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Monday, January 16

16th Jan - Holiday is Roundup Day

Market holiday, less quality material. Starting from tomorrow, I am shortening my morning posts and occasionally only posting once in the evening.

To the links:

Press Digest: WSJ, NYT
FX option vols – Saxo
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
Tracking Europe’s Debt Crisis – NYT

EURO CRISIS
GENERAL
The Massendowngrade EffectEdward Hugh / Fistful of Euros
Complete roundup of the euro crisis, extensively hyperlinked.

The Party’s Over in the EurozoneDan Steinbock / EconoMonitor
The postwar era of illusionary trade-offs – an expensive social model without the robust postwar growth – is now fading into history in the Eurozone… After the dust settles, the Eurozone we know today will look very different. The region’s problems are systemic and pervasive. In structural terms, Greece already looks like an emerging economy.

The ECB is very p.o.’dFinance Addict
ECB board member wrote an angry letter on Friday, complaining that the fiscal treaty draft is being watered down. Two weeks to go before the draft should be acceptable by all parties – including Mr. Market.

The End of German Merkel and SarkozyMish’s
Sarkozy might not even make the second round in the elections, and Merkel might have a hard time keeping the coalition together until the elections in 2013.

More on euro conspiracy theoriesThe World / FT
Are the MEP’s insane, stupid or just very clever and trying to get the popular opinion behind them?

GREECE
Watch the Greeks, not the agenciesButtonwood’s / The Economist
Greece's debt is a complex issue. Clearly, it must default to get its debt-to-GDP ratio down. But it also has a competitiveness problem that requires either a devaluation (not possible within the euro) or a fall in its costs…

More Thoughts on the Greece's PSIMarc to Market
This and the following are the best outlines and views I’ve seen on the negotiations.

Greece Dispatches Officials to US Over Default Fears; Senior S&P Official Expects Default Soon; Greek One-Year Bond Yield Touches 415%; Ducks Lined Up for Merkel Orchestrated DefaultMish’s
The hangup preventing an agreement is the coupon rate. Germany has proposed a 2% coupon rate. That would drive the losses on Greek bonds from 60% to 80%. Is this a signal that Chancellor Merkel has had enough of bailouts and wants to dump Greece? I think so and talks with the IMF suggest so as well.

THE DOWNGRADES
EU commission: 'We know better than ratings agencies' eubobserver.com
Commission spokesman Bailly said they have confidential, better data than S&P. When challenged on why Brussels does not make the good news public, he answered it would take too much time.

What S&P’s Downgrades Mean for the Euro’s FutureThe Curious Capitalist / TIME
Okay non-technical roundup: austerity has a feedback, crisis now a boxing match of who retains the burden of reform: private or public, core or periphery.

S&P Downgrades EFSF From AAA To AA+, May Cut More If Sovereign Downgrades ContinueZH
With the press release, key points highlighted. Also
Portugal got downgraded today.