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MOST CRITICAL TIPPING POINT ARTICLES TODAY | |||
CYRPUS
CYPRUS - Breaks Public Trust, Signals Enormnity of EU Banking Problems and Incites the Politics of Germany Distating Terms "I object to the entire scheme. First the bondholders should have been wiped out. If that was not enough then the deposits above the €100,000 deposit guarantee should have been hit. Then and only then should the average citizen been hit. ... And guess what. The average Cyprus citizen would likely not have been hit. Instead, the EU mandated a "screw every citizen" policy to protect the senior bondholders. This is not going to sit well in Cyprus or anywhere else, and all for a mere EU 5.8 billion Euros. The stupidity and arrogance of these nannycrats is staggering.The nannycrats think this will stop "contagion". They are nuts." Mish 03-17-13 PUBLIC TRUST It breaks a cardinal rule, namely public trust on which money relies. Had th public thought their savings were at risk from a restructuring, savers would have run on local banks, hence it is different from a tax SIGNALS & POLITICS Frederik Ducrozet, an economist with Credit Agricole, tells Business Insider: I think the Cyprus deal as it stands a big deal indeed, mostly in terms of bad signaling (as the ongoing normalisation in Eurozone capital flows remains fragile and vulnerable to sudden stops) and politics (Germany still imposing its rules despite growing discontent in the South). There were multiple reports which indicated that Germany told Cyprus: Confiscate your depositors' money or leave the Eurozone. That's a terrible political dynamic, and on top of Italy it exacerbates a bad overall political situation. #Cyprus Depositors Vent Fury Through Social Media 03-17-13 Zero Hedge
CYPRIOT PRESIDENT ADDRESSES NATION: We Were Given Two Options Like Blackmail 03-17-13 BI Cyprus President Nicos Anastasiades just addressed the nation in a dramatic Sunday night speech regarding the bailout of Cyprus, which will see a one-time tax on everyone with cash in Cypriot banks.
The basic gist:
Depositors Pay Price in Cyprus Bailout Deal 03-16-13 WSJ
The deal, announced early Saturday, marks the first time in the euro zone's five-year-old financial crisis that depositors in bloc's banks will lose money. "We have taken immediate measures so that electronic transfers cannot take effect before banks reopen on Tuesday," said the minister, who took office just two weeks ago. Jörg Asmussen, a member of the executive board of the European Central Bank, stressed that amounts in excess of the levy will remain fully available. Accounts held in Greek offshoots of Cypriot banks will also be spared. Cyprus, which first applied for help last summer, has proved a major headache for the euro zone, mostly because
As they struggled to bring down the rescue costs, euro-zone finance ministers and the troika of the European Commission, the ECB and the IMF chose to go ahead with the deposit tax despite warnings it could unsettle savers and investors in other weak European countries. "This is a special situation, with a very specific banking sector, with a very specific structure and size, which calls for this specific package," said Jeroen Dijsselbloem, the Dutch finance minister who chaired the discussions. He said similar measures weren't being considered for other countries that have received bailouts. Officials hoped that the contribution of depositors will make it easier to pass the rescue package through parliaments in rich countries like Germany, the Netherlands and Finland. Lawmakers there have balked at bailing out foreign depositors, many of them Russians, whom they suspected of taking advantage of Cyprus's lax banking laws.
The IMF, which had been the strongest advocate for having the bailout burden fall partly on depositors, will contribute to the rescue, said the fund's Managing Director Christine Lagarde. Two officials said the IMF is expected to chip in €1 billion of the overall €10 billion needed. Olli Rehn, the European Union's economic affairs commissioner, said Russia had indicated it was willing to give Cyprus more time to repay a €2.5 billion rescue loan from 2011, and may also lower the interest it charges. Mr. Sarris is expected to travel to Moscow on Wednesday to nail down the final terms. The struggle to agree on a bailout for tiny Cyprus, which accounts for just 0.2% of the euro zone's economy, once again underlines how vulnerable the currency union remains to economic shocks in any member nation. "Cyprus is of systemic relevance to the euro area," said Mr. Rehn. "Not to provide assistance to Cyprus would have posed a risk of undoing the progress that has been painstakingly made over the past year." Ministers also agreed to give Portugal and Ireland more time to repay their bailout loans, but didn't provide any details. The Cyprus Bailout Is Unfair, Short-Sighted, And Self-Defeating 03-17-13 The Economist IT IS not a fudge, but it is still a failure. The euro zone’s bail-out of Cyprus, which was sealed in the early hours of Saturday, did get the bill for creditor countries down from €17 billion to €10 billion, as had been rumoured. But the way it did so was somewhat unexpected.
Almost €6 billion of the savings for taxpayers in euro-zone countries came from losses imposed on depositors in Cyprus’s outsize banks. A one-off 9.9% levy will be imposed on all deposits over the insurance threshold of €100,000 before banks reopen after a bank holiday on Monday. That idea had been in the air for a while, not least because a lot of those uninsured deposits came from outside Cyprus, and from Russia in particular. The politics of saving wealthy Russians with money loaned by thrifty Germans were always going to be tricky. What had not been anticipated was a 6.75% loss for savers with deposits in Cypriot banks below the insurance ceiling. Cypriots woke up this morning to find bank branches closed to them. By the time they will be able to get at their money, it will be too late. The offer of equity in banks to replace the value of their savings is meant to be a balm but it’s not a choice they would have made. Why this decision was taken is not yet clear. The most plausible explanation is that the Cypriot government itself preferred to spread the pain rather than wipe out non-resident depositors and jeopardise its long-term prospects as an offshore financial centre for Russian and other money. Whatever the rationale, it is a mistake for three reasons.
The bail-out appears to move Europe further away from the institutional reforms that are needed to resolve the crisis once and for all. Rather than using the European Stability Mechanism to recapitalise banks, and thereby weaken the link between banks and their governments, the euro zone continues to equate bank bail-outs with sovereign bail-outs. As for debt mutualisation, after imposing losses on local depositors, the price of support from the rest of Europe is arguably costlier now than it ever has been. It is also hard to square this outcome with the ongoing overhaul of finance. The direction of efforts to improve banks’ liquidity position is to encourage them to hold more deposits; the aim of bail-in legislation planned to come into force by 2018 is to make senior debt absorb losses in the event of a bank failure. The logic behind both of these reform initiatives is that bank deposits have two, contradictory properties. They are both sticky, because they are insured; and they are flighty, because they can be pulled instantly. So deposits are a good source of funding provided they never run. The Cyprus bail-out makes this confidence trick harder to pull off. Other than that, it is a really good deal. MOHAMED EL-ERIAN: The EU Had Four Valid Reasons To Force Cypriot Depositors To Pay Up 03-17-13 BI According to El-Erian, the EU actually had four valid reasons to make such an unprecedented move.
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03-18-13 | EU CYPRUS |
4- EU Banking Crisis |
CRONY CAPITALISM - Understanding Cyprus Top Banking Analyst: Subsidies to Giant Banks Exceed $780 Billion Dollars Per YEAR 03-13-13 Washingtons Blog
Trillions In Subsidies to the Giant Banks Are Continuing to This Day
Preface: Bloomberg’s recent estimate that the big banks are subsidized to the tune of $83 billion dollars per year created tremendous controversy. But – as shown below – the real number is many times larger. Chris Whalen is one of America’s top banking analysts. Well-known economist Nouriel Roubini notes:
Whalen notes today that the big American banks get a subsidy in excess of $780 billion dollars per year. Specifically, Whalen estimates the following types of subsidies to the giant banks:
That totals $780 billion per year. But Whalen notes that there are many other subsidies as well:
The bailouts of the big banks amount to trillions of dollars, are never-ending … and continue to this day. (Indeed, the government is arguably paying trillions of dollars more in unnecessary interest payments just to have the banks “create” money, instead of creating it itself … as the Founding Fathers may have envisioned.) Whalen notes that the big banks are not really profitable:
Indeed, they are government sponsored enterprises where all of the profits are privatized, and all of the losses socialized. And the big banks are not helping – but are rather destroying – the economy. Indeed, failing to break up the big banks – and the malignant, symbiotic relationship between D.C. politicians and the banking giants – is destroying our country. |
03-18-13 | THEMES | CRONY CAPITALISM |
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - Mar. 17th - Mar. 23rd, 2013 | |||
RISK REVERSAL | 1 | ||
SOVEREIGN DEBT CRISIS [Euope Crisis Tracker] | 2 | ||
RISK REVERSAL | 3 | ||
CHINA BUBBLE | 4 | ||
JAPAN - DEBT DEFLATION | 5 | ||
BOND BUBBLE | 6 | ||
CHRONIC UNEMPLOYMENT | 7 | ||
GEO-POLITICAL EVENT | 8 | ||
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MACRO News Items of Importance - This Week | |||
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CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES | |||
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COMMODITY CORNER - HARD ASSETS | |||
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2013 - STATISM |
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2012 - FINANCIAL REPRESSION |
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2011 - BEGGAR-THY-NEIGHBOR -- CURRENCY WARS |
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2010 - EXTEN D & PRETEND |
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CORPORATOCRACY - CRONY CAPITALSIM | |||
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