Weekend Developments and Their Significance Going Forward

There have been several important developments over the weekend which are likely to support the euro at the start of the week, after falling for the past four consecutive weeks and recording a 7-week low before the weekend. However, I continue to expect corrective gains in the euro will be short-lived and subject to headline risks. I still think that the $1.29 year end target for the euro is reasonable

Franco-German secret negotiations for new euro contract

Boxed in by the ever-worsening sovereign debt crisis, the Franco-German euro zone axis is trying to formulate a policy that both adheres to the German economic orthodoxy without worsening the crisis any further

Officially Eurobonds are taboo but behind the scenes nothing has been ruled out

Almost exactly one year ago I wrote the following: In practice, you could have sovereigns conduct a ‘sovereign debt swap’ whereby the ECB buys an agreed-upon portion of the existing debt from the sovereigns and then uses these funds to back the supranational debt. In future, the same agreed upon percentage of debt would be

Juergen Stark explains ECB opposition to monetisation is not about inflation

As I have been saying at Credit Writedowns, the ECB’s opposition to monetising sovereign debt is not about inflation concerns but rather its resistance to moving into a politicised quasi-fiscal role

News Links: The Real Reason Germany Doesn’t Want The ECB To Print Money

Here are the English-language links for 26 November

Poll: Germans reject eurobonds

Neither the current governing coalition nor the German populace is anywhere close to getting where Schröder is. The most Germany will deliver is what’s on the table now: EU fiscal oversight with penalties and potentially expulsion for governments which deviate from the German low deficit vision for a United Europe

Foreign News: Commerzbank capital, Portuguese bailout, Franco-Belgian problems

Here is the second version of this foreign news links post that I am starting. The feedback yesterday was good. You all said it makes sense to see what the press in country are saying in Europe since that is the locus of the sovereign debt crisis, so I will continue this

What the German bond auction disaster means

This morning the German government held an auction for 10-year money at just under 2 percent. The auction failed disastrously with a bid-to-cover ratio of just 1.1. The Germans wanted to issue 6 billion euros of 10-year bunds but managed to sell only 3.64 billion, with the central bank picking up 39 percent of the issue

Chart of the day: Germany’s finances not as sound as believed

This will surprise many. Der Spiegel reports that Germany’s fiscal management is not as “exemplary” as most perceive

News Links: Downgrade watch begins as debt panel concedes defeat

Downgrade watch begins as debt panel concedes defeat – The Hill’s On The Money Credit rating agencies reiterated Monday that the U.S. is at risk of a downgrade following the announcement that the supercommittee has failed. Standard & Poor’s warned lawmakers not to try and roll back the $1.2 trillion in automatic cuts set to

The Four Key Issues that are Dividing Europe

First, there is a disagreement about whether the ECB should be buying a significant amount of European bonds. Second, there is a disagreement over whether the ECB should declare that is it buying bonds for an extended period or unlimited amounts. Third, the ECB currently sterilizes its sovereign bond purchases. Some want the ECB to refrain from doing this. Fourth, there is a dispute over whether Greece is a unique event

Credit Writedowns Weekly Report, Vol 1 Issue 1: European and US Sovereign Debt

With the fundraiser week winding down, I am going to start making a few changes now. One thing we probably need is a synopsis of the past week’s posts in order to tie the week’s events together thematically. I will make this synopsis using the most read and tweeted posts plus the ones I think are most relevant to what’s actually happening in global markets and the economy.

This week there is a ton of stuff here. So, here we go with the weekly report volume 1, issue