EURO
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Why Canada Should Be the EU's Model -- Seeking Alpha
If the European Union wants to endure, perhaps its architects should look at how Canada keeps disparate regions together in one union. One of the magic ingredients, as we Canadians know only too well, is equalization payments — i.e. transfers of income from the richest to the poorest provinces – specifically, from Alberta and Ontario (although Ontario is faltering) to the Maritimes and Quebec. Does the EU have the same capacity to make equalization payments? It would seem not. The Germans, who pay their taxes, are quite disenchanted about supporting Greek citizens, who, by and large, avoid taxes and have more generous social programs (e.g. 57 as the retirement age for civil servants versus 67 for civil servants in Germany).
Ignore the doom-mongers. The euro’s end is not nigh | Oliver Kam
Kenneth Clarke is to back down over plans for a big extension of “secret” trials, The Times has learnt. The Justice Secretary believes that proposals to hold a wide range of trials behind closed doors go too far and should be scaled back. Instead of allowing closed trials whenever “sensitive” evidence is given, Mr Clarke accepts that the new powers should apply only to material where disclosure poses a risk to national security.Ireland Is The Eurozone's Bright Spot - Seeking Alpha
It is remarkable that Irish 10-year yields have completely decoupled from Greece. At the beginning of the year, the 60-day correlation between Irish and Greek 10-year yields was above 0.90. Today, the correlation stands at -0.42. At the same time, Irish 10-year bonds yields have become significantly more correlated with German bund yields. That 60-day rolling correlation is near 0.85 today.
Now This Explains Why Everyone Thinks Europe Is Fine And The US Is Screwed
The latest European Strategy report from Morgan Stanley's Graham Secker offers this nice chart of the newsflow in the US and in Europe. Specifically it looks at the four-week moving average of economic "surprises." As you can see, it's the US where the data keeps missing on the downside.
Ambrose Evans-Pritchard today has his usual type of offering: extreme, but nevertheless based on a valid observation, on his favorite hobbyhorse, the EMU. His key observation comes at the end : EMU architects were warned in the early 1990s that monetary union would prove unworkable as constructed. They scoffed, sure that any crisis could be exploited to force the pace of economic union. Commission chief Romano Prodi later admitted as much.
Should Germany Quit the EU Rather Than Rescue Greece? « naked ca
If you're an export powerhouse, and everyone is deteriorating around you, the question should probably, could there really be anyway for Germany to avoid a recession? What's more says Hugh... It is the monthly manufacturing PMI chart, and note the sharp smooth downward line, which stretches from February’s high point of 62.7, down to July’s 52. Yes, German manufacturing industry is still expanding, but only just, and it is the pace of the slowdown which is remarkable . He goes onto note that because Germany is such an export powerhouse, it's actually pretty volatile from a GDP perspective. It doesn't decouple from its neighbors.
Suddenly People Are Starting To Ask: How Screwed Is Germany?
Greek Debt: Lehman Brothers Redux? -- Seeking Alpha
Yesterday's commentary appearing in Spiegel Online about the ongoing mess in Greece contains a disturbing analogy about debt - Lehman Brothers in 2008 and Greece in 2010: [The situation is reminiscent of] Lehman Brothers, that seemingly unimportant New York investment bank whose September 2008 bankruptcy led the world into a crisis that is still affecting us. First came Lehman and the banking crisis, now it's Greece and its national crisis.Greek crisis intensifies as Joe Stiglitz calls for Europe to 'te
Yields on Greek debt rose by 14 basis points, as investors digested the fact that G7 and eurozone finance ministers refused at their weekend summit to provide more detail on a rescue package for the troubled economy. Alongside Portugal, Spain, Italy and Ireland, Greece has been the focus of widespread market selling over the past few weeks, with investors fearing the countries may be unable to repair their balance sheets alone. The interest rate on Greek 10-year benchmark debt is now 6.75pc, compared with fellow euro member Germany’s rate of 3.14pc.
Greece? Just a Side Show if the U.K. Defaults -- Seeking Alpha
In our younger years we were quite accomplished at the “Match Game” on Sesame Street – to some we have just hopelessly dated ourselves, to others we hope to have given you a nostalgic boost. Whichever group you find yourself, please indulge us as we revert to times past and play the game once again… Do you see it? For those pattern challenged we shall spell it out… The U.K. service sector has begun to contract.The Real Problem with PIIGS Debt -- Seeking Alpha
The top chart shows the spread on 5-year Credit Default Swaps on Greek government bonds. Spreads have shot up to over 400 bps on fears that Greece's federal deficit is spiraling out of control (with a deficit of about 12% of GDP) with no fix in sight. Similar fears have surfaced in Portugal, with spreads today reaching 230 bps, Italy (153 bps), Ireland (172 bps), and Spain (170 bps), thus giving rise to the new acronym for fiscally challenged countries: PIIGS. (Truth be told, the US should be included in the group of PIIGS, since an objective analysis of Obama's 2011 budget implies deficits of 10% of GDP or thereabouts for at least the next several years.)
That’s a Goldman Sachs snapshot of European central bank liquidity. As you can see, it basically falls off a cliff come summer 2010, when the the ECB is due to withdraw its emergency liquidity operations. The central bank’s exit strategy has become something of a worry for markets in recent months, especially given the turmoil occurring in Greece, Spain and Italy — some of the biggest users of the liquidity facilities. Indeed, the looming withdrawal of these facilities, as well as the possible downgrades to its credit ratings, is one of the things that kicked off the current Greek crisis.
The European exit strategy, revisited
The Euro zone crisis will remain the largest threat to economic stability and growth in 2012. The four options for the current situation have been thoroughly discussed at seekingalpha.com and elsewhere: complete (or at least fiscal) integration, complete breakup, weak members leave the Euro zone or strong members leave the Euro zone. In the following I'd like to discuss the fourth option and contradict the conventional wisdom which forecasts total disaster for Germany and the fiscally stronger countries if they should leave the Euro zone. Even if the willpower were in place (anybody care to execute referendums?) the political process itself would take a decade. The European Union is a body of 27 members and the Euro zone a subset of 17 members all with strongly differing cultures and languages.
Why Germany Should Leave The Eurozone - Seeking Alpha
Global Economics - RGE Monitor -- Europe EconoMonitor
First, we would like to clarify that we are strong supporters of the European monetary integration project. Our view is that the single currency involves significant potential economic and political benefits for all its participants which far outweigh its potential costs. We thus believe it is right to spare no effort to ensure the euro’s continued stability and success. Having said so, however, we cannot but admit that we are currently faced with hard facts that cannot be ignored by Europe’s policy-makers. The present turmoil in the Greek sovereign bonds market, as well as the increasing pressure on Spanish and Portuguese bonds, is not coincidental but symptomatic of a fundamental truth. This is that the eurozone is not an optimum currency area.In France, new vehicle registrations have been plunging. Already down 17.8% in December and 20.7% in January compared to prior year, they sank 20.2% in February. Year to date, the results were even worse than they appear.
Testosterone Pit - Home - Deep Trouble at the Core of the Eurozone
A few months on and the financial world is purportedly short the euro to the tune of $8bn. Unsurprisingly the contrarians are once again beginning to show. Among them is Citi’s FX Technicals team, who warned clients on Tuesday that a long term uptrend might be about to resume in EUR/USD: For several weeks as EUR/USD has fallen, we have tried to make an effort to continually express the view that the move down is part of a ‘correction’ in the long term uptrend rather than a trend itself. One chart we have remained focused on is our favourite EUR/USD overlay which regular readers should know well by now.