RBA Discussing Measures to Cool ‘Unbalanced’ Housing Market - BB
Australia’s central bank said investors are starting to distort the nation’s housing market and is discussing possible measures with other regulators to strengthen lending practices.

Millä eväillä Saksan populistipuolue kasvaa?TalSa
Uusi saksalainen populistipuolue AfD riemuitsee pärjättyään Brandenburgin ja Thüringenin osavaltiovaaleissa. AfD esiintyi vaaleissa pullistelevana protestipuolueena, mutta sitä on vaikea sijoittaa poliittiselle kartalle.

EK:lta Kasvun manifesti: Tekoja teollisuuden ja työpaikkojen turvaamiseksiEK
1: Verotuksen ja sääntelyn liipaisinsormi saatava vihdoin kuriin * 2: Kannustetaan uusia ideoita sekä osaavia ja innostuneita tekijöitä: investoidaan tutkimukseen, koulutukseen ja kansainvälistymiseen. 3: Otetaan kaikki tehot irti tuotantopanoksista – antaa energian, rahoituksen ja datan virrata. Eikä logistiikkaverkosta ole varaa tinkiä. 4: Uudistetaan työmarkkinat kasvun esteestä sen mahdollistajaksi.