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from MacroScope:

Putin – is he ready to deal?

Russian President Vladimir Putin and Ukrainian President Poroshenko are due to meet on the sidelines of the EU/Asia summit in Milan today to try to find a way out of the Ukraine crisis.

Germany’s Angela Merkel and French President Hollande will also meet the pair as part of a four-way contact group. The Kremlin has just said Putin and Merkel have "serious differences".

Although Putin announced this week that Russian forces near the border with Ukraine would be pulled back, Western officials want to see clear evidence that Moscow is withdrawing troops and military equipment from east Ukraine. The Ukrainian and Russian presidents spoke by telephone on Tuesday and discussed measures to restore peace.

The other big question is whether gas supplies to western Europe from Russia, via Ukraine, will continue unchecked through the winter. Any interruption would deal another blow to already struggling EU economies. On Thursday, Putin threatened to cut gas supplies to Europe if Ukraine steals from the transit pipeline to cover its own needs.

from MacroScope:

ECB in the dock

Protestors left some barbed wire in front of the euro sign landmark outside the headquarters of the ECB before its monthly news conference in Frankfurt

The European Court of Justice holds a first hearing on the legality of the European Central Bank's Outright Monetary Transactions programme. There won’t be anything definitive today but it serves to rekindle debate about the limits of the ECB’s powers.

In February, the German Constitutional Court asked the European Court to rule on the legality of OMT, the mechanism that drew a line under the euro zone crisis when it was unveiled in 2012. The court may give guidance about how best to make a final ruling which is expected in late spring next year.

from Breakingviews:

Asset price disinflation may be next big thing

By Edward Hadas

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

The great divergence may be about to come to an end. For investors in almost everything but the safest bonds, that is bad news.

from MacroScope:

Britain back on board for action in Iraq

An Iraqi SWAT trooper covers his ears as he fires a mortar bomb during clashes with Islamic State militants, north of Muqdadiyah

U.S. air strikes in Syria continued overnight with a monitoring group saying at least 14 Islamic State fighters were killed.

Having sat out so far, Britain said it would join strikes against militants but only in Iraq for now – which has asked for such help – not Syria. IS holds swathes of land in both countries.

from MacroScope:

What’s it all about, Mario?

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It’s ECB day and after Mario Draghi’s recent dramatic utterances, expectation for fresh action has grown, expectations which are likely largely to be dashed.

Draghi told the world’s central banking elite in Jackson Hole last month that market inflation expectations were falling markedly and the European Central Bank would use everything in its power to stabilize them in order to avoid a deflationary spiral. He also ripped up central banking orthodoxy by calling for more fiscal spending by governments at the same time as redoubling economic reform efforts. How to read that?

from MacroScope:

Euro zone recovery snuffed out

A BMW logo is seen the wheel of a car in Mexico City

A glut of euro zone GDP data is landing confirming a markedly poor second quarter for the currency area.

The mighty German economy has shrunk by 0.2 percent on the quarter, undercutting the Bundesbank’s forecast of stagnation. Foreign trade and investment were notable weak spots and the signs are they may not improve soon.

from MacroScope:

ECB’s fingers crossed for private loans growth

Mostly bereft of policy options except for outright quantitative easing, European Central Bank President Mario Draghi hopes that hundreds of billions of euros more in cheap loans to banks will boost inflation.

The jury will be out for a long time before we get any decision on whether they have worked.

from MacroScope:

Draghi vs Weidmann

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European Central Bank President Mario Draghi makes a lengthy appearance in the European Parliament in Strasbourg. He will doubtless reassert that the ECB would start printing money if necessary but, as we reported last week, policymakers are fervently hoping they won’t have to and that a raft of measures announced in June will do enough to lift the economy and inflation.

Bundesbank chief Jens Weidmann fired another broadside over the weekend, saying rates were too low for Germany and policy should remain expansive for no longer than absolutely necessary.

from MacroScope:

Draghi in London

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European Central Bank President Mario Draghi will deliver an evening keynote speech in London – the scene for his game-changing “whatever it takes” declaration in 2012.

He is unlikely to come up with anything so dramatic this time but is clearly trying to convince that the ECB could yet start printing money if required to avert deflation.

from MacroScope:

Juncker begins to fill in the gaps

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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.

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