EZ rescue or recession? Fallout of the October 2011 package

MADRID – Spain’s conservative prime minister is preparing a package of small measures — such as tax breaks for young entrepreneurs — to stimulate the economy even as he vows to stick to budget cuts. Prime Minister Mariano Rajoy, whose popularity has plummeted after a year in the job, will announce the steps on Feb. 20 in his first State of the Union address in an effort win back public trust after severe spending cuts.

With 2011 rapidly winding down EuroIntelligence discusses the LIBOR-OIS spread, the ECB's Long Term Refinance Operation (LTRO) and the End of Yet Another Suckers’ Rally

A collapse in demand for credit is underway in Europe. Banks lending is down sharply and the decline has "surprised the experts".

By Simit Patel:The big story in the gold market today is a change in banking capital adequacy ratios that would give banks greater regulatory incentive to hold gold. This article from Ross Norman explains the story in greater detail.Here's my simple interpretation on what's going on and what it means for the price of gold:

Following a relatively tiny two-day rally in the Euro the ECB blows its horn with a statement Credit Crunch AvertedThe euro rose, extending its first weekly gain versus the dollar in six weeks, as Italian bonds advanced and after European Central Bank President Mario Draghi said policy makers have averted a credit shortage.

Daniel Gros, 27 October 2011At 4am today, EZ leaders agreed the rough outline of a package of measures designed to end the EZ crisis. This column argues that a central pillar of the package will not work. The so-called first-loss insurance of EZ sovereign debt relies on an incomplete analysis of the underlying problem and the proposed solution.Full Article: An EU Summit mis-think: The pitfalls in official first-loss bond insurance

Michael Burda, 17 May 2012The on-going EZ crisis reveals critical flaws in the Eurozone’s design. This column argues that failing to abolish national central banks left the door open for national interests to interfere with the natural workings of the financial system and Hume’s adjustment mechanism. This flaw, and the omission of a European Banking Authority with real teeth, will come back to haunt Europe in the months and years to come.Full Article: Hume on hold?

Michael Burda, 17 May 2012The ongoing EZ crisis reveals critical flaws in the Eurozone’s design. This column argues that failing to abolish national central banks left the door open for national interests to interfere with the natural workings of the financial system and Hume’s adjustment mechanism. This flaw, and the omission of a European Banking Authority with real teeth, will come back to haunt Europe in the months and years to come.Full Article: Hume on hold?