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from MacroScope:

Juncker begins to fill in the gaps

juncker.jpg

European Commission president-elect Jean-Claude Juncker will hold talks with the various political groupings in the European Parliament as he seeks to develop policy positions. Most interesting would be indications about which way he is bending in the growth versus austerity debate.

Italy’s Matteo Renzi, resurgent after a strong performance in May’s EU elections, is pressing for a focus on measures to get the euro zone economy firing and has even managed to get Germany to talk the talk. But any leeway will be within the existing debt rules, not by writing new ones.

We know from the history of the euro debt crisis that Berlin can only move so far, so fast and only last week it proudly proclaimed it would not be a net borrower of zero next year, for the first time in over 45 years. Having said that it has just passed into law a generous national minimum wage and its labour costs are rising, so there is some rebalancing going on.

Euro zone finance ministers met in Brussels late yesterday and affirmed that EU countries can get more time to cut budget gaps provided they deliver reforms with a clear long-term impact. A similar pledge was made by EU leaders at a summit last month.

from MacroScope:

Balance tilted in Ukraine?

slaviansk.jpgUkrainian forces pushed pro-Russian rebels out of their stronghold of Slaviansk on Saturday. Its re-capture represents Kiev's most notable military victory in three months of fighting in which more than 200 Ukrainian troops have been killed as well as hundreds of civilians and rebels.

The regions of Donetsk and Luhansk are likely to be next in the government forces’ crosshairs.

from MacroScope:

A call to arms

The prospect of U.S. and Iranian intervention in Iraq looms larger.

Baghdad has asked the United States for air support to counter Sunni militants who have seized major cities in a lightning advance that has routed the Shi'ite-led government army. And Iranian President Hassan Rouhani has signalled that Tehran was prepared to intervene to protect Iraq's great Shi'ite shrines.

As of last night, ISIL fighters were in control of three-quarters of the territory of the Baiji refinery north of Baghdad and some international oil companies were pulling out workers.

from MacroScope:

Marathon banking union talks

Shots were fired at an international team of monitors in Crimea over the weekend, violence flared in Sevastopol as thousands staged rallies and Angela Merkel, who perhaps has the most receptive western ear to Vladimir Putin, rebuked him for supporting a referendum on Ukraine’s southern region joining Russia. But in truth we’re not much further forward or backwards in this crisis.

The West from Barack Obama on down has said the referendum vote next Sunday is illegal under international law but it’s hard to put the genie back in the bottle if Ukraine’s southern region chooses to break away. The best guess – but it is only a guess – is that barring an accidental sparking of hostilities, there is not much percentage in Russia putting its forces in Crimea onto a more aggressive footing in advance of the vote.

from MacroScope:

Renzi’s moment

Italy’s president will meet centre-left leader Matteo Renzi today and is likely to ask him to form a government following the ousting of Enrico Letta as prime minister.

Renzi will need to reach an agreement with the small New Centre Right party to continue the current coalition and there is common ground. The 39-year-old has already said he backs lower taxes affecting employment, but they differ on issues such as immigration and laws allowing gay and lesbian civil partnerships.

from MacroScope:

Emerging wobbles

This week will go a long way to determining whether a violent emerging market shake-out turns into a prolonged panic or is limited to a flight of hot money that quickly fizzles out.

On our patch, Turkey is under searing pressure, largely of its own making and that is the theme here. Yes, the Federal Reserve’s slowing of money printing is the common factor, prompting funds to quit emerging markets, but it is those countries with acute problems of their own that are really under the cosh.

from MacroScope:

Union? Don’t bank on it

The Eurogroup of euro zone finance ministers meets, followed by the full Ecofin on Tuesday, to try and unpick the Gordian Knot that is banking union.

The ministers are seeking to create an agency to close euro zone banks and a fund to pay for the clean-up - completing a new system to prevent a repeat of the bloc’s debt crisis.

from MacroScope:

What is France to do?

It’s euro zone third quarter GDP day and Germany and France are already out of the traps with the latter’s economy contracting by 0.1 percent, snuffing out a 0.5 percent rebound in the second quarter. Growth of 0.1 percent was forecast, not just by bank economists but by the Bank of France too.

Germany failed to match its strong 0.7 percent growth in the second quarter, but expanding by 0.3 percent – in line with forecasts - it is clearly in much better shape.

from MacroScope:

Of euro budgets and banks

Euro zone finance ministers meet today and will have one eye on budgetary matters given a Tuesday deadline for member states to send their draft budgets to the European Commission for inspection, and with protracted German coalition talks keeping other meaningful euro zone reform measures on hold.

Most draft budgets are in but we’re still waiting on Italy and Ireland. Dublin will unveil its programme on deadline day. Italy’s situation is more fluid so we may get something today.

from MacroScope:

Euro chat resumes

After the summer lull, euro zone and EU finance ministers meet in Lithuania. The “informal Ecofin” can often be quite a big deal but with German elections only nine days away, it’s hard to see that being the case this time.

During the election campaign German Finance Minister Wolfgang Schaeuble let slip that Greece would need more outside help which would not include a haircut on Greek bonds held by euro zone governments and the ECB.

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