Tag Archives: europe

Citizens Of Cyprus: This Bailout Is Gonna Cost You…

Cyprus Works On Last-Minute Deal To Soften Bank Levy

By Michele Kambas |From Reuters.com | On Sunday, March 17th, 2013

(Reuters) – Cyprus was working on a last-minute proposal to soften the impact on smaller savers of a bank deposit levy after a parliamentary vote on the measure central to a bailout was postponed until Monday, a government source said.

In a radical departure from previous aid packages, euro zone finance ministers want Cyprus savers to forfeit a portion of their deposits in return for a 10 billion euro ($13 billion) bailout for the island, which has been financially crippled by its exposure to neighboring Greece.

The decision, announced on Saturday morning, stunned Cypriots and caused a run on cash points, most of which were depleted within hours. Electronic transfers were stopped.

The originally proposed levies on deposits are 9.9 percent for those exceeding 100,000 euros and 6.7 percent on anything below that.

The Cypriot government on Sunday discussed with lenders the possibility of changing the levy to 3.0 percent for deposits below 100,000 euros, and to 12.5 percent for above that sum, a source close to the consultations told Reuters on condition of anonymity.

The source said the discussions had the “blessing” of a troika of lenders from the European Commission, the IMF and the European Central Bank.

In Brussels, a spokesman for Olli Rehn, the European commissioner in charge of economic affairs, said discussions were still under way in Cyprus.

“If the Cypriot leaders agree on a more progressive scale for the one-off levy, in view of making it fairer for smaller savers and provided this would have the same financial impact, the Commission would be ready to recommend that the Eurogroup endorse such an agreement,” the spokesman said.

The move to take a percentage of deposits, which could raise almost 6 billion euros, must be ratified by parliament, where no party has a majority. If it fails to do so, President Nicos Anastasiades has warned, Cyprus’s two largest banks will collapse.

One bank, the Cyprus Popular Bank, could have its emergency liquidity assistance (ELA) funding from the European Central Bank cut by March 21.

A default in Cyprus could unravel investor confidence in the euro zone, undoing the improvements fostered by the European Central Bank’s promise last year to do whatever it takes to shore up the currency bloc.

A meeting of parliament scheduled for Sunday was postponed for a day to give more time for consultations and broker a deal, political sources said. The levy was scheduled to come into force on Tuesday, after a bank holiday on Monday.

BREAKS A TABOO

Making bank depositors bear some of the costs of a bailout had been taboo in Europe, but euro zone officials said it was the only way to salvage Cyprus’s financial sector.

European officials said it would not set a precedent.

In Spain, one of four other states getting euro zone help and seen as a possible candidate for a sovereign rescue, officials were quick to say Cyprus was a unique case. A Bank of Spain spokesman said there had been no sign of deposit flight.

But the chief of Greece’s main opposition, the anti-bailout Syriza party, Alexis Tsipras, blamed the move on German Chancellor Angela Merkel, according to Greek state news agency ANA.

“We must all together raise a shield to protect the peoples (of Europe) from Ms Merkel’s criminal strategy,” said Tsipras, who wants a pan-European debt conference to forgive debt.

The crisis is unprecedented in the history of the Mediterranean island, which suffered a war and ethnic split in 1974 in which a quarter of its population was internally displaced.

Anastasiades, elected only three weeks ago, said savers will be compensated by shares in banks guaranteed by future natural gas revenues.

Cyprus is expecting the results of an offshore appraisal drilling this year to confirm the island is sitting on vast amounts of natural gas worth billions.

In a televised address to the nation on Sunday, Anastasiades said he had to accept the tax in return for international aid, or else the island would have faced bankruptcy.

“The solution we concluded upon is not what we wanted, but is the least painful under the circumstances,” Anastasiades said.

With a gross domestic product of barely 0.2 percent of the bloc’s overall output, Cyprus applied for financial aid last June, but negotiations were stalled by the complexity of the deal and the reluctance of the island’s previous president to sign.

International Monetary Fund Managing Director Christine Lagarde, who attended the meeting, said she backed the deal and would ask the IMF board in Washington to contribute to the bailout.

RUSSIANS, EUROPEANS

According to a draft copy of legislation, failing to pay up would be a criminal offence liable to three years in jail or a 50,000 euro fine.

Those affected will include rich Russians with deposits in Cyprus and Europeans who have retired to the island, as well as Cypriots themselves.

“I’m furious,” said Chris Drake, a former Middle East correspondent for the BBC who lives in Cyprus. “There were plenty of opportunities to take our money out; we didn’t because we were promised it was a red line which would not be crossed.”

“I’ve lost several thousand,” he told Reuters.

British finance minister George Osborne told the BBC on Sunday that Britain would compensate its 3,500 military personnel based in Cyprus.

Anastasiades’ right-wing Democratic Rally party, with 20 seats in the 56-member parliament, needs the support of other factions for the vote to pass. It was unclear whether even his coalition partners, the Democratic Party, would fully support the levy.

Cyprus’s Communist party AKEL, accused of stalling on a bailout during its tenure in power until the end of February, would vote against the measure. The socialist Edek party called EU demands “absurd”.

“This is unacceptably unfair and we are against it,” said Adonis Yiangou of the Greens Party, the smallest in parliament but a potential swing vote.

Many Cypriots, having contributed to bailouts for Ireland, Portugal and Greece – Greece’s second bailout contributed to a debt restructuring that blew the 4.5 billion euro hole in Cyprus’s banking sector – are aghast at their treatment by Europe.

Cyprus received a “stab in the back” from its EU partners, the daily Phileleftheros said.

But it and another newspapers highlighted the danger of plunging the banking system into further turmoil if lawmakers sat on the fence.

“Even if the final agreement is wrong, if this is not approved by parliament the damage will be even greater,” Politis economics editor Demetris Georgiades said in an editorial.

Source: http://www.reuters.com/article/2013/03/17/us-cyprus-parliament-idUSBRE92G03I20130317

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

Euro Crisis Brings World to Brink of Depression

By Darrell Delamaide | From Marketwatch.com | On Monday, July 24th, 2012

Europe is a tinderbox waiting for a spark.

The financial volatility in Europe may have created a situation that is now beyond the capacity of policy makers to control or curb.

When an accomplished fixer like Pascal Lamy, the head of the World Trade Organization and the longtime chief of staff for former European Commission President Jacques Delors, describes the situation in Europe as “difficult, very difficult, very difficult, very difficult,” you know it is time to run for cover.

The Great Depression was worsened by bank runs.

The crisis has now gone well beyond the prospect of breaking up the euro to the threat of a full-fledged financial and economic collapse in Europe that could plunge the world into a second Great Depression.

Few Americans are aware that a worldwide banking crisis started by cascading bank failures in Austria and Germany was one of the major causes of that earlier Depression.

It was in the summer of 1931 that the collapse of Creditanstalt in Vienna forced one of Germany’s big banks, Danatbank, to fail, leading to a credit crisis that prompted bank holidays around the world and exacerbating an already severe economic crisis.

The spark in the current crisis could come from a bank failure, and not necessarily in Spain. It could be a bank in Italy — or Austria, or Germany. German banks are notoriously undercapitalized and poorly supervised and have created a number of mini-crises in the past few decades since the collapse of the Herstatt Bank in 1974.

German economist Fabian Lindner drew the parallel to 1931 in an op-ed last fall when he compared his country’s intransigence toward southern Europe now to the misguided harshness of the U.S. and France toward Germany in the earlier crisis.

Hough: Now is the time to buy Spain

Spain has led headlines following its surging bond yields but investors who plunk money into a broad basket of Spanish shares today could see average returns of 20% a year over the next several years. Jack Hough discusses on Markets Hub.

“Both the German public and politicians should learn from history,” Lindner wrote in a commentary for Die Zeit that was also published in The Guardian. “Solidarity with the crisis countries is in Germany’s long-run interest. The German government should stop abusing its power to dictate economic decline to other nations. The alternative is economic stagnation and increased tensions between European nations.”

The situation has deteriorated since Lindner hoped in vain for some enlightenment on the German side. Instead, German Chancellor Angela Merkel and Bundesbank President Jens Weidmann have held to the prescription Lindner saw leading to disaster: “Germany and the German central bankers demand drastic austerity and only give piecemeal and insufficient help in return — too little, too late.”

The latest austerity measures in Spain, approved by the national Parliament last week even as the economy continues to contract, has led to new riots in the streets, pushing the yields on Spanish bonds above the 7% level deemed manageable, and increasing the likelihood of contagion to Italy.

Meanwhile, German Economics Minister Philipp Roesler whistles in the wind, saying the possibility of a Greek exit from the euro has “lost its horror,” and German Finance Minister Wolfgang Schaueble says Greece must try harder to meet its austerity commitments.

The problem, meine Herren, is not poor little Greece, long since written off by a smug German officialdom. The problem is the growing possibility of defaults in Spain and Italy that will lead to bank failures across the continent and incalculable consequences.

Paul Krugman quipped at the beginning of the current crisis that someone will be able to write a sequel to Liaquat Ahamed’s Pulitzer Prize-winning book, “Lords of Finance” — which chronicles how the four leading central bankers of that era plunged the world into the Great Depression with their wrong-headed policies — and call it “Lords of Finance: The Next Generation.”

The target of Krugman’s barb was Jean-Claude Trichet, then president of the European Central Bank. But his successor, Mario Draghi, has proven equally clueless in his public statements and actions.

Federal Reserve Chairman Ben Bernanke, an avowed admirer of Ahamed’s book, has nonetheless been relatively timid in recent months, keeping his distance from the European crisis and failing to make a convincing case for the Fed’s inaction in following its own mandate to promote employment in the U.S.

History is not likely to be any kinder to Bernanke and his cohorts than to the European policy makers who collectively have not been equal to the task.

The worst may still be averted but the challenge is indeed very, very, very difficult, and it is hard to see at this point where salvation could come from.

The article was originally posted at http://www.marketwatch.com/story/euro-crisis-brings-world-to-brink-of-depression-2012-07-24

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

EU Leaders Discuss Possible Greek Exit, Seek Legal Advice

By Beckett Adams | From TheBlaze.com | On June 12th, 2012

As the possibility of a Greek exit becomes more likely, leaders in the European Union are seeking legal advice from the European Commission on how to shift money and keep people within borders, the Associated Press reports.

“European finance officials have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario should Athens decide to leave the euro,” Reuters reports.

E.U. spokesman Olivier Bailly said Tuesday that, legally, the EU can limit the movement of people and money across national borders “if it’s necessary to protect public order or public security.”

“There is a possibility for member states to restrict movement of capital in specific cases relating to public order and public security,” Bailly told reporters.

Yes, you read that right. The EU can legally limit the movement of people and capital if it deems it a “safety issue.”

Bailly added that the EU cannot restrict the movement of people or money if it’s for “economic reasons.” But who gets to define what’s a “safety issue” and what’s an economic issue? The same people who thought it was a good idea to let Greece into the eurzone?

“Some people are working on scenarios,” he said, but refused to confirm or identify which organizations and people were working on them.

Perhaps hoping to calm anxious investors, Bailly insisted that although multiple scenarios are being discussed, the only one that’s being taken seriously is one where Greece remains in the 17-nation union.

“The Commission is not working on a Greek exit plan,” Bailly said, according to the Wall Street Journal.  “We‘re working on one plan and one plan only and that’s to keep Greece in the euro zone.”

This article was originally posted at http://www.theblaze.com/stories/is-the-eu-preparing-for-a-breakup/

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

Spain Enters New Round Of Quantitive Easing

Spain Sells 2.07B Euros of Bonds, Tops Target

From MarketWatch.com | On June 7th, 2012

FRANKFURT (MarketWatch) — Spain saw borrowing costs rise Thursday in a closely-watched debt auction, but topped its target range, selling a total of 2.07 billion euros ($2.6 billion) of government debt, news reports said. Spain’s Treasury had aimed to sell a total of 1 billion to 2 billion euros of debt. A sale of 10-year government bonds produced an average yield of 6.04%, up from 5.74% in a previous sale, Bloomberg reported. Bids exceeded supply 3.29 times, up from a bid-to-cover of 2.56 in a previous auction, the report said. Spain also sold bonds maturing in 2014 and 2016. In the secondary market, the yield on 10-year Spanish government bonds was down 0.13 percentage point at 6.14%, according to FactSet.

This article was originally posted at http://www.marketwatch.com/story/spain-sells-207b-euros-of-bonds-tops-target-2012-06-07

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

Rehn: EU Weighing Direct European Bank Bailouts

From MarketWatch.com | On June 4th, 2012

Olli Rehn

FRANKFURT (MarketWatch) — The European Commission has considered the possibility of directly recapitalizing euro-zone banks via the region’s permanent bailout fund, but such a maneuver would require a treaty change, Olli Rehn, commissioner for monetary and economic affairs, said Monday, according to news reports. “We have been considering this as a serious possibility, of breaking the link between the sovereigns and the banks,” Rehn said at a briefing in Brussels, according to Reuters. Such moves aren’t allowed under the treaty, “but we see that it is important to consider this alternative of direct bank recapitalization as we are now moving on in the discussion on the possible ways and means to create a banking union,” Rehn said, according to the report.

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

Former Hedge Funder Presents A Terrifying Vision Of The End Game

By By Max Nisen | From BusinessInsider.com | On Jun 1, 2012

Everyday, we hear some pretty grim predictions about the markets and the economy.  But this is one of the more comprehensive and most gloomy outlooks we’ve ever seen.

Raoul Pal expects a series of sovereign defaults, the “biggest banking crisis in world history”, and asserts that we don’t have many options to stop it.

Pal previously co-managed the GLG Global Macro Fund. He is also a Goldman Sachs alum. He currently writes for The Global Macro Investor, a research publication for large and institutional investors.

A note on the presentation; the last slide is not meant to suggest that we’re going back to the economic activity of 3000 years ago. It refers to the 3000 year old trade links between the nations along the Indian Ocean, which Mr. Pal believes will be the center of world’s opportunities. Just like the West 50 years ago, they have “…low debts, high savings and a young population”.

Here is a link to the presentation: http://www.businessinsider.com/raoul-pal-the-end-game-2012-6#-1

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

Jim Cramer Predicts Run On Banks In Spain & Italy

By Erica Ritz | From The Blaze.com | On May 20th, 2012

Jim Cramer, a former hedge fund manager and the host of CNBC’s Mad Money, was on Meet the Press with David Gregory this morning where the two discussed Europe’s economic woes and the worldwide ramifications of the disaster.

“I’m predicting bank runs [in] Spain and Italy within the next few weeks.  Without a coordinated policy, there is going to be financial anarchy in Europe and [it's] going to cause a slowdown worldwide, China and here.”

Watch the interaction, below:

Just a few days ago, Cramer was discussing the run on Greek banks and how it would become a “slippery slope.”

“This is not Argentina and Brazil in the 80′s,” he said, “these are big countries.”

The Street TV, which conducted the interview, summarized: “Our Banks Can’t Outrun European Banks.”

This article was originally posted at http://www.theblaze.com/stories/financial-anarchy-jim-cramer-predicts-a-run-on-banks-in-spain-and-italy-within-weeks/

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

Greek Bank Run Showing More Signs As Greece Citizens Line Up At ATMs

By Allan Soldner | From Z6Mag.com | On May 15th, 2012

Greek Bank RunIt was confirmed by the President of Greece, “that the strength of banks is very weak right now.” Multiple reports including the President of Greece has reported that on Monday alone nearly $898 Million or €700 million Euros were withdrawn from Greek banks.

The tipping for for a Greek Bank Run has picked up steam as the news spreads across the world. As soon as the news started spreading to other news publications which started with the Wall Street Journal’s report, “Greek Depositors Withdrew $898 Million From Banks Monday” markets started to fall.

On top of the JP Morgan Chase & Company drama that has unfolded with the $2 billion in losses the

Greek run on banks seemed to fuel the loss of any positive territory the DOW, S&P 500 or NASDAQ had at the closing bell. The DOW ended down -63.35, the S&P 500 down -7.69 and the NASDAQ down -8.82.

The stock market in the US and the precious metals market fell nearly in sync. Gold bullion prices and Silver Bullion prices fell fairly significant amounts in lockstep with the drops of the US Stock market. Gold price was down $17.20 today ending at $1.545.30 at 5pm EDT and Silver price was down .65 cents today ending at $27.77 an ounce.

Other pressures on the market was the euro tumbling to four month lows when compared to the US Dollar which in turn had the same effect on precious metals pricing. What everyone is holding their breath trying to figure out is whether the Greek bank run will continue and erode the total deposits held by Greece’s Central Bank of €165.36 billion reported in March 2012.

A report from Tyler Durden at ZeroHedge.com asked the same question in a post called, “Has the Greek Bank Run Started?” On that post while mentioning the withdrawal numbers from Greek bank accounts there are also pictures that are shown there of citizens of Greece lining up at ATMs. ATM lines are often the hysteria that starts the ball rolling even worse in any bank run because people walking by start asking if they should be doing the same. We’re sharing pictures of those Greek ATM lines below.

The original article was posted at http://z6mag.com/business/greek-bank-run-showing-more-signs-as-greece-citizens-line-up-at-atms-169333.html

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

Sixteen Spanish Banks Have Credit Ratings Cut…

From BBC News | On May 17th, 2012

Bankia shares have fallen 50% in May

Bankia shares have fallen 50% in May

Ratings agency Moody’s has cut the credit ratings of 16 Spanish banks, a further blow to a country that is struggling to deal with the bad debts of its banking sector.

It also cut the debt rating on Santander UK, a subsidiary of the Spanish banking giant.

It comes after shares in struggling lender Bankia fell another 14%. They have almost halved in value this month.

Fears about losses at Spanish banks has hit shares across Europe.

The banks include Banco Santander and BBVA, the biggest banks in Spain. Ten of the 17 banks were also put on negative credit watch, meaning that further downgrades are possible.

“The change to Moody’s credit rating of Santander UK plc has no impact on our businesses in the UK or our plans for future growth,” Andy Smith, a spokesman at Santander said about the downgrade.

“Santander UK plc is an autonomous subsidiary of the Santander Group, with more than 90% of its total assets held in the UK and a eurozone sovereign exposure of less than 1% of assets.”

In cutting the ratings, Moody’s cited the “adverse operating conditions, characterised by the renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment”.

It also said that the Spanish government, due to its borrowing difficulties, has had its ability to provide support to the banks “reduced”.

The Spanish government also had to pay higher rates of interest to borrow money on the markets, which leads some to believe it will need a bailout.

Moody’s also cut the ratings of four of Spain’s regions – Catalonia, Murcia, Andalucia and Extremadura – of whom it said there is only a “low probability that the regional governments will be able to meet the 2012 deficit target”.

‘Basically normal’

Bankia was forced to deny a report customers had taken 1bn euros ($1.3bn; £800m) out of the bank, which is set to be part-nationalised, in the past week.

Spain’s economy minister denied reports of a surge in withdrawals from Bankia in recent days.

“It’s not true that there is an exit of deposits at this moment from Bankia,” said Fernando Jimenez Latorre.

Later, the bank’s chief executive said volumes had been “basically normal”.

Bankia, which holds 32bn euros (£25.7bn) in distressed property assets, was partly nationalised this month. On Wednesday, it said it was delaying the release of its first-quarter results.

It has the industry’s largest exposure to the property market, which burst spectacularly and has saddled its banks with bad debt.

“Markets are worried about eurozone bank deposit runs and an escalating banking crisis,” said VTB Capital economist Neil MacKinnon.

Alberto Gallo, head of credit research at Royal Bank of Scotland, told the BBC: “The problem is Spanish banks are too large for the government to bear all of their weight.

“You [the Spanish government] need to make a choice and just protect stronger banks, otherwise Spain will go the way of Ireland – having to do a lot of austerity and potentially incurring losses for bank bondholders.”

Earlier, the Spanish government raised 2.5bn euros through issuing a number of different types of bonds.

On bonds due to be paid back in January 2015, it had to pay an interest rate of 4.373%, up from 2.89% in April. Governments have to pay higher returns to investors, or yields, as lenders become more concerned about a country’s ability to pay the money back.

On Wednesday, Spain’s Prime Minister Mariano Rajoy warned that borrowing costs could become “astronomical” as fears about the weakness of its banks persist.

This article was originally posted at http://www.bbc.co.uk/news/business-18100049

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.

Greek Bank Withdrawls Fuel Fears Of Bank Run

By Brian Blackstone & David Enrich | From WSJ.com | On Tuesday, May 15th, 2012

Greek depositors withdrew €700 million ($898 million) from the country’s banks on Monday, fueling fears of a bank run amid the growing political disarray.

With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area.

Greek President Karolos Papoulias told the country’s political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures.

The original article was posted at http://online.wsj.com/article/SB10001424052702303505504577406310678151998.html?mod=WSJ_hp_LEFTTopStories#articleTabs%3Darticle

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About The Author: RSOPerator is the co-founder & Executive Editor of Radical Survivalism Webzine.