The recession in the euro area could be ending — and that means the European Central Bank likely won’t cut interest rates Thursday. …read more
Source: FULL ARTICLE at Fox World News
Tag Archives: ECB
Cyprus: ECB to help after top bank restructured
Cyprus’ president says the European Central Bank will help prop up the country’s hard-hit banking sector once its largest lender, Bank of Cyprus, is restructured.
Nicos Anastasiades said Friday that ECB Chief Mario Draghi didn’t specify in a meeting last month how he will help. That will be decided after the restructuring is done.
Anastasiades warned Cyprus’ international creditors that the bank’s cash reserves were running dangerously low after a €23 billion ($30 billion) financial rescue deal forced it to shoulder billions in debt when it merged with parts of the country’s now-defunct second-largest lender.
The deal also imposed major losses on large savers in the two biggest banks.
Source: FULL ARTICLE at Fox World News
ECB's Draghi urges speedy banking union
The head of the European Central Bank is urging the 17 European Union countries that use the euro to move swiftly toward completing a full banking union to stabilize the bloc’s financial sector.
Mario Draghi told the EU parliament Tuesday that it is of “utmost importance” to pass the legal prerequisites for a centralized banking oversight under the aegis of the ECB before the summer.
He says Europe must then move to set up the next “key element” of the new system — a joint resolution mechanism that would restructure or wind down failed banks and minimize costs to taxpayers.
That step faces reluctance from officials in Germany, who fear they might have to pick up the bill for bailing out banks in other European nations.
From: http://feeds.foxnews.com/~r/foxnews/world/~3/39DuHGHXaXI/
Violent And Panicky Gold Selling Collapse Bullion And Commodity Markets
By Agustino Fontevecchia, Forbes Staff
Panic selling in gold markets has accelerated on Monday, with the yellow metal falling more than $200 an ounce over the past two trading sessions. The blood bath started on Friday, as sell orders for 400 metric tons worth about $20 billion hit the market, amid rumors the ECB would force Cyprus to sell gold reserves to help finance its bailout. The violent decline was then fueled by weaker than expected economic data from China, and calls from major banks including Goldman Sachs to short bullion. Continued ETF liquidation and margin call selling makes it difficult to see a bottom in the near-term.
ECB leaves key rate at 0.75 percent
The European Central Bank has left its key interest rate unchanged at a record low of 0.75 percent.
The bank decided to hold off on further stimulus despite signs that a hoped-for recovery may be delayed for the group of 17 European Union countries that use the euro.
Surveys of services and manufacturing purchasing managers suggest the eurozone’s economy shrank in the first quarter of 2013, for the sixth three-month period in a row. Unemployment is at 12 percent. The ECB has said it expects a gradual improvement later this year.
ECB officials have indicated a rate cut might do little additional good. They worry that the current low benchmark rate is not being passed on to companies because of troubled bank finances in heavily indebted eurozone countries.
Source: FULL ARTICLE at Fox World News
Dow May Gain After Japanese Central Bank Doubles QE
By Roland Head, The Motley Fool
Filed under: Investing
LONDON — Stock index futures at 7 a.m. EDT indicate that the Dow Jones Industrial Average may open 0.36% higher this morning, while the S&P 500 may open up by 0.4%. Both indexes closed sharply lower yesterday after weaker-than-expected economic data dented investor sentiment and led to a big drop for the CNN Fear & Greed Index, which closed down 13 points at 58.
This morning’s trading is likely to be influenced by the Japanese central bank’s surprise decision to accelerate its bond-buying program and double its monetary base in the next two years. The Bank of Japan said it would expand its balance sheet from $1.43 trillion to $2.86 trillion by March 2015 by doubling its asset purchases, the majority of which will be long-term government bonds. The bank is targeting inflation of 2% to kick-start growth after years of deflation.
In Europe, markets rose ahead of the European Central Bank announcement due later today, although the ECB is expected to leave interest rates unchanged. The eurozone service sector continued to contract in March, according to the Markit eurozone services PMI, which fell to 46.4 in March from 47.9 in February, indicating that the rate of contraction is increasing. In London, the FTSE 100 was 0.17% lower at the time of writing following the Bank of England‘s announcement that it would leave both interest rates and its asset purchase program unchanged this month.
In the U.S., today’s initial jobless claims report at 8:30 a.m. EDT is likely to be closely watched after yesterday’s ADP employment figures came in below expectations. A Reuters survey suggests that 350,000 new jobless claims were made last week, down slightly from 357,000 the previous week. Today’s figures are likely to be seen as a leading indicator ahead of tomorrow’s nonfarm payrolls and unemployment reports. Meanwhile, this morning’s Challenger job-cut report said that layoffs planned by U.S. companies spiked 37% from January to February. However, the cuts were more than offset by planned hiring.
Other economic data due today includes the EIA weekly natural-gas storage report at 10:30 a.m. EDT and the global services PMI at 11 a.m. EDT.
Companies expected to report quarterly earnings before markets open include International Speedway, Jos. A Bank Clothiers, and RPM International. Facebook stock could also be actively traded ahead of today’s much-hyped media launch of a new Android-related product — widely expected to be a Facebook phone. Facebook stock climbed 3.3% yesterday and was 1.2% higher in premarket trading this morning.
Finally, let’s not forget that the Dow’s daily movements can add up to serious long-term gains. Indeed, Warren Buffett recently wrote, “The Dow advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions.” If you, like Buffett, are convinced of the long-term power of the Dow, you should read “5 Stocks To Retire On.” Your long-term wealth could be transformed, even in this uncertain …read more
Source: FULL ARTICLE at DailyFinance
ECB to leave rates alone, faces Cyprus questions
The European Central Bank is expected to leave its benchmark interest rate unchanged at a record low of 0.75 percent when its rate-setting council meets Thursday in Frankfurt, Germany.
Europe‘s economy is in a recession, but economists say rates are already low and another rate cut might not provide much added stimulus.
At his news conference afterward bank head Mario Draghi will give his outlook on when a recovery might arrive.
He will also likely be asked his views on the 10 billion euro bailout of Cyprus by the other eurozone countries.
Markets will listen for Draghi’s take on the country’s capital controls, a step aimed at preventing bank runs. Some economists say the practice violates the idea of a shared currency.
Why America Is Headed For Civil Unrest
By Gene Daily
I am writing from a very fearful Spain. The looming Banking crisis in Cypress has nearly everyone in Spain concerned. When the story first broke nearly ten days ago, the Spanish Stock Market dropped, and the price of interest on Spanish Bonds doubled in one day. The Troika (as they are being called), the IMF, the EU, and the ECB, calmed fears somewhat by saying it was only a one-off decision in relation to Cypress. But is it really?
The Euro Group formed by the Troika from a group of European Finance Ministers has made a new demand in face of the opposition to the initial orders, which failed to pass the Parliament in Cypress. They now demand 20% of deposits over 100,000 Euros and the closing of the second largest bank in Cypress. This stipulated because deposits up to 100,000 Euros are insured, and deposits over that amount are not.
All of this works as planned in Europe. The bankers will expect to recoup as much as 10 billion from this so-called “Haircut” on account holders. But wasn’t it the bankers who did the bad investments with the depositors’ money? Why do the depositors who have saved and are receiving virtually no return on their savings currently, due to low interest rates, now have to bear the cost of bailing out the bankers who lost the money in the first place? Think about it. It is because they can. There are strict gun laws in nearly all of Europe. Of course, the people demonstrate; of course, there will be demonstrations against this action. But as people in Cypress are now restricted to a mere 100 Euro per day as a withdrawal limit, what can they possibly do?
Think for a moment what would happen in the USA if the people were restricted to a mere $100 limited withdrawal per day and the banks were closed on Bank Holiday for 10 days. Would there be animosity towards the Bankers, demonstrations, or worse?
Could this be why the 2700 armored vehicles have been purchased for DHS, along with an estimated 1.5 billion rounds of hollow point jacketed ammunitions. The question hangs as a hammer over why Janet Napolitano refuses to answer questions surrounding this subject.
As recently as March 18, 2013, a train was sighted near Peach Springs, Arizona carrying well over 100 of these vehicles along with many other types of support vehicles of a military type (and what appeared to be cases containing unknown material, possibly ammunition.) This was caught on tape by chance. How many of these trains are active in the USA? What is their purpose? Where are they headed for? These are all questions to be put to representatives of the people at all levels. What person can trust a government that carries out such operations without any legislative sanctions?
Personally, I find it difficult to trust an administration that proclaimed it would be the most transparent in history and then refuses to answer honest questions asked in a direct and simple …read more
Source: FULL ARTICLE at Western Journalism
Cyprus and Pending Home Sales Plague the Dow
By John Maxfield, The Motley Fool
Filed under: Investing
You can tell that investors and the financial media had grown accustomed to the run-up in stocks earlier this month, as any down day now triggers speculation of impending doom. Today, we have the ongoing situation in Cyprus and disappointing pending home sales here in the U.S. to thank for the worry. With roughly an hour left in the trading session, the Dow Jones Industrial Average is down 32 points, or 0.22%.
In order to meet its obligations under an ECB- and IMF-funded bailout, the tiny island nation of Cyprus has agreed to close its second-largest lender and confiscate a purported 40% of all deposits in excess of 100,000 euros. The country has also imposed capital controls meant to stem the outflow of money once its banks reopen for business on Thursday: They’ve been closed for the last week and a half, pursuant to a government-mandated bank holiday. Suffice it to say that the decision on deposits has rattled the markets over the last few weeks, as it has called into question the sanctity of funds once presumed safe.
Adding to pessimism today was data showing that pending home sales — a measure based on contract signings — slipped last month. The National Association of Realtors’ pending-home-sales index fell 0.4% in February to 104.8. While this was lower than the previous month’s reading of 105.2, it was nevertheless 8.2% higher on a year-over-year basis.
The problem, according to NAR chief economist Lawrence Yun, is that a limited inventory is holding back sales in many areas. “Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50% from current levels,” Yun said in a prepared statement. “Most local homebuilders are small businesses and simply don’t have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market.”
Despite the marginal step backward, it has become increasing clear that housing is truly improving. According to a New York-based fund-manager quoted by Bloomberg, “There’s absolutely no question about that if you look at all the data, not just one month. Investment is starting to come back and one of those legs is housing.”
In terms of individual stocks, shares of Boeing are lower today after aviation experts and government officials predicted that the Federal Aviation Administration would limit the flying times of its beleaguered 787 Dreamliners. The planes were grounded two months ago after battery problems sparked fires on two separate aircraft.
According to an industry analyst quoted by Reuters, “Depending on how long that restriction remains in place, it would completely undermine the business case for the airplane, which was to be able to do these long, thin intercontinental routes.”
And shares of JPMorgan Chase , the nation’s largest bank by assets, are also suffering following a revelation that prosecutors are looking into …read more
Source: FULL ARTICLE at DailyFinance
3 Shares to Survive the Cyprus Aftershock
By Tony Reading, The Motley Fool
Filed under: Investing
LONDON — It’s getting tiresome, but once again the eurozone is threatening markets. Shares wobbled last week but just held on after an 11th-hour deal to “rescue” Cyprus was agreed. The wobble showed that the confidence powering markets up this year is fragile. If Cyprus hadn’t secured funding from the “troika” of the IMF, the EU, and the ECB, then stocks would have plunged.
The snowball keeps rolling
That’s worrying, because the Cyprus deal has stored up more trouble ahead. It has loaded the country with debt and simultaneously trashed its financial sector, the mainstay of its GDP. Capital controls mean a euro in Cyprus isn’t the same as a euro in Germany, and confidence in Southern Europe‘s banks has been undermined.
What should investors do? It’s too much of a bunker mentality to just put your money in a (non-eurozone) bank. Europe will probably muddle through, and 2013 could be a great year to be in the market.
Safety first
But I think there’s a good case for having a slug of safe shares that would survive a euro blow-up. They are shares that:
- Have low exposure to the eurozone.
- Aren’t exposed to the financial sector.
- Are in defensive sectors.
- Have growth prospects.
Here are three I have picked.
1. Tesco
Tesco has lost its halo, but it’s repairing past mistakes. The U.K.’s economy is vulnerable to events in Europe, but Tesco’s 30% share of the grocery market makes it resilient. It’s not short of ideas for growth, from coffee shops in the U.K. to online sales in China.
2. Centrica
British Gas, Centrica‘s downstream utility, is well insulated from economic turmoil. Last week’s bad weather exposed the U.K.’s shortage of gas storage, and the Government’s “dash for gas” is sure to benefit Centrica’s upstream gas-production business.
3. Unilever
Strong brands and the indispensible nature of Unilever‘s personal-care and health care products give it its defensive characteristics. Expansion in emerging markets provides growth. A quarter of Unilever’s sales come from Europe, but that’s lower than for Reckitt Benckiser.
Boring is good
Two of my three picks are included in “Five Shares To Retire On,” a brand-new report from the Motley Fool. It describes a mix of five solid (some might say boring) shares in diverse sectors that could form the core of a portfolio — shares that you can tuck away and not have to watch every day.
Whether you’re saving for retirement or building an investment portfolio for any other reason, it’s sensible to have some solid, dependable core holdings. To find out which of my three picks made the grade and discover the identity of the other three stocks, you can download the report straight to your inbox. Just click here — it’s free.
The article 3 Shares to Survive the Cyprus Aftershock originally appeared on Fool.com.
Fool contributor Tony Reading owns shares …read more
Source: FULL ARTICLE at DailyFinance
ECB: Cyprus unique situation, no new template
A top European Central Bank official on Tuesday exposed rare signs of public discord among those in charge of the euro currency when he rejected the idea that Cyprus‘ rescue plan should become a model for other countries.
Benoit Coeure, who sits on the ECB‘s six-member executive board, on Tuesday bluntly dismissed an idea voiced the day before by Jeroen Dijsselbloem, the head of the Eurogroup of euro finance ministers, that forcing losses on banks’ shareholders, bondholders and even large depositors could become the template for future rescues.
Coeure told France’s Europe 1 radio that Dijsselbloem was “wrong” to say that because the solution agreed on for Cyprus cannot be a model for the eurozone. He said Cyprus‘s situation is unique because of the island nation’s outsized financial sector, including large deposits from foreigners.
The 17-country eurozone and the International Monetary Fund early Monday granted Cyprus a 10 billion euro ($13 billion) bailout that foresees dissolving the country’s second-largest bank, wiping out its bondholders and inflicting significant losses — possibly up to 40 percent — on all deposits larger than 100,000 euros ($130,000).
In an interview later Monday, Dijsselbloem (die-SELL-bloom) insisted investors must be held responsible “before looking at public money or any other instrument coming from the public side.” But his comments that the approach taken in Cyprus — including forcing losses on large deposits — was a model solution spooked markets and sent the euro to its lowest value against the dollar since November.
“The experience in Cyprus is not a model for the eurozone since the situation had reached a dimension that can’t be compared with any other country,” Coeure said. “I think Mr. Dijsselbloem was wrong to say what he said.”
Deposits in Europe are guaranteed by a state-backed deposit insurance scheme only up to 100,000 euros. The bailout program for Cyprus marks the first time in Europe‘s three-year-old debt crisis that large deposit holders — wealthy savers, business people or institutions — will be forced to take losses.
EU officials previously stressed that this measure, a so-called bail-in, was a “unique step” in Cyprus, but Dijsselbloem’s remarks raised the specter for that solution to be applied elsewhere in Europe too.
Investors were concerned that if holders of large deposits in weaker southern European countries were to start fearing for their …read more
Source: FULL ARTICLE at Fox World News
Cyprus Reaches a Deal with the ECB and IMF.
By Chuck Jones, Contributor The good news is Cyprus has reached a deal which brings a bailout of 10 billion Euros from the ECB and IMF and does NOT need to be approved by Cyprus’ Parliament. …read more
Source: FULL ARTICLE at Forbes Latest
Monday's Market: How Cyprus Will Play Out
By Alex Dumortier, CFA, The Motley Fool
Filed under: Investing
At this stage, anything that’s written about the outcome of the Cypriot situation is still speculative, as the Eurogroup working group that includes finance ministers from the 17 eurozone countries met in Brussels from 6 p.m. local time (1 p.m. ET) to hammer out an agreement with Cyprus. I’d expect negotiations to continue into the early morning hours. If you haven’t been following the news, here’s what you need to know about what will probably happen next.
Cyprus needs to come up with EUR 5.8 billion to receive EUR 10 billion in aid from the troika (the European Union, the International Monetary Fund, and the European Central Bank) to recapitalize its banking system. The plan developed last weekend — which called for a levy on all bank depositors to pay for Cyprus‘ contribution — collapsed after it was unanimously voted down by Cypriot lawmakers.
Time’s up!
Cyprus has one more shot at this, as the European Central Bank gave the nation a Monday deadline to reach an agreement with international lenders; failing that, the ECB will withdraw its emergency liquidity — which is the only thing that has been keeping the Cypriot banking sector afloat for months.
These are the broad strokes of a new agreement, as reported earlier today:
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All uninsured depositors (i.e., those with an account that exceeds EUR 100,000) at the Bank of Cyprus, one of the country’s largest lenders, will suffer a penal haircut. The reports I have seen refer to either a 20% or 25% levy.
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Uninsured depositors at other banks in Cyprus — whether Cypriot or one of the 26 foreign banks operating in the country — will suffer a 4% haircut.
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Cyprus Popular Bank (known as “Laiki”), the country’s second largest lender, will be wound down. Laiki has now limited ATM withdrawals to EUR 100.
What does all of this mean for U.S. investors? If we wake up tomorrow morning with an agreement in place, the effect on U.S. indexes, including the Dow Jones Industrial Average will, in my opinion, be negligible — this outcome is largely discounted in Friday’s closing prices. That is as it should be — I think this is the most likely option. Cypriot lawmakers will (hopefully) have realized that they have run out of road, there are no good outcomes available, and a bad outcome is still preferable to a catastrophe. Should they choose collective suicide, however, the fallout would probably hit the shores of the U.S. stock market, and investors should expect a bumpy ride on Monday.
If you’re tired of being a victim of “risk on/risk off” and you’re ready to become a business-focused investors, The Motley Fool’s chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the brand-new free report: “The Motley Fool’s Top Stock for 2013.” Just click here to access the …read more
Source: FULL ARTICLE at DailyFinance
Cyprus Secures Bailout, Avoids Bankruptcy
Filed under: Global Economy, European Union
By DON MELVIN and JUERGEN BAETZ
BRUSSELS (AP) – Cyprus secured a package of rescue loans in tense, last-ditch negotiations early Monday, two EU diplomats said, saving the country from a banking system collapse and bankruptcy.
The cash-strapped island nation needs a 10 billion euro ($13 billion) bailout to recapitalize its ailing lenders and keep the government afloat. The European Central Bank had threatened to cut crucial emergency assistance to the country’s banks by Tuesday without an agreement.
The finance ministers of the 17-nation eurozone accepted the plan reached in 10 hours of negotiations in Brussels between Cypriot officials and the so-called troika of creditors: the International Monetary Fund, the European Commission and the ECB.
Under the plan, Cyprus‘ second-largest bank, Laiki, will be restructured and holders of bank deposits of more than 100,000 euros will have to take losses, the diplomats said. They spoke on condition of anonymity pending the official announcement. It was not immediately clear whether the holders of large deposits in the remaining Cypriot banks would equally be forced to take losses.
The diplomats also did not elaborate on how much large deposit holders would lose. Making them take a hit is expected to net several billion euros, reducing the amount of rescue loans the country needs.
Without a deal by Monday night, the tiny Mediterranean island nation of about 1 million would have faced the prospect of bankruptcy, which could force it to abandon the euro currency and spur turmoil in the eurozone of 300 million people.
To secure a rescue loan package, Nicosia had to find ways to raise 5.8 billion euros so it could qualify for the 10 billion euro bailout package. The bulk of that money is now being raised by forcing losses on large deposit holders as well as bond holders in Laiki bank, which will be split into a bad bank of toxic assets and a remaining viable core business.
But Cyprus resisted pressure by creditors to also unwind the country’s largest lender, Bank of Cyprus, the diplomat said.
A plan agreed to in marathon negotiations earlier this month called for a one-time levy on all bank depositors in Cypriot banks. But the proposal ignited fierce anger among Cypriots because it also targeted small savers. It failed to win a single vote in the Cypriot Parliament.
Under the new agreement, average savers’ deposits with all Cypriot banks of up to 100,000 euros will be guaranteed by the state in accordance with the EU‘s deposit insurance guarantee, the diplomat said.
In an illustration of the depth of the fear of a banking collapse, Cyprus‘ central bank on Sunday imposed a daily withdrawal limit of 100 euros ($130) from ATMs of the country’s two largest banks to prevent a bank run by depositors worried about …read more
Source: FULL ARTICLE at DailyFinance
Is Germany Playing A Game Of Chicken Over Cyprus?
By Tim Worstall, Contributor There’s a school of thought that Germany is simply playing a game of chicken over the Cyprus situation. They know that the island nation doesn’t really have anywhere to go other than the “troika” of EU, ECB and IMF. The only realistic alternative is that the entire economy crashes and burns and that would be so unpleasant that it will inevitably be the Cypriots that blink first. …read more
Source: FULL ARTICLE at Forbes Latest
What happens if Cyprus collapses?
What happens if Cyprus‘ banks collapse? If its government goes broke? If it leaves the euro?
The European Union, the International Monetary Fund, the European Central Bank and the country’s leaders are trying to find a deal to secure a 10 billion euro ($13 billion) loan for Cyprus and stave off a failure of its banking system. The Cypriot parliament has already rejected one deal, which would have taxed all bank deposits in the country. The ECB has now put a ticking timer on this drama by declaring it would cut off emergency support to Cyprus‘ banks on Monday if no deal is found.
That’s the worst case.
Even if a deal is found, the messy decision-making over the past week will have shaken confidence in Cyprus and the euro currency union itself. Here’s what’s at stake.
CYPRUS
The consequences for Cyprus itself could be so rough that many analysts think some kind of deal will be struck. If not:
The only thing keeping Cyprus‘ banks afloat right now are short-term loans from the Cypriot central bank with the blessing of the ECB. The banks need this special funding because they can’t borrow normally. They don’t have good enough collateral to receive normal loans from the ECB, and others are reluctant to lend to them for fear of not getting their money back. The emergency lending program isn’t publicly declared, but analysts say the Cypriot central bank has already handed out around 9 billion euros ($11.6 billion).
If the ECB pulls the plug, the Cypriot banks would probably not be able to open their doors, or would very quickly collapse because they wouldn’t be able to satisfy the likely rush of customers pulling their money out. Then the banking system enters a sort of twilight zone — with the banks closed, there can be no real run on the banks, but salaries won’t be paid, mortgage payments won’t go through, electricity bills will linger.
After the banks, the next logical step is that the government goes bankrupt, either as it tries to shore up the banking system or because it is on the hook for insuring all deposits under 100,000 euros ($130,000).
The resulting disaster cannot be predicted clearly — and shouldn’t be underestimated. The road could lead to an …read more
Source: FULL ARTICLE at Fox World News
Market Vectors' Fran Rodilosso on EU Plans for Cyprus and the Risks They May Hold for Investors in S
By Business Wirevia The Motley Fool
Filed under: Investing
Market Vectors’ Fran Rodilosso on EU Plans for Cyprus and the Risks They May Hold for Investors in Senior Debt
NEW YORK–(BUSINESS WIRE)– A push by the so-called Troika (a tripartite committee led by the European Commission, European Central Bank, and International Monetary Fund) to impose a deposit tax on Cyprus-based bank accounts was flatly rejected this week. As the Cyprus government, EU, ECB and IMF try to find a compromise before Monday, the rest of the world is watching closely, even if market action this week does not portray a high level of concern. Still, the Troika’s original proposal should give investors in European senior debt some cause for concern, according to Fran Rodilosso, Fixed Income Portfolio Manager at Market Vectors ETFs, who also believes that the entire process does not bode well for future bank resolutions in Europe‘s larger peripheral economies.
“Cyprus has built up its status as a tax haven and its banking system is now close to seven times the size of the country’s GDP. Given that scale, I see no option for the government by itself to bail out the banks,” said Rodilosso. “It certainly seems as though Cyprus is a test case for some new approaches within Europe to keep the costs of bailing out banks away from the taxpayers in other countries, namely Germany. That the very banks in question in Cyprus were largely damaged by the Greek restructuring seems to have had minimal impact on the equation.”
“Upon announcement of the original package, there were legitimate questions of fairness voiced by several different constituencies,” Rodilosso added. “I do not think, however, that Europe would have been pushing for a tax on depositors were the deposits in Cypriot banks primarily those of its own citizens. That is why I and so many others take the skeptical view that the Troika considered Cyprus to be small enough that any resulting volatility in both the markets and among the island’s citizens would not cause wider contagion. So far that assumption has held — the Cyprus crisis has been relatively contained. From a longer-term perspective, this past week, in my view, it paints a bleak picture about the strength of the Troika’s anti-crisis formula.”
“The news around Cyprus did appear to cause modest widening of spreads on senior and subordinated bank debt across Europe, with more substantial widening in the periphery,” continued Rodilosso. “While the original Cyprus plan imposed losses on subordinated holders, it also attempted to set a new precedent in ‘bailing in’ depositors. In my opinion, the latest plan is likely to still impose a significant haircut on …read more
Source: FULL ARTICLE at DailyFinance
Cyprus: Test Case for Leaving the Euro?
Key Takeaway: This weekend Cyprus will have to either have to take money from depositors, default/restructure some of its bank debt (but there isn’t enough to absorb what needs to be done), let its banking system fail, turn to Russia for cash or some combination to get money from the ECB and IMF or be forced to leave the Euro. …read more
Source: FULL ARTICLE at Forbes Latest
Whatever It Takes? Cyprus and the Euro on the Brink
Many people heaved a sigh of relief last summer when Mario Draghi uttered the phrase “whatever it takes” and followed it up by announcing the OMT program. Today, as Cyprus sits on the brink of a potential exit from the euro, it’s worth re-examining what Draghi actually said and assessing the ECB’s ability to save the euro. …read more
Source: FULL ARTICLE at Forbes Latest
Key players in Cyprus' financial drama
The government of Cyprus is trying frantically to come up with a Plan B to avoid the country’s financial collapse and possible exit from the euro currency union.
Plan A was shot down by the parliament, which was outraged over a proposal to raid bank deposits. The seizures were meant to raise 5.8 billion euros ($7.5 billion) in order to qualify for 10 billion euros ($12.9 billion) in rescue loans.
The new plan taking shape involves restructuring of one of the country’s biggest banks and possibly dipping into the pension funds.
At this point, there’s not a lot of time. The European Central Bank has taken a hard line, saying it will pull the plug Monday on emergency credit being supplied to Cyprus‘ banks. If that happens, the banks will collapse, fueling financial chaos. It’s not clear if Cyprus‘ plan B will win approval for loans from the other eurozone governments.
Here are the main players in Cyprus‘ drama and what they have at stake:
CYPRUS — The Mediterranean island country attracted foreign depositors, many Russians, by offering high interest rates and low taxes. That has swollen banks’ deposits to 68 billion euros ($88 billion), four times the size of the Cypriot economy.
The banks then invested heavily in Greek government bonds — and suffered huge losses when Athens defaulted last year. Now both the banks and the government, which has been shut out of bond markets, need rescuing.
The 16 other eurozone countries and the International Monetary Fund are unwilling to give Cyprus more than 10 billion euros because they fear the country would be unable to repay a debt that is any bigger.
So Cyprus has to cough up the rest, in cash.
If Cyprus doesn’t find the money, the ECB says it will end emergency support for the banks, which would then collapse. The government would run out of money and need to drop out of the euro to print the money it needs. A euro exit would likely cause extreme financial chaos, as people try to get their money out of the country before all their holdings are changed into a new, weaker currency.
Experts say it’s hard to craft a deal …read more
Source: FULL ARTICLE at Fox World News