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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 MacroScope:

A dissenting voice

A train carrying the remains of the victims of Malaysia Airlines MH17 arrives in Kharkiv

Interesting intervention from former Russian finance minister Alexei Kudrin late yesterday who warned that Russia risked isolation and having its efforts to modernize derailed.

That sort of internal criticism is rare but Kudrin has done so before without censure which suggests Vladimir Putin is – or has been - willing to hear it. Kudrin added that Moscow should not intervene militarily in eastern Ukraine.

from MacroScope:

EU on Russia sanctions: slowly, slowly

Ukraine's President Poroshenko and Dutch ambassador to Ukraine Klompenhouwer commemorate victims of Malaysia Airlines Flight MH17 outside the Dutch embassy in Kiev

EU foreign ministers meet to decide how precisely to deploy sanctions agreed 10 days ago to hit Russian companies that help destabilise Ukraine and to block new loans to Russia through two multilateral lenders.

The EU foreign ministers are tasked with preparing a first list of people and entities from Russia that would be targeted. The number of individuals and companies to be penalized is up for grabs so there is scope to adopt a tougher posture.

from MacroScope:

Acid test of EU’s resolve over Russia

Emergencies Ministry member walks at the site of a Malaysia Airlines Boeing 777 plane crash near the settlement of Grabovo in the Donetsk region

EU leaders said over the weekend they would be prepared to impose tougher sanctions on Russia, giving Vladimir Putin one more chance to douse the violence in eastern Ukraine and help investigators do their work at the site of the crashed Malaysian airliner or face the consequences.

A statement from the British government said Germany’s Angela Merkel, Britain’s David Cameron and France’s Francois Hollande agreed on a telephone call that their ministers should be ready to announce a fresh round of sanctions at a meeting of the European Union's Foreign Affairs Council on Tuesday.

from MacroScope:

Sanctions tighten

Britain's PM Cameron, Portugal's PM Passos Coelho, Germany's Chancellor Merkel and Finland's PM Stubb attend an EU leaders summit in Brussels

EU leaders failed to get anywhere on sharing out the top jobs in Brussels last night but did manage another round of sanctions against Russia.

This time they will target Russian companies that help destabilize Ukraine and will ask the EU's bank, the European Investment Bank, to suspend new lending for Russia and seek a halt to new lending to Russia by the European Bank for Reconstruction and Development.

from Breakingviews:

French persist in dead-end strong-euro moaning

By Pierre Briançon

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

Once again, a senior executive of Airbus  is complaining about the euro’s strength. Fabrice Brégier, the pan-European aircraft maker's current boss, told the Financial Times that the European Central Bank should do something about the “crazy” currency, the strength of which is hurting earnings. A few years ago it was Louis Gallois, then chief executive of Airbus’ parent EADS, who regularly vented his frustration with the central bank. Curiously, those complaints are never heard when Airbus or EADS is headed by a German executive.

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.

from Breakingviews:

Sarkozy probe latest sign of sick French politics

By Pierre Briançon

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

France has sunk a little deeper into political paralysis with the corruption probe against Nicolas Sarkozy. The former president, who denies the charges, has been put under formal investigation for trying to convince a judge in France’s highest court to tell him about one of the many judicial probes of his behaviour.

from MacroScope:

Renzi and Schaeuble: Compare and contrast

renzi2.jpgItalian Prime Minister Matteo Renzi will spell out to the European Parliament his priorities for Italy’s six-month tenure of the EU presidency.
Emboldened by a strong showing in May’s EU elections, Renzi is pressing for a focus on growth rather than austerity and has even managed to get Germany to talk the talk.

At an EU summit last week, leaders accepted the need to allow member states extra time to consolidate their budgets as long as they pressed ahead with economic reforms. They pledged to make "best use" of the flexibility built into the bloc's fiscal rule book – not, you will notice, countenancing any change in the rules.

from Breakingviews:

BNP’s Prot should go

By Pierre Briançon

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

Baudouin Prot should go. The French establishment has circled the wagons, and there is little chance that the chairman of BNP Paribas, who was the bank’s chief executive at the time of the criminal activities it just admitted to, will resign or be asked to. He will then fail to do the decent thing after the bank’s unprecedented guilty plea and near-$9 billion fine.

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