Stop me if you heard this one before - banks now closed until Thursday ( of which month ? ) , the vote set for Monday , then moved to Tuesday , now delayed again ! Quelle Surprise ? Cyprus situation clear as mud , the scheme keeps changing and becoming more dubious by the hour !
http://www.silverdoctors.com/and-this-is-why-the-cypriot-parliament-depositor-haircut-vote-is-delayed-indefinitely/
Want to bet this won't be the last offer ?
http://www.silverdoctors.com/latest-ecb-haircut-offer-cyprus-depositors-0-russian-oligarchs-15-6/
http://openeuropeblog.blogspot.com/2013/03/the-great-cypriot-game-how-important-is.html
( Is Russia planning to have the last laugh though..... )
http://www.zerohedge.com/news/2013-03-18/eurogroup-folds-telld-cyprus-safeguard-depositors-under-%E2%82%AC100k-euros
Submitted by Tyler Durden on 03/18/2013 16:08 -0400
http://www.zerohedge.com/news/2013-03-18/complete-eurogroup-statement-cyprus
Submitted by Tyler Durden on 03/18/2013 16:57 -0400
http://www.zerohedge.com/news/2013-03-18/majority-cypriot-parties-refuse-support-deposit-loss-law
Submitted by Tyler Durden on 03/18/2013 15:03 -0400
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_18/03/2013_488440
Published on March 18, 2013
http://www.zerohedge.com/news/2013-03-18/will-russia-kill-cyprus-bailout
Submitted by Tyler Durden on 03/18/2013 08:48 -0400
And have the wise men in the Troika not considered how their scheme has basically assured deposit flight for all monies able to flee further confiscation ?
http://www.zerohedge.com/news/2013-03-18/lesson-1-greece-lesson-2-cyprus-pay-attention
Submitted by Tyler Durden on 03/18/2013 08:18 -0400
Submitted by Tyler Durden on 03/18/2013 06:58 -0400
http://www.silverdoctors.com/and-this-is-why-the-cypriot-parliament-depositor-haircut-vote-is-delayed-indefinitely/
AND THIS IS WHY THE CYPRIOT PARLIAMENT HAIRCUT VOTE IS DELAYED INDEFINITELY
Sunday’s scheduled Cypriot Parliament vote was delayed until Monday as the banksters did not have enough votes. Today’s scheduled 4pm vote has been delayed till Tuesday, with reports that the vote could be delayed as late as Friday (while the Cypriot banking system remains shut down in a bank holiday until the banksters receive their proper vote).
Troika now urging #Cyprus to exempt all deposits below €100K from bank levy. Anastasiades still resisting:on.ft.com/16F8NL2 via @ft
Word from Nicosia that they've canceled the bailout vote for tomorrow. #Cyprus
Want to bet this won't be the last offer ?
http://www.silverdoctors.com/latest-ecb-haircut-offer-cyprus-depositors-0-russian-oligarchs-15-6/
LATEST ECB HAIRCUT OFFER: CYPRUS DEPOSITORS- 0%, RUSSIAN OLIGARCHS- 15.6%
Reuters headlines are reporting that the Eurozone finance bureaucrats were looking athttp://openeuropeblog.blogspot.com/2013/03/the-great-cypriot-game-how-important-is.html
( Is Russia planning to have the last laugh though..... )
Monday, March 18, 2013
The Great Cypriot Game - How important is gas to Cyprus' economic and geopolitical future?
Update 12:00 18/03/13:
Russian Finance Minister Anton Siluanov has had some interesting things to say on the deposit levy (via Reuters):
***************** Original post ********************************
In the middle ages, Cyprus was a key battle ground between great powers seeking dominance in the region. Well, the country - which, remember, only accounts for 0.2% of eurozone GDP - could become a hotspot once more (though we shouldn't be over-excited about this).
According Greek Reporter, Gazprom made an offer over the weekend to the Cypriot government to fund the bank restructuring planned under the Cypriot bailout (which is set to cost up to €10bn) in exchange for exclusive exploration rights for Cypriot territorial waters. How reliable this story is remains to be seen, but it does hint at the geopolitical tension which we have been warning about.
So how important is the gas element for Cyprus' economic and geopolitical future? Well, there is no denying that Cyprus could potentially be sitting on top of gas reserves worth many times its GDP. However, as a revenue stream it is far from a sure thing. Here is how we put it in our flash analysis released on Friday:
Russian Finance Minister Anton Siluanov has had some interesting things to say on the deposit levy (via Reuters):
It seems Russia is none too happy with the eurozone approach, unsurprisingly. If it does refuse to ease the terms of the €2.5bn bailout loan it previously gave Cyprus, it could hit Cypriot funding requirements, although probably not by a substantial amount. Still it could result in eurozone bailout funds being used to pay off a Russian loan in the near future - something which may not sit well with German taxpayers. Again, the interesting fall out will be to see how this impacts Russia's approach to Cyprus and the EU more broadly."We had an agreement with colleagues from the euro zone that we'll coordinate our actions.""It turns out that the euro zone actions on the introduction of the deposit levy took place without discussions with Russia, so we will consider the issue of restructurisation of the (Cyprus) loan taking into account our participation in the joint actions with the European Union to help Cyprus."
***************** Original post ********************************
In the middle ages, Cyprus was a key battle ground between great powers seeking dominance in the region. Well, the country - which, remember, only accounts for 0.2% of eurozone GDP - could become a hotspot once more (though we shouldn't be over-excited about this).
According Greek Reporter, Gazprom made an offer over the weekend to the Cypriot government to fund the bank restructuring planned under the Cypriot bailout (which is set to cost up to €10bn) in exchange for exclusive exploration rights for Cypriot territorial waters. How reliable this story is remains to be seen, but it does hint at the geopolitical tension which we have been warning about.
Gazprom is known to be very close to the Russian government and despite Russian President Vladimir Putin overtly slamming the deposit tax - calling it "unfair, unprofessional and dangerous" - it is unlikely that they would let this opportunity pass untouched. Fortunately, the Cypriot government is said to have rejected the deal off the bat, but if displeasure towards the eurozone and the EU grows, the Russian option may become increasingly appealing.
So how important is the gas element for Cyprus' economic and geopolitical future? Well, there is no denying that Cyprus could potentially be sitting on top of gas reserves worth many times its GDP. However, as a revenue stream it is far from a sure thing. Here is how we put it in our flash analysis released on Friday:
Recent exploration has suggested Cyprus may have between €18.5bn and €29.5bn (103% - 163% of GDP) in untapped gas reserves lying in its territorial waters (according to Deutsche Bank). There have been rumours that this future revenue stream could be incorporated or used to backstop the bailout somehow. Although an appealing idea, there is still a huge amount of uncertainty around the real value of these reserves and how soon they can begin producing revenue
So far, one field has been explored (known as Block 12) and estimates of its potential value go as high as €100bn. See below for a useful diagram (via Baker Tilley):
However, there are a few key points to remember when considering the impact of this on the Cypriot bailout:
- Exports from the gas fields are not expected to begin until 2019 at the earliest. Cyprus runs out of cash in June this year, a short and medium term solution is needed now. Tapping the further reserves (beyond Block 12) will take even longer.
- There needs to be significant investment, potentially up to $4bn to begin extracting the gas – the Cypriot government certainly cannot afford this. Although there is sizeable interest in the exploration rights, the FT’s Nick Butler notes that Noble Energy (which explored Block 12) is not bidding for further rights, which raises some concerns.
- Furthermore, Turkey is still contesting Cyprus’ ownership of these reserves. Although Cyprus currently has the backing of the international community, this dispute could further hold up progress in tapping these reserves. Many of the energy companies looking into Cyprus also have interests in Turkey and may not want to put those at risk.
To us then, the offer by the Cypriot government to provide Cypriot depositors with bonds linked to gas revenues sounds like a nice idea, but will not compensate these depositors for some years, at best.
But, remember with a view to Moscow, this is definitely one to watch.
But, remember with a view to Moscow, this is definitely one to watch.
And with the vote stalled in Parliament , Wednesday trip of the Cypriot Fin Min to Moscow may have added meaning !
http://www.globalpost.com/dispatch/news/afp/130318/cypriot-finance-minister-visit-russia
Cypriot Finance Minister Michalis Sarris is expected to visit Russia on Wednesday, the Russian Finance Ministry told AFP, with Nicosia keen to discuss restructuring a loan from Moscow.
Cyprus is planning a controversial bank levy on private depositors, a move that Russian President Vladimir Putin on Monday described as "unfair, unprofessional and dangerous."
The purpose of the Cypriot minister's visit has not been officially announced but Moscow in 2011 lent Cyprus 2.5 billion euros ($3.23 billion) as a bailout.
Last month, Russian Finance Minister Anton Siluanov raised the possibility of further financial help by easing the terms of the 2011 loan.
Russians are among the most affected by the Cypriot tax on bank accounts.
Estimates vary but Moody's rating agency estimated the holdings of Russian businesses in Cyprus at $19 billion, while another $12 billion was held there by Russian banks in September last year.
http://www.zerohedge.com/news/2013-03-18/eurogroup-folds-telld-cyprus-safeguard-depositors-under-%E2%82%AC100k-euros
Eurogroup Folds: Tells Cyprus To "Safeguard" Depositors Under €100,000 Euros; Angry Russians To Get Even Angrier
Reuters headlines crossing the closing tape, supposedly out of a (very credible) Greek source, according to whom the Eurogroup will give Cyprus more flexibility on bank levy, and that Cyprus should safeguard depositors under €100,000, even as the full €5.8 billion deposit goal must still be hit. Well, at least they were not kidding with the whole plan. This was not unexpected - as we tweeted last night:
And while after all this, it is perfectly obvious that ordinary Cypriots just can't wait to start depositing money again with their local friendly bank, there are two very key questions which remain woefully unanswered:
i) how will Europe restore the confidence it has lost by even contemplating insured deposit impairments, and
ii) a deposit haircut is still a deposit haircut, and as noted earlier, the majority of Cypriot parties have announced they would vote against any bank levy, not just that which is determined to be "fair" by 10 European bureaucrats, and supposedly only hurts those evil, evilRussian billionaires.
In other words, the final word still remains with the Cypriot parties. Let the horse trading begin.
Finally, the Russian response to the discovery that haircuts on big deposits just rose from 9.9% to over 15.6% will hardly be warm and cuddly. Now may be a good time to ban gun (and plutonium) sales to angry Russian billionaire oligarchs.
P.S. All of this coming from a Greek finance minister source (speaking on behalf of Europe) means it is all 100% accurate, credible and true. We can't wait for the refutation.
P.P.S for Cypriot banks, if you see this man coming to make a withdrawal, it may be a good idea to run.
http://www.zerohedge.com/news/2013-03-18/complete-eurogroup-statement-cyprus
Complete Eurogroup Statement On Cyprus
One key, and very important, thing to note per the statement below, is that nowhere in the statement does the Eurogroup say that no levy will be taxed on those with €100,000 and less in deposits. What is said is the following: "The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below EUR 100.000.The Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on 16 March, provided that it continues yielding the targeted reduction of the financing envelope and, hence, not impact the overall amount of financial assistance up to EUR 10bn."
Bottom line: it is absoutely not clear what the levy on small "insured" deposits will be, if any, and it will be up to the Cyprus government to define it: a decision which will make or break the parliamentary vote, whose passage this statement will hardly make any easier.
From the Eurogroup
Statement by the Eurogroup President on CyprusThe Eurogroup held a teleconference this evening to take stock of the situation in Cyprus I recall that the political agreement reached on 16 March on the cornerstones of the adjustment programme and the financing envelope for Cyprus reflects the consensus reached by the Cypriot government with the Eurogroup. The implementation of the reform measures included in the draft programme is the best guarantee for a more prosperous future for Cyprus and its citizens, through a viable financial sector, sound public finances and sustainable economic growth.I reiterate that the stability levy on deposits is a one-off measure. This measure will - together with the international financial support - be used to restore the viability of the Cypriot banking system and hence, safeguard financial stability in Cyprus. In the absence of this measure, Cyprus would have faced scenarios that would have left deposit holders significantly worse off.The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below EUR 100.000. The Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on 16 March, provided that it continues yielding the targeted reduction of the financing envelope and, hence, not impact the overall amount of financial assistance up to EUR 10bn.The Eurogroup takes note of the authorities' decision to declare a temporary bank holiday in Cyprus on 19-20 March 2013 to safeguard the stability of the financial sector, and urges a swift decision by the Cypriot authorities and parliament to rapidly implement the agreed measures.The euro area Member States stand ready to assist Cyprus in its reform efforts on the basis of the agreed adjustment programme.
http://www.zerohedge.com/news/2013-03-18/majority-cypriot-parties-refuse-support-deposit-loss-law
Majority Of Cypriot Parties Refuse To Support Deposit-Loss Law
Update: Just as we predicted - Cyprus president Anastasiades to tell Eurogroup he lacks support and votes to pass levy - Antenna
Moments ago the state-run CYBC media reported perhaps the most material news ahead of tomorrow's Cyprus parliamentary vote, which at this point will likely be rescheduled once more, for the simple reason that yet another key Cypriot party, DIKO, has come out and decided to vote against the depositor-loss law on the Parliament's docket tomorrow. This is notable because while yesterday JPM, in its "bazooka" assessment speculated that DIKO would vote for the law which made sense previously as DIKO had supported president Anastasiades in his election bid, which gave a pro-bailout vote a one vote margin. As a result of today's flip, the party's 9 votes will now be aligned with the "anti" votes of AKEL and EDEK, whose combined 33 votes mean the proposed bailout law has no chance of passing as they have the needed 29 votes to block any bail-inout proposal! The Eurogroup better come up with some very convincing adjustments to the deposit haircut scheme in its ongoing conference, or else tomorrow's vote will be quite painful for the Fed's "wealth effect creation vehicle", once upon a time known as the S&P 500.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_18/03/2013_488440
Report: Anastasiades tells Rehn: 'I told you tax wouldn't pass. Regards to Mrs Merkel'
Cypriot President Nicos Anastasiades held a telephone conversation with European Economic and Monetary Affairs Commissioner Olli Rehn on Monday night to inform him that there might not be enough parliamentary support for a deposit tax on the island.
Cypriot MPs were due to debate on Tuesday a tax on deposits but it looks like Anastasiades will not be able to get enough votes to approve the one-off levy, which was decided at Eurogroup meeting in the early hours of Saturday.
Anastasiades is also reported to have spoken to German MEP Elmar Brok, a member of Chancellor Angela Merkel’s CDU party who is close to the German leader.
According to Mega TV, Anastasiades is reported to have said to Rehn and Brok: “When I warned you that there would not be a parliamentary majority to pass the agreement, you didn’t want to listen. Give my regards to Mrs Merkel.”
The Cypriot president’s reported comments have not been confirmed.
European Bank 'Jogs' And The Final Kick Of The Can
Authored by Juhani Huopainen, originally posted at his blog at TradingFloor.com,
An interesting compromise on Cyprus: a EUR 5 billion bail-in by a small haircut on deposits, with bank stocks offered in return to the depositors and a EUR 10 billion bailout from the EU, coupled with the usual austerity requirements.
By acting after the Italian elections, options were limited
The option of conducting a bail-in (confiscating deposits) was tabled months ago and leaked. The deposit flight from Cyprus was measured in billions because of that. Guess if the leak will ever be investigated? The European Union had painted itself in the corner: not wanting to deal with Cyprus immediately has proven costly. The EU had hoped for a pro-euro, pro-austerity government in Italy, but the plan backfired. The idea was that by postponing the bailout it would help in the elections.
It was impossible to wait until the German elections, as Cyprus has a bond maturity in June that it would have been unable to pay. As the maturity date was so close, there was no time to take the bond owners to court (the bonds were issued under English law, so a simple haircut was not possible). The only way to fund the bailout was either a gift from the EU or deposit confiscation. They did both.
Russia obviously made some thinly veiled threats that they would only accept a deposit haircut of below 10 percent, so in order to rake in enough money from the deposits, the EU had to go for the little people’s accounts as well – thus breaking their word on the guaranteed deposits below EUR 100,000. Even with that, the EU has to fork over EUR 10 bn as the confiscation will bring in only EUR 5 bn.
Warming up for a bank jog?
Personally I believe a simple gift of EUR 5 bn of free money would have been a better choice. The lending of EUR 10 bn raises the debt/GDP, lowers growth prospects, forces austerity and has the danger of creating a negative spiral that could turn the island into a second Greece: a continuous source of headaches and disappointment to the EU. The haircut is small and while commissioner Rehn stated that this is a one-off and Cyprus is a special case, whether the depositors in Spain and Italy believe this remains to be seen. If not, the bank jogs slow bank runs could start again. That could push Spain to eventually apply for the ECB's OMT-program. Perhaps that is what Brussels and the ECB actually want. But with the IMF and Germany coming to the negotiations demanding a 40 percent deposit cut, ‘more Europe’ is no longer a winning campaign promise.
Further apart or closer still?
There are two ways of seeing this: #1 Europe just became even more dysfunctional and fragmented, or #2 it has become more unified in doing whatever it takes to protect investors’ interests:
Personally, I’d vote for #1. The commentary is already utterly negative, but it might take some time for the markets to realize that the upside in crisis country bonds is minimal and there are no restrictions stopping the bank jogs. Next week in Europe will be very, very interesting.
Sunday funnies:
On Friday morning the IMF posted a large report on Europe where they stated that the deposit guarantee scheme in the euro area must be ironclad. On Friday evening they happily agreed to go against their own advice.
Cyprus has agreed to an outside audit of its banking sector, but Nicos Anastasiades, the president, says it will “never” accept a haircut of depositors – Financial Times, March 14, 2013
http://www.cyprus-mail.com/cyprus/banks-remain-shut-tuesday-and-wednesday/20130318
Banks to remain shut Tuesday and Wednesday |
Published on March 18, 2013
BANKS in Cyprus will be shut on Tuesday and Wednesday pending a decision by parliament to approve a levy on bank depositors, a government source told Reuters.
"Tuesday and Wednesday are bank holidays," the source said. A decree will be released shortly from the Finance Ministry to this effect, he said.
http://www.zerohedge.com/news/2013-03-18/will-russia-kill-cyprus-bailout
Will Russia Kill The Cyprus Bailout?
While hope appears to still be alive that the Cypriot government will hand over their natural resources to wealthy Russia (or Gazpromia) and all depositors (Russians and Cypriots alike will be saved), we suspect there is a much bigger threat from Russia that has not been discussed. As Monument Securities' Marc Ostwald notes "there's a 50/50 chance Cypriot bailout fails because of the 'massive danger' a large amount of Russian cash flees Cyprus following deposit tax plans." Russia has ~$60 billion exposure to Cyprus, including loans to companies registered in the country and after the haircut 90% of Russian deposits will still be free to leave the country if the levy is approved.
The critical point is that, should this occur (such a large outflow of Russian cash - dwarfing in fact the size of the bailout package itself) it is hard to see how the Cypriot banking system could survive (even with the assistance of the ECB's ELA). Russia's Finance Minister Siluanov expressed disappointment that Russia was not involved in the deal and it is clear that should those outflows leave Cyprus, they are unlikely to end up in other European nation banks.
It seems the pre-emptive contagion and anxiety of this 'levy' have only just begun.
And have the wise men in the Troika not considered how their scheme has basically assured deposit flight for all monies able to flee further confiscation ?
http://www.zerohedge.com/news/2013-03-18/lesson-1-greece-lesson-2-cyprus-pay-attention
Lesson 1: Greece; Lesson 2: Cyprus - Pay Attention
- Bond
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- default
- European Central Bank
- European Union
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- Sovereign Debt
Submitted by Mark J. Grant, author of Out of the Box,
Lest We Forget
The main issue is not Cyprus. Cyprus just happens to be the nation where the confiscation is to be enacted. Cyprus is the scapegoat. The European Union, the ECB and the IMF are the villains. Cyprus is the mostly unwilling recipient. What has taken place in Cyprus is far less important than the larger issue which is a forfeiture of private property being demanded by the nations on the Continent and by an international organization headquartered in Washington D.C. That would be in America.
"The leading banker in Amsterdam is now the pastry chef in our kitchen."
-Casablanca
In the case of the Greek default the country was told by the same organizations to retroactively change the covenants of their bond indenture. They did this. In the case of Cyprus, Europe has told this small nation to seize a portion of all of the bank accounts in the country so as to partially fund its debt. In both cases neither Greece nor Cyprus made the decisions; they were made by the European Union and forced upon the host countries by the threat of capital to be provided or not.
(AP) "Jean-Claude Juncker, head of the Eurogroup meeting of Eurozone finance ministers, has vowed that a Greek default was not an option and would be avoided even after Athens' admission that it would miss its deficit-reduction targets raised questions about whether it would receive its next bailout loan."
-October 3, 2011
Right up until the day it happened the President of Cyprus claimed it would never happen. Then, faced with bankruptcy, the fellow folded. I do not take a position here upon his actions, he has been in office for three weeks, but I do take a position upon the tyranny of the governmental bodies in question; they have demanded and forced the forfeiture of private property for their own betterment. I state with authority; if they can do it in Greece and then again in Cyprus they can do it anywhere and under any guise they like. They can wield the army of their pen, of their money, as an effective armament on the battlefield, to change what they like, when they like, all for the good of the State.
"Every collectivist revolution rides in on a Trojan horse of ‘emergency’. It was the tactic of Lenin, Hitler, and Mussolini. In the collectivist sweep over a dozen minor countries of Europe, it was the cry of men striving to get on horseback. And ‘emergency’ became the justification of the subsequent steps. This technique of creating emergency is the greatest achievement that demagoguery attains."
-Herbert Hoover
Deposit Insurance at a bank, any bank in Europe, is now meaningless. A bond indenture, any clause, any paragraph, any promise or assurance; now meaningless. The notion of private property, land, cash, house; now meaningless. The European Union will take what they want as they deem it necessary and the IMF will follow along. The question has been asked, during the last few days, why the bond holders of Cyprus were not tagged along with the bank deposits. I can answer the question. Virtually all of the Cyprus sovereign debt is governed under British law and so the EU did not pursue this course.
I recall the movie, Casablanca, where the Germans stood up to sing their National Anthem and the French responded with the "Marseilles." It is too bad that the French have forgotten how to sing this song but then, apparently, all of the nations in the EU have forgotten how to sing their own songs.
Greece came first. Lesson one and "shame on you." Cyprus comes second and now "shame on me." What will come next? What will you tell your partners or your shareholders when they say, "You should have known." You will have no excuse! The Europeans will take what they want and when they want it and to have money invested there now only has one excuse; masochism. Neither you nor I have any idea of what they might do next. When a government changes an indenture retroactively as a condition of funding and then demands that private property be seized as a condition of funding then this government, the European Union, will stop at nothing, find no boundary or fence, to halt its ambitions.
When Lesson three comes, and it will, I will not be kind. I will say; "I told you so!"
The main issue is not Cyprus. Cyprus just happens to be the nation where the confiscation is to be enacted. Cyprus is the scapegoat. The European Union, the ECB and the IMF are the villains. Cyprus is the mostly unwilling recipient. What has taken place in Cyprus is far less important than the larger issue which is a forfeiture of private property being demanded by the nations on the Continent and by an international organization headquartered in Washington D.C. That would be in America.
"The leading banker in Amsterdam is now the pastry chef in our kitchen."
-Casablanca
In the case of the Greek default the country was told by the same organizations to retroactively change the covenants of their bond indenture. They did this. In the case of Cyprus, Europe has told this small nation to seize a portion of all of the bank accounts in the country so as to partially fund its debt. In both cases neither Greece nor Cyprus made the decisions; they were made by the European Union and forced upon the host countries by the threat of capital to be provided or not.
(AP) "Jean-Claude Juncker, head of the Eurogroup meeting of Eurozone finance ministers, has vowed that a Greek default was not an option and would be avoided even after Athens' admission that it would miss its deficit-reduction targets raised questions about whether it would receive its next bailout loan."
-October 3, 2011
Right up until the day it happened the President of Cyprus claimed it would never happen. Then, faced with bankruptcy, the fellow folded. I do not take a position here upon his actions, he has been in office for three weeks, but I do take a position upon the tyranny of the governmental bodies in question; they have demanded and forced the forfeiture of private property for their own betterment. I state with authority; if they can do it in Greece and then again in Cyprus they can do it anywhere and under any guise they like. They can wield the army of their pen, of their money, as an effective armament on the battlefield, to change what they like, when they like, all for the good of the State.
"Every collectivist revolution rides in on a Trojan horse of ‘emergency’. It was the tactic of Lenin, Hitler, and Mussolini. In the collectivist sweep over a dozen minor countries of Europe, it was the cry of men striving to get on horseback. And ‘emergency’ became the justification of the subsequent steps. This technique of creating emergency is the greatest achievement that demagoguery attains."
-Herbert Hoover
Deposit Insurance at a bank, any bank in Europe, is now meaningless. A bond indenture, any clause, any paragraph, any promise or assurance; now meaningless. The notion of private property, land, cash, house; now meaningless. The European Union will take what they want as they deem it necessary and the IMF will follow along. The question has been asked, during the last few days, why the bond holders of Cyprus were not tagged along with the bank deposits. I can answer the question. Virtually all of the Cyprus sovereign debt is governed under British law and so the EU did not pursue this course.
I recall the movie, Casablanca, where the Germans stood up to sing their National Anthem and the French responded with the "Marseilles." It is too bad that the French have forgotten how to sing this song but then, apparently, all of the nations in the EU have forgotten how to sing their own songs.
Greece came first. Lesson one and "shame on you." Cyprus comes second and now "shame on me." What will come next? What will you tell your partners or your shareholders when they say, "You should have known." You will have no excuse! The Europeans will take what they want and when they want it and to have money invested there now only has one excuse; masochism. Neither you nor I have any idea of what they might do next. When a government changes an indenture retroactively as a condition of funding and then demands that private property be seized as a condition of funding then this government, the European Union, will stop at nothing, find no boundary or fence, to halt its ambitions.
When Lesson three comes, and it will, I will not be kind. I will say; "I told you so!"
http://www.zerohedge.com/news/2013-03-18/overnight-ramp-attempt-fizzles-news-russia-may-reconsider-cyprus-bailout-role-bailou
News Russia May Reconsider Cyprus Bailout Role, Bailout Vote Delay Crushes Overnight Ramp Attempt
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As expected, it is all about Cyprus this morning, and overnight, and just as naturally it wouldn't be a centrally-planned market without the generic BTFD overnight ramp attempt, which we got from the EURUSD, as the pair rose from sub 1.29 to 1.2973, which also pushed the US futures up to nearly fill half the overnight gap lower. Citi explained this, observing the "EUR/USD squeezed higher on reports Cyprus bailout terms may be eased, CitiFX Wire says", but it did add that "selling was likely to materialize; flow has 60% bias in favor of downside, Seeing heavy net selling, mainly from leveraged funds." Naturally, the market does what it does best - clutches at straws, although not even this centrally-planned market could ignore news that today's Cyprus parliament vote has been cancelled, that banks will likely remain closed tomorrow, and that a vote may not happen until Friday, which likely means the bank holiday is about to stretch to one week, and possibly much longer as Cyprus is terrified to open its banks to the fury of scrambling "bank-runners."
As for Cyprus, the absolute confusion deepens following comments from the ECB's Asmussen that the ECB did not insist on a Cyprus bank levy structure. This is confusing, and comes on the heels of last night's comments from German FinMin Schauble in which he blamed the ECB, Commission and Cypriot government for the wide bail in. So if the ECB, Germany, and the Cypriot government all did not want a deposit confiscation, who did? Russia?
And speaking of the Russian wildcard, things are starting to get interesting: first the country reported, via RIA, that it sees no impact on capital movement from Cyprus tax, which is interesting considering all bank transfers in and out of the island have been frozen.
But then things started to get interesting following another RIA report citing finance minister Siluanov, that Russia may reconsider its role in the Cyprus rescue following the bank tax. Siluanov added that bank tax breaks the plan for joint steps on Cyprus and that the decision was made without Russia (which is expected since Russia is not part of the Eurozone).
Russia concluded the overnight headlines after deputy economy minister Sergei Belyakov told reporters in Moscow that the Cyprus decision casts doubts on the EU banking system. Here is why all of Europe can kiss Russian oligarch savings goodbye: risks to safety of retail and corporate bank deposits “cast doubt on the principles of the banking system not just in Cyprus, but in the countries of the EU,” Belaykov says. Cyprus deposit losses won’t influence Russia’s attempts at "de-offshoreization" of economy, Belyakov added.
Forget trade and currency wars - is this the weekend we just launched the second part of the Cold war? Because if memory servers, the last time Russia and Germany were openly at each other's throats, things in Europe did not end too well...
Finally, for those who missed the news frenzy of the weekend, here is DB's Jim Reid summarizing it:
I had a strange dream that night that a European country had seized a portion of insured depositors money to fund a bail-out while senior bondholders of the banks and the Sovereign survived unscathed. I think it took until yesterday and the effects of the medicines to wear off to realise that this was what actually happened. Although EU leaders have made it clear that the shock resolution in Cyprus is a one-off it has surely changed the landscape in Europe and now provides a template that will be at least on the table, even as a bargaining chip only, in the years ahead.
The real damage here is going back on the Government's pledge to honour all deposits up to Euro 100k - one that now exists EU wide. It’s clear that the Cypriot Government was given the alternative of a chaotic default where arguably much more would have been lost for many. But could the authorities not have taxed the uninsured depositors more than the 9.9% and kept those with under 100k whole as opposed to a 6.75% levy? Overnight reports have suggested that this is one area that might be up for internal negotiations within Cyprus before the banks reopen tomorrow after today's holiday. Indeed, The FT is reporting that deposits over 100k could see an increased rate of 12.5% while smaller deposits would be levied at 3.5% in an effort by President Anastasiades to scrape together a parliamentary majority to approve the bailout. Martin Schulz, head of the European parliament, while agreeing that savers should bear some of the bailout costs, called for changes to exempt those with savings under €25,000 (The Guardian).
If the smaller depositors are hit at all, one can't help thinking that this move has crossed a sacred line and that any depositors in any bank domiciled in a country reliant on the largesse of the EU should in theory now think very carefully about alternative places to store money whatever the size of their holdings. For now one would suspect that markets are calm enough that the contagion will be limited but such a move could easily amplify any future crisis in Europe as the spectre of deposit losses will now be on the table whatever politicians say in advance or whatever insurance scheme is on the table. So this is perhaps more of a slow burning issue than the start of the immediate resumption of stress. It is however worrying that little consistency has been used relative to previous bail-outs and that smaller seemingly insured savers have been brought into the solution.
The reality though is this move is the latest (but by no means the last) manifestation of financial repression -albeit one which is a bit less subtle than say inflation or devaluation but one that has a similar impact. Indeed those of us with money in a UK bank account have seen the international value of these deposits fall notably in 2013 so far and a fair bit more since 2008. In international terms, as it stands, the smaller Cypriot deposits will have lost similar amounts to UK depositors in 2013 but clearly in a manner that will provoke much more anger. It perhaps shows how the options become more limited when you don't have your own currency to use as part of the solution.
For the record, further measures of the deal include a bail-in of junior bondholders and increases of taxes on capital income. Corporate tax rates will also be lifted to 12.5% from 10%.
According to the Eurogroup, these measures, combined with the deposit levies will reduce the size of the Cyprus bailout from around EUR 17bn to EUR 10bn and lead to an improvement in the Cypriot public debt trajectory with debt/GDP falling to 100% by 2020. So what's next? Cypriot finance minister Michalis Sarris has said that his government had already moved to ensure deposit holders could not make large withdrawals electronically before Tuesday’s open. ECB's Jörg Asmussen also said a portion of deposits equivalent to the levies would likely be frozen immediately. In terms of the legislative process, Cyprus' parliament will not be convened until 4pm Cypriot (2pm London) time today with a vote on the levy expected before tomorrow. The current ruling party's lack of majority may just complicate things here. Indeed the parliament is composed of 56 MPs and legislation requires a simple majority of 29 votes. DB’s George Saravelos noted that the opposition already stating that they will vote against so the ratification hinges on all of the ruling party's (DISI, 20 MPs) and the smaller coalition partner's DIKO (9 MPs) votes. That said, George’s baseline scenario is that the levy will pass, not least because there is now little alternative left but he also highlighted that the approval would be a close call and the risk is that decisions are delayed. A delay or failure to approve the bailout may put Cyprus banks' liquidity profile at risk. For instance, the UK Telegraph noted that Cyprus Popular Bank could have its emergency liquidity assistance funding removed by the ECB by 21 March. Interestingly, approval of the levy would also have consequences on the approximately EU2bn of British deposits held in Cyprus but George Osborne on Sunday said that British troops and Government staff's savings that are threatened by the bailout will be compensated with the details to be worked out over the next few days.
Taking a look at the market reaction thus far, the EUR took a dive against the Dollar overnight to 1.2885 (vs 1.3076 close on Friday) but is off the intra-session lows for now. Asian equities are lower across the board with losses seen on the Hang Seng (-2.1%) and ASX200 (-2.05%). Most other Asian indices are down between half to one percent but are off the early lows.
S&P 500 Futures are down -1.7% overnight. Credit spreads gapped wider with the Australia and Asia iTraxx indices 4-5bp wider as we type. European Financials Snr and Sub indices are 24bp and 36bp off their recent wides but we can perhaps expect a weak day ahead given the focus on Cyprus. Reflecting the greater demand for so-called safe haven assets, gold is up 0.3% and 10yr UST yields have rallied 9bp overnight.
Aside from the events in Cyprus, the other news of note over the weekend was the election of presidents (speakers) in the Italian parliament’s two houses. As DB’s Marco Stringa writes, both speakers are newcomers in the Italian parliament. In the senate, Pietro Grasso, an antimafia prosecutor, won in a run-off vote. Grasso obtained 13 votes more than the number of centre-left senators with the additional support more likely coming from a minority of the Five Star Movement senators than Monti’s centre. However, this should not be read as an opening of the 5SM to an alliance with the centre-left. The great majority of the 54 5SM Senators followed the party’s line even in the run-off. Indeed, Marco continues to sees little hope for cooperation among the parties to form a government.
Turning to the day ahead, the immediate focus will be on the parliamentary session in Cyprus beginning this afternoon. There is little data scheduled for today with the US NAHB housing index the main release of note.
Beyond today, the FOMC’s policy announcement and Bernanke's press conference on Thursday will take centre-stage. Our US economists do not expect any imminent changes in Fed policy. Thursday’s flash European PMIs will be the focus data-wise following the mixed readings last month. In China, the HSBC flash manufacturing PMI (also on Thursday) will be watched for any bounce back after February’s fall - which many blamed the timing of new year for. A busy week for the UK is scheduled with the government's 2013 budget (Wednesday) as well as jobless/inflation/retail/government borrowing reports and BoE minutes through the week. In the US we get the latest round of housing data with housing starts and building permits on Tuesday; and existing home sales/house prices on Thursday. Outside of housing, Thursday's Markit PMI and Philly Fed surveys are worth watching.
Greek view of Cyprus mess....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_18/03/2013_488369
( So , the 40 percent tax alleged by Germany as rebuffed by Cyprus would have been just as to sums over 100 ,000 euros..... )
Greek view of Cyprus mess....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_18/03/2013_488369
( So , the 40 percent tax alleged by Germany as rebuffed by Cyprus would have been just as to sums over 100 ,000 euros..... )
Anastasiades rebuffs Schaeuble statements
The Cypriot government categoriacally refuted on Monday statements that it had rejected the proposal for smaller bank accounts to be exempted from the one-off tax to support the country's flagging economy and its credit sector.
In a strongly-worded statement issued by spokesman Christos Stylianides about an hour after the postponement of the vote of the measdures in Parliament in order to amend the measures, Nicosia rejected claims attributed to German Finance Minister Wolfgang Schaeuble that Cyprus turned down the idea of a 40 percent levy on accounts in excess of 100,000 euros, and said that the plan was imposed on the Cypriot government.
The statement cites President Nicos Anastasiades as saying that "he categorically denies he was ever given the option of exemption of guaranteed depostis, i.e. deposits up to 100,000 euros."
The government statement went on to say that «reports about a Gazprom proposal for the acquisition of one of Cyprus's major banks are completely unfounded."
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and the Cyprus updates of the day - from the Cyprus Mail .....
http://www.cyprus-mail.com/cyprus/new-vote-deposit-levy-changed-tuesday-germany-says-open-changing-cyprus-deal/20130318
