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from Hugo Dixon:

Euro crisis is sleeping, not dead

Euro zone policymakers may feel they can afford to relax this summer. That would be a terrible error. The euro crisis is sleeping, not dead.

The region is suffering from stagnation, low inflation, unemployment and debt. The crisis could easily rear its ugly head because the euro zone is not well placed to withstand a shock.

What’s more, it’s not hard to see from where such a blow could come. Relations with Russia have rapidly deteriorated following the downing of the Malaysia Airlines flight over Ukraine. If Europe imposes sanctions that make Moscow think again, these will hurt it too.

The euro zone needs to take measures to insure itself against disaster: looser monetary policy by the European Central Bank to boost inflation; a new drive for structural reform, especially in France and Italy but also in Germany; and some loosening of budgetary straitjackets.

from Global Investing:

The people buying emerging markets

We've written (most recently here) about all the buying interest that emerging markets have been getting from once-conservative investors such as pension funds and central banks. Last year's taper tantrum, caused by Fed hints about ending bond buying, did not apparently deter these investors . In fact, as mom-and-pop holders of mutual funds rushed for the exits,  there is some evidence pension and sovereign  wealth  funds actually upped emerging allocations, say fund managers. And requests-for-proposals (RFPs) from these deep-pocketed investors are still flooding in,  says Peter Marber, head of emerging market investments at Loomis Sayles.

The reasoning is yield, of course, but also recognition that there is a whole new investable universe out there, Marber says:

from Edward Hadas:

Growth in a rich and crowded world

Perky, productive robots, or nothing more than a few new smartphone apps? Cascading innovation, or just a few tweaks? Economists and technologists are debating what the future holds.

Pessimists like Robert Gordon of Northwestern University see decades of slow growth ahead, with little scope for big leaps forward. The optimists, among them Erik Brynjolfsson and Andrew McAfee of the Massachusetts Institute of Technology, expect new technological glories. Both sides are more wrong than right.

from Breakingviews:

Credit Suisse cost cuts mask uneven performance

By Dominic Elliott

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Credit Suisse’s cost-cutting is masking uneven performance overall. The Swiss bank’s ugly second-quarter net loss was down to an already announced 1.6 billion Swiss franc charge: part of a mega-fine to U.S. authorities for helping American citizens evade taxes. But even after stripping that out, investors can’t sleep easy.

from Hugo Dixon:

What is EU capital markets union?

What is capital markets union? Jean-Claude Juncker, the European Commission’s president-elect, has embraced the goal of creating one for the European Union. But so far it is more of a slogan than a set of policy actions. There’s no harm in having a catchy term to encompass a myriad of specific plans, but the idea needs fleshing out.

The first thing is to clarify the goals. One is to finance jobs and growth throughout the European Union. Another is to have a financial system that is better able to absorb shocks. Banks are shrinking and so can’t do the job of funding economic expansion on their own. Nor are they good at coping with crises. Indeed, they often magnify them, as the credit crunch and euro zone saga showed.

from Hugo Dixon:

UK prepares for possible EU failure

David Cameron looks to be preparing for the possibility that his plan to renegotiate Britain’s relationship with the European Union will fail. The UK prime minister would then campaign for the country to quit the EU in a referendum he plans to hold by 2017. That seems the best way to interpret his appointment of a eurosceptic foreign minister and the nomination of a little-known former lobbyist as Britain’s European commissioner.

This is not to say that Cameron wants to take Britain out of the EU – which would be a historical mistake. It is rather that he apparently thinks quitting could be an acceptable Plan B that would keep him in his job and his Conservative party reasonably united.

from Jack Shafer:

The truth is, you’ve never had the ‘right to be forgotten’

An illustration picture shows a Google logo with two one Euro coins

A recent ruling by Europe's top court has given its people a "right to be forgotten." Google and other search engines must now delete "inadequate, irrelevant, or no longer relevant, or excessive" information from search queries when a European individual requests it, even when the info is true. This isn't a classic case of censorship: the "offending" pages produced by newspapers and other websites will go untouched. Google and the other search engines just won't be allowed to link to them.

The court has largely left to the search engines how best to handle requests to decouple the names of petitioners from search results served, which has already produced major confusion, as well as a comically passive-aggressive response from Google, which has received more than 70,000 requests in the opening round, with 1,000 said to be arriving daily. (See this Washington Post editorial for a few examples of people who have succeeded in persuading Google to "delist" certain search results.)

from Counterparties:

Europe’s debt woes

The parent company of Portugal’s Banco Espírito Santo suspended trading this morning after shares fell 17% (its market value has declined 32% in this week alone). The bank — the country’s second-largest lender — missed interest payments on some short-term securities to “a few clients” earlier this week. Things haven’t been great for the Portuguese bank since December, when an audit revealed serious accounting irregularities in its parent company.

“Lisbon needs to sort out Banco Espírito Santo – fast,” say Breakingviews’ George Hay and Neil Unmack. “The Espírito Santo group has managed to create a national crisis out of a family drama,” they add. Specifically, Portuguese regulators need to keep a closer watch on the bank, which has traditionally been run by the Espírito Santo family, and step up to manage the fallout of what’s already done, “pushing through an orderly restructuring, and making sure it is equitable for creditors,” they write. However, Bloomberg View editors say that “Portugal can't easily afford to support the bank, should support be needed.” This is a problem, they say, because while recent reforms in Europe were supposed to break the ties between bank finances and sovereigns, it hasn’t really happened yet, leaving the Portuguese government on the hook.

from Breakingviews:

Cash calls misstate likely EU bank equity deficit

By Dominic Elliott

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

European bank cash calls could be misstating the sector’s overall equity deficit. Sixteen lenders have raised over 18 billion euros in equity this year, with Portugal’s Millennium BCP the most recent. Until the European Central Bank divulges its comprehensive assessment results in October, it’s not certain which ones are doing so out of desperation, and which are just being cautious.

from Breakingviews:

Philips lighting split is a bright idea

By Dominic Elliott

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A lighting split at Philips is a bright idea. The Dutch electronics group, which makes everything from defibrillators to air purifiers, has already spent years restructuring, pulling back from areas like televisions and home audio. Now Philips is moving its high-powered LED and car lights components operations into a standalone unit. Stepping out of their parent’s shadow should help the fast-growing businesses attract outside capital.

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