Tag Archive: European Central Bank


 

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ZeroHedge

“Social Explosion” Begins In Greece As Massive Street Protests Bring Economy To A Fresh Halt

One thing that became abundantly clear after Alexis Tsipras sold out the Greek referendum “no” back in the summer after a weekend of “mental waterboarding” in Brussels was that the public’s perception of the once “revolutionary” leader would never be the same. And make no mistake, that’s exactly what Berlin, Brussels, and the IMF wanted.

By turning the screws on the Greek banking sector and bringing the country to the brink of ruin, the troika indicated its willingness to “punish” recalcitrant politicians who pursue anti-austerity policies. On the one hand, countries have an obligation to pay back what they owe, but on the other, the subversion of the democratic process by using the purse string to effect political change is a rather disconcerting phenomenon and we expect we’ll see it again with regard to the Socialists in Portugal.

After a month of infighting within Syriza Tsipras did manage to consolidate the party and win a snap election but he’s not the man he was – or at least not outwardly. He’s obligated to still to the draconian terms of the bailout and that means he is a shadow of his former self ideologically. As we’ve said before, that doesn’t bode well for societal stability.

On Thursday, we get the first shot across the social upheaval bow as the same voters who once came out in force to champion Tsipras and Syriza are staging massive protests and walkouts.

 

Read More Here

 

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Bloomberg Business

Greece Comes to a Standstill as Unions Turn Against Tsipras

November 11, 2015 — 6:01 PM CST Updated on November 12, 2015 — 6:04 AM CST
  • Unions hold general strike to protest against austerity
  • PM races to satisfy creditor demands in exchange for funds

As Greek workers took to the streets in protest on Thursday, Alexis Tsipras was for the first time on the other side of the divide.

Unions — a key support base for the prime minister’s Syriza party — chanted in rallies held in Athens the same slogans Tsipras once used against opponents. Doctors and pharmacists joined port workers, civil servants and Athens metro staff in Greece’s first general strike since he took office in January, bringing the country to a standstill for 24 hours.

As many as 20,000 protesters gathered in central Athens while a small group of anarchists at the tail of the demonstration threw petrol bombs at police officers at around 1:30 pm local time, a police spokesman said, requesting anonymity in line with policy. The police responded with tear gas and stun grenades.

Greece’s biggest unions, ADEDY and GSEE, are holding marches accusing Tsipras of bowing to creditors and imposing measures that “perpetuate the dark ages for workers,” as the country’s statistical agency released data showing that 1.18 million Greeks, or 24.6 percent of the workforce, remained unemployed in August.

The 41-year-old Greek premier, who was among anti-austerity protesters in previous general strikes, is now racing to complete negotiations with creditors on belt-tightening in exchange for the disbursement of 10 billion euros ($10.7 billion) to be injected into banks. Failure to reach an accord with euro-area member states and the International Monetary Fund on policies including primary residence foreclosures, and stricter rules on overdue taxes, would put the solvency of the country’s lenders in doubt.

“The economic policies Tsipras has to implement are definitely harsher than warranted, and also harsher than they would be if it wasn’t for these seven months of brinkmanship and extreme political uncertainty,” said Manolis Galenianos, a Professor of Economics at the Royal Holloway, University of London. “This wasn’t necessary, it could have been avoided, and the government will now implement deeper cuts to achieve less ambitious fiscal targets.”

 

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Bloomberg

French Recovery Fades as Manufacturing, Services Contract

Photographer: Balint Porneczi/Bloomberg

An employee removes excess felt from berets inside the factory of 174-year-old… Read More

French manufacturing and services unexpectedly shrank this month, highlighting President Francois Hollande’s struggle to revive the euro area’s second-largest economy.

A Purchasing Managers Index of factory activity dropped to 49.3 from 51.2 in April, while a services gauge fell to 49.2 from 50.4, Markit Economics said today in London. Economists had forecast readings above 50, the level that divides expansion from contraction.

Hollande is grappling with an economy that stagnated in the first quarter as both investment and consumer spending fell. After two years in office, his government has yet to achieve two consecutive quarters of expansion, a performance that has driven jobless claims to an all-time high of 3.3 million and his own popularity to a record low.

 

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French economy contracts while rest of eurozone keeps expanding

The headquarters of the European Central Bank (ECB) in Germany.

The strong pace of growth in the eurozone’s private sector eased very slightly this month, with drastic price cuts preventing any further slowdown, surveys showed yesterday.

Slower growth in activity at factories took the shine off an unexpected pickup in the service industry, although the bloc’s recovery appears to be gaining traction.

“This doesn’t change the picture of the eurozone having one of its best growth spells in the past three years. It’s broad-based – with the one exception being France,” said Rob Dobson, senior economist at survey compiler Markit.

Markit’s Composite Purchasing Managers’ Index, based on surveys of thousands of companies across the region and seen as a good indicator of growth, edged down to 53.9 from April’s near three-year high of 54.0, matching the forecast in a Reuters poll of analysts.

 

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Eurozone’s 18-month-long recession may be over, economic surveys suggest

French factories

The Osram factory in Molsheim. French factories returned to growth with their strongest performance in 17 months. Photograph: AFP/Getty

Hopes of a recovery in the eurozone were lifted after private sector firms across the region reported a rise in output for the first time in 18 months, leading to predictions that the single currency bloc is on the cusp of exiting recession.

A strong performance by German manufacturers and a halt to the headlong decline in French business activity gave the eurozone a much needed boost after the area slipped into reverse last year.

With the US manufacturing sector expanding at a faster pace in July, the main blot on the global economic recovery was a decline in manufacturing output in China that some economists have warned could force Beijing to renew its stimulus spending or risk a hard landing.

China’s manufacturing sector tempered the eurozone data, slowing to an 11-month low as new orders faltered and the job market darkened.

The flash HSBC/Markit Purchasing Managers’ Index (PMI) fell to 47.7 this month from June’s final reading of 48.2, marking a third straight month below the 50 threshold between expansion and contraction for China.

As if to highlight concerns that global growth is slowing, Caterpillar, the US construction and mining business that is considered a bellwether of global business activity, downgraded its forecast for the pace of the global recovery this year and next.

Alexandra Knight, an economist at National Australia Bank, said the weak Chinese PMI posed a problem for countries that relied on exports to China.

“It adds to the concern about the outlook for demand, and brings into question just how strong Chinese commodities demand will be,” she said.

 

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Exclusive: EU executive sees personal savings used to plug long-term financing gap

LONDON Wed Feb 12, 2014 6:00pm EST

A picture illustration taken with the multiple exposure function of the camera shows a one Euro coin and a map of Europe, January 9, 2013. REUTERS/Kai Pfaffenbach

A picture illustration taken with the multiple exposure function of the camera shows a one Euro coin and a map of Europe, January 9, 2013.

Credit: Reuters/Kai Pfaffenbach

(Reuters) – The savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.

The EU is looking for ways to wean the 28-country bloc from its heavy reliance on bank financing and find other means of funding small companies, infrastructure projects and other investment.

“The economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment,” said the document, seen by Reuters.

The Commission will ask the bloc’s insurance watchdog in the second half of this year for advice on a possible draft law “to mobilize more personal pension savings for long-term financing”, the document said.

Banks have complained they are hindered from lending to the economy by post-crisis rules forcing them to hold much larger safety cushions of capital and liquidity.

Read More Here

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ZeroHedge

Europe Considers Wholesale Savings Confiscation, Enforced Redistribution

At first we thought Reuters had been punk’d in its article titled “EU executive sees personal savings used to plug long-term financing gap” which disclosed the latest leaked proposal by the European Commission, but after several hours without a retraction, we realized that the story is sadly true. Sadly, because everything that we warned about in “There May Be Only Painful Ways Out Of The Crisis” back in September of 2011, and everything that the depositors and citizens of Cyprus had to live through, seems on the verge of going continental. In a nutshell, and in Reuters’ own words, “the savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.” What is left unsaid is that the “usage” will be on a purely involuntary basis, at the discretion of the “union”, and can thus best be described as confiscation.

The source of this stunner is a document seen be Reuters, which describes how the EU is looking for ways to “wean” the 28-country bloc from its heavy reliance on bank financing and find other means of funding small companies, infrastructure projects and other investment. So as Europe finally admits that the ECB has failed to unclog its broken monetary pipelines for the past five years – something we highlight every month (most recently in No Waking From Draghi’s Monetary Nightmare: Eurozone Credit Creation Tumbles To New All Time Low), the commissions report finally admits that “the economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment.”

The solution? “The Commission will ask the bloc’s insurance watchdog in the second half of this year for advice on a possible draft law “to mobilize more personal pension savings for long-term financing“, the document said.”

Mobilize, once again, is a more palatable word than, say, confiscate.

And yet this is precisely what Europe is contemplating:

Read More Here

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Reblogged  from :  Blavatar   Here and Now

Published time: June 01, 2013 11:08
Edited time: June 01, 2013 17:56

Activists of the anti-globalist Blockupy movement scuffled with dozens of riot police who charged into a marching crowd to disperse protesters, reports RT’s Peter Oliver. The march has been reportedly stopped.

What was supposed to be a march through the middle of German’s financial capital by anti-austerity demonstrators really lasted only about 500 meters, when several hundred riot police in full kit came among the crowd.

The protesters started throwing paint-filled objects at the police so puddles of paint are here and there, RT’s Peter Oliver reported. Later the paint filled bags were confiscated by police.

The organizers maintain there are tens of thousands of protesters and Peter Oliver witnesses a whole column of protesters going around the ECB headquarters.

The police force has split into two groups now. They do not let anybody through so the demonstration is not moving anywhere, as police and protesters are locked in a stand-off.

Water cannons arrived at the scene of a peaceful protest, Oliver reports.

Watch video of RT correspondent Peter Oliver live from the scene.

Riot police officers have already used pepper spray several times and some people have been taken away, but it is not clear if they have been arrested.

RT’s crew working at the scene has been separated by the riot police dividing demonstrators. The crew reports the use of fences and barbed wire by police.

Photo from twitter.com user @PeterGOliver_RT

Photo from twitter.com user @PeterGOliver_RT

Protests in Frankfurt-am-Main started on Friday when some 3,000 ‘Blockupy’ protesters, clutching signs demanding “humanity before profit”, blocked the main entrance of the ECB, the organizers announced that the coalition has “reached its first goal” of the day.

The anti-globalism march was called to celebrate the anniversary of the ‘Occupy’ rallies by blocking the European Central Bank.

Photo from twitter.com user @PeterGOliver_RT

Photo from twitter.com user @PeterGOliver_RT

The protesters moved to city’s downtown from activists’ camp in the Frankfurt suburbs, set up earlier.

Police reported that though some protesters thrown stones and there were some clashes at the barricades, about 400 people were detained on Friday.

The ECB, which has headquarters at Kaiserstrasse 29, in Frankfurt-am-Main, has promised to remain operational during the planned demonstrations.

Photo from twitter.com user @PeterGOliver_RT

Photo from twitter.com user @PeterGOliver_RT

Blockupy activists lay blame for the debt crisis in Europe with the banks and in particular the ECB for its role in imposing austerity measures on EU citizens.

 

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Thousands blockade European Central Bank in Frankfurt (VIDEO, PHOTOS)

  RT

Published time: May 31, 2013 08:12
Edited time: May 31, 2013 13:50

The entrance of the ECB is blocked by over 3,000 ‘Blockupy’ protesters in a march against austerity. ‘Blockupy’ has announced the coalition has “reached its first goal” of the day.

Anti-capitalist protesters have taken to the streets of the financial heart of Frankfurt a day ahead of Europe-wide gatherings planned for June 1 to protest leaders handling of the three-year euro debt crisis.

“We call up everyone to join our protests.”

 

 

German riot police scuffle with protestors in front of the European Central Bank (ECB) head quarters during a anti-capitalism "Blockupy" demonstration in Frankfurt, May 31, 2013. (Reuters / Kai Pfaffenbach)

German riot police scuffle with protestors in front of the European Central Bank (ECB) head quarters during a anti-capitalism “Blockupy” demonstration in Frankfurt, May 31, 2013. (Reuters / Kai Pfaffenbach)

The ECB spokesman told The Guardian that the Blockupy protests have not disturbed day to day operations at the bank, but would not specify how many bankers managed to come to work.

Apart from those who amassed outside the ECB, a smaller demonstration took place at the nearby Deutsche Bank AG (DBK) headquarters, where around 50 police vehicles had been deployed. The protesters set off by midday.

The crowd, estimated at 2,500 by local authorities, clutched signs demanding ‘humanity before profit’.

Rain-soaked and dressed in ponchos, the crowd is equipped with a wide array of protest props- vuvuzelas, yellow wigs, pots and pans, and mattresses with the spray-painted slogan ‘War Starts Here’.

 

Image from twitter user@Migs_Bru

Image from twitter user@Migs_Bru

Blockupy’ has become a top-ten Twitter trend in Frankfurt, and at 10:09am (08:09 GMT), user Enough14 tweeted, “Strong Powerful blockade at Kaiserstr. Not one banker will come through here,” in reference to the ECB headquarters.

 

Read Full Article  and Watch Video Here

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    Image Source                           Angela Merkel, Chancelière allemande.

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Proper analysis of Mario Draghi’s figures suggests Germany is a major cause of the crisis – not a wage productivity paragon

Mario Draghi, president of the European Central Bank: his analysis of the euzozone crisis is flawed, argues Andrew Watt. Photograph: Lisi Niesner/Reuters

Over the course of the last week’s tense negotiations over a Cyprus bailout deal, much of the commentary has focused on the role of Europe’s finance ministers. But perhaps closer attention should be paid to Mario Draghi, the president of the European Central Bank. On 14 March Draghi made a presentation to heads of state and government on the economic situation in the euro area. His intent was to show the real reasons for the crisis and the counter-measures needed. In this he succeeded – although not in the way he intended.

Draghi presented two graphs that encapsulate his central argument: productivity growth in the surplus countries (Austria, Belgium, Germany, Luxembourg, Netherlands) was higher than in the deficit countries (France, Greece, Ireland, Italy, Portugal, Spain). But wage growth was much faster in the latter group. Structural reforms and wage moderation lead to success; structural rigidities and greedy trade unions lead to failure. QED.

According to the Frankfurter Allgemeine Zeitung, which reported the affair approvingly, the impact of Draghi’s intervention was devastating. François Hollande, the French president, who had earlier been calling for an end to austerity and for growth impulses, was, according to the newspaper, completely silenced after the ECB president had so clearly demonstrated, with incontrovertible evidence, what was wrong in Europe – or rather in certain countries in the eurozone – and what must be done.

Things are not as they seem, however. Draghi’s presentation contains a simple but fatal error – or should that be misrepresentation? As the note to the graphs indicates, the productivity measure is expressed in real terms. In other words, it shows how much more output an average worker produced in 2012 compared with 2000. So far so good. However, the wage measure that he uses, compensation per employee, is expressed in nominal terms (even if, interestingly, this is not expressly indicated on the slides). In other words, the productivity measure includes inflation, but the wage measure does not.

 

Read Full Article  Here

 

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Cyprus Salvaged After EU Deal Shuts Bank to Get $13B

By Rebecca Christie, James G. Neuger & Patrick Donahue – Mar 25, 2013 10:24 AM CT

Cyprus dodged a disorderly sovereign default and unprecedented exit from the euro by bowing to demands from creditors to shrink its banking system in exchange for 10 billion euros ($13 billion) of aid.

Cypriot President Nicos Anastasiades agreed to shut the country’s second-largest bank under pressure from a German-led bloc in an overnight negotiating melodrama that threatened to rekindle the European debt crisis and rattle markets.

“It’s been yet another hard day’s night,” European Union Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels early today. “There were no optimal solutions available, only hard choices.”

It was the second time in nine days that Cyprus struck a deal with its euro partners and the International Monetary Fund, capping a tumultuous week that underscored the contradictions of euro-crisis management that has dominated European policy making for more than three years. Cyprus, the euro area’s third- smallest economy, is the fifth country to tap international aid since the crisis broke out in Greece in 2009.

The first Cypriot accord, reached March 16, fell apart three days later when the parliament in Nicosia rejected a key plank, a tax on all bank accounts that sparked the indignation of smaller depositors. Efforts to win an alternative bailout from Russia, which loaned Cyprus 2.5 billion euros in 2011 when the nation was shut out of international markets, failed.

‘Playing Games’

“Nobody knows where we are heading,” said Epifanos Epifaniou, 50, who used to drive a delivery truck in Nicosia and has been unemployed for six months. “People are playing games with Cyprus. We are alone. Nobody is supporting us.”

The euro retreated 0.4 percent, trading at $1.2935 at 2:33 p.m. in Frankfurt, after initially rising as much as 0.5 percent. Stocks gained, with the Stoxx Europe 600 Index rising 0.5 percent. Italian 10-year bonds erased their decline since last month’s inconclusive election.

German Chancellor Angela Merkel lauded the agreement as lawmakers in her coalition embraced the package, which should go to a vote in Berlin in the coming weeks. The agreement goes a “long way” toward satisfying Germany’s Bundestag, Christian Democratic lawmaker Norbert Barthle said in an interview.

Bartering

The breakthrough came after Anastasiades bartered with officials including EU President Herman Van Rompuy, European Central Bank President Mario Draghi and IMF Managing Director Christine Lagarde. It was then sealed by the finance ministers, some of whom went out to dinner while the talks were ongoing.

With the ECB threatening to cut off emergency financing for tottering banks as soon as today, Cyprus’s leaders engineered another way of shrinking the island’s financial system.

The revised accord spares bank accounts below the insured limit of 100,000 euros. It imposes losses that two EU officials said would be no more than 40 percent on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl (CPB), the second biggest.

Cyprus Popular Bank, 84 percent owned by the government, will be wound down. Those who will be largely wiped out include uninsured depositors and bondholders, including senior creditors. Senior bondholders will also contribute to the recapitalization of Bank of Cyprus.

Debt Doubts

The squeezed banking industry will likely lead to a “sharp drop” in Cyprus’s gross domestic product this year and next, according to Reinhard Cluse, a London-based economist at UBS AG. As a result, the euro group’s debt-to-GDP ratio target of 100 percent by 2020 “must be doubted,” he said.

The Cypriot Finance Ministry said in a January presentation that bailing out the country may push debt to a peak of about 140 percent of GDP next year.

“Cyprus’s sovereign debt problems will remain an issue of concern — for European policy makers and for the markets,” Cluse wrote in a note to clients today.

Banks in Cyprus, which have been shut for the past week, will remain closed until further notice. Lawmakers in Cyprus voted last week to impose capital controls to prevent a run on deposits when they reopen.

The union representing Cypriot banking workers said today the Mediterranean island is faced with a “painful compromise,” according to a statement posted on its website. It urged employees to be ready to return to work when banks reopen.

Better Solution

“This solution we reached tonight doesn’t have the downsides that the solution of last week did,” said Dutch Finance Minister Jeroen Dijsselbloem, chairman of the euro ministers’ panel. He said the deal was beyond the range of “political possibilities” a week ago.

The Cypriot parliament won’t have to vote again because it has already passed laws on bank restructuring, officials said. On the creditors’ side, legislatures in Germany, Finland and the Netherlands may hold votes to approve loans to Cyprus from the European Stability Mechanism, the 500 billion-euro rescue fund.

Klaus Regling, managing director of the rescue fund, said approval by creditor governments in mid-April will pave the way for the first payouts to Cyprus in early May.

Lagarde said she will recommend that the IMF provide loans, without giving a figure. “There might have been a bit of friction here and there,” she said of the talks.

Solvent Banks

The next step lies with the ECB, which needs to keep funds flowing to solvent Cypriot banks to enable them to open. While Draghi and Executive Board member Joerg Asmussen left Brussels without commenting to reporters, a statement by the ministers said the bank will channel liquidity to Bank of Cyprus “in line with applicable rules.”

The seizure of larger deposits may spark tensions with Russia, the source of an estimated $31 billion in holdings in Cypriot banks according to Moody’s Investors Service. A Cypriot mission to Moscow last week failed to yield an alternative to the European-sponsored bailout.

Still, Russian President Vladimir Putin ordered his government to discuss restructuring a 2011 loan to Cyprus, Russian news service RIA Novosti cited a spokesman as saying.

The effort to go after insured deposits, while abandoned, may have harmful repercussions, said Moody’s in a note early today. “Policy makers’ recent decisions raise the risk of deposit outflows, capital flight, increased bank and sovereign funding costs and broader financial-market dislocation throughout the euro area in the future,” Moody’s said.

Nine Months

In a replay of tensions over aid for Greece at the outset of the crisis, European governments had wrangled over aid for Cyprus for nine months, exposing holes in the revamped economic management system that was built in three years of emergency policymaking, often at all-night summits.

A tightening of Europe’s budget-deficit restrictions and new rules to penalize countries with unbalanced economies or asset bubbles failed to stop the rot in Cyprus, which makes up less than 0.2 percent of euro-region output.

Hundreds of protesters massed outside the floodlit presidential palace in Nicosia late yesterday, one group brandishing a banner that said: “It’s capitalism, stupid.”

Source  Bloomberg

 

Related Articles

Protesters during an anti- bailout rally in Nicosia, Cyprus, on March 24, 2013. Photographer: Petros Karadjias/AP Photo

Lagarde Says Troika `Doing Fine' After Cyprus Deal

0:17

March 25 (Bloomberg) — International Monetary Fund Managing Director Christine Lagarde says the so-called troika of the European Central Bank, European Commission and IMF is “doing fine” when asked by reporters about its future backing of bailouts. She spoke earlier today alongside Olli Rehn in Brussels following an emergency meeting of euro-area finance ministers, who agreed to a 10 billion-euro ($13 billion) bailout for Cyprus. (Source: Bloomberg)

March 22 (Bloomberg) — Bloomberg Television’s Ryan Chilcote reports on how the Russian population living and banking in Cyprus could be affected by the current crisis. He speaks from Limassol, Cyprus, on Bloomberg’s “The Pulse.” (Source: Bloomberg)

Getting Cash in Cyprus Is a Problem Amid Bailout

1:35

March 25 (Bloomberg) — As Cyprus dodges a disorderly default and unprecedented exit from the euro currency by winning a 10 billion-euro ($13 billion) bailout, Cypriots are finding cash hard to come by. Bloomberg Television’s Ryan Chilcote reports from Nicosia. (Source: Bloomberg)

Pissarides Sees `Disastrous' Implications in Cyprus

9:21

March 25 (Bloomberg) — Christopher Pissarides, the head of Cyprus’s economic policy council, talks about the island nation’s bailout package and the outlook for its future membership of the euro zone. He speaks from Nicosia with Guy Johnson and Francine Lacqua on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Cyprus Aid Package Seen to Set `Worrying' Precedent

6:36

March 25 (Bloomberg) — Stelios Platis, managing director of MAP S.Platis, talks about Cyprus’s deal with the European Union to shrink its banking system in exchange for a 10 billion-euro ($13 billion) bailout. He speaks from Cyprus on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

MP Says Cyprus Must Assess Benefits of Euro Exit

4:49

March 25 (Bloomberg) — Nicholas Papadopoulos, Cypriot lawmaker and chairman of the parliamentary finance committee, discusses the consequences of the nation’s 10 billion-euro ($13 billion) bailout. He speaks in Nicosia with Ryan Chilcote on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Europe Debt Crisis Needs `Pan-European' Solution

4:48

March 26 (Bloomberg) — Philippe D’Arvisenet, chief global economist at BNP Paribas SA, talks about Europe’s sovereign debt crisis and the outlook for the euro. Cyprus dodged a disorderly sovereign default and unprecedented exit from the euro by bowing to demands from creditors to shrink its banking system in exchange for 10 billion euros ($13 billion) of aid. D’Arvisenet speaks in Singapore with Haslinda Amin on Bloomberg Television’s “On the Move.” (Source: Bloomberg)

Jeroen Dijsselbloem, the Netherlands’s finance minister and president of the Eurogroup, center, speaks as Christine Lagarde, managing director of the International Monetary Fund, left, and Olli Rehn, economic and monetary affairs commissioner for the European Union, listen during a news conference following the Eurogroup meeting in Brussels on March 25, 2013. Photographer: Jock Fistick/Bloomberg

Cyprus Popular Bank, 84 percent owned by the government, will be wound down. Photographer: Simon Dawson/Bloomberg

The revised accord spares bank accounts below the insured limit of 100,000 euros. It imposes losses that two EU officials said would be no more than 40 percent on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second biggest. Photographer: Simon Dawson/Bloomberg

BoozWheezBoozWheez

Published on Mar 23, 2013

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The Cyprus debt crisis is being felt by the banks but also by the people who work at them. Nick Paton Walsh reports

Bank Runs IN THE USA now??? Check this out!!

Germany  and The  Central Bank are  Pressuring  Cyprus to  steal from  it’s  citizens as and  answer for   fiscal irresponsibility.  The  Central Bank  has ordered banks to block  citizens access  to their  own personal accounts.  Thereby  barring  access to their  own money.  I   suppose  they  are  biding their  time making   sure that  people  do  not  empty  their accounts  before the  decision  to allow  them   to  steal the money is reached.

Since  when  is  this  kind of blatant theft not an   unlawful act?  Who  do  they  EU and  the   Central Bank  think they  are  to  be coercing the government  to commit this crime against  it’s people?

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Central Bank of Cyprus orders island’s lenders to block customers’ transfers

Cyprus’s central bank has written to the island’s lenders to ask them to block customer’s transfers and payments, according to reports on the island.

Cypriot website 24h revealed on Sunday that the Central Bank of Cyprus wrote to Cypriot lenders on Saturday, March 16 to ask them to stop all form of payments from their accounts, even those that were from one account at the bank to another.

The measure comes after the Eurogroup asked Cyprus to impose a one-off tax on depositors as part of its bailout.

Kathimerini English Edition understands that the capital controls do not apply to the units of Cypriot banks in Greece. Normal restrictions on cash withdrawals and electronic transfers are in place.

The depositor tax will not apply to Cypriot bank units in Greece but the branches are set to be absored by a Greek lender by Tuesday.

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19 March 2013 Last updated at 23:26 ET

Cyprus warned over parliament’s bailout rejection

BBC

Anti-bailout protesters raise their open palms showing the word "No" after Cyprus"s parliament rejected a proposed levy on bank deposits
The proposed levy had caused an outcry among many Cypriots

Germany’s finance minister has warned Cyprus that its crisis-stricken banks may never be able to reopen if it rejects the terms of a bailout.

Wolfgang Schaeuble said major Cypriot banks were “insolvent if there are no emergency funds”.

He was speaking after the Cypriot parliament rejected an international bailout deal that would have imposed a one-off tax on bank deposits.

Frantic talks are under way to try to agree an alternative plan.

Leaders of political parties in Cyprus are due to meet later after parliament rejected the controversial levy, proposed as part of a 10bn-euro (£8.7bn; $13bn) bailout package.

The BBC’s Mark Lowen, in Nicosia, says the country is in turmoil and the eurozone’s plan has completely unravelled,

 

Analysis

Mark Lowen BBC News, Nicosia

There may have been jubilation among many Cypriots at Tuesday night’s parliamentary defeat of the hated banking tax, but now the country faces a tough reality.

The EU bailout has been derailed and Cyprus is edging towards bankruptcy. But talks are also continuing with the EU to find a credible alternative.

The eurozone’s third smallest economy has just sent a resounding message of defiance to Brussels. And the impact will spread far beyond this tiny island.

Not a single MP voted in favour of the controversial deal, sending a clear message to Brussels that the strategy needs a drastic rethink, our correspondent adds.

Late on Tuesday, Mr Schaeuble said that he “regretted” the vote.

“The ECB (European Central Bank) has made it clear that without a reform programme for Cyprus the aid can’t continue. Someone has to explain this to the Cypriots and I think there’s a danger that they won’t be able to open the banks again at all,” he said.

“Two big Cypriot banks are insolvent if there are no emergency funds from the European Central Bank,” Mr Schaeuble added.

Cypriot President Nicos Anastasiades called the talks between party leaders when it became clear that the measure would not be passed by parliament.

Fearing a run on accounts, Cyprus has shut its banks until at least Thursday. The local stock exchange also remains closed.

Cyprus’ banks were badly exposed to Greece, which has itself been the recipient of two huge bailouts.

Read Full Article Here

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Europe’s Central Bank Issues Cyprus Ultimatum

March 21, 201310:08 AM
People line up at an ATM in Nicosia to withdraw cash on Thursday.

People line up at an ATM in Nicosia to withdraw cash on Thursday.

Patrick Baz/AFP/Getty Images

The clock is ticking on Cyprus’ fiscal cliff.

The European Central Bank has given the Mediterranean country just four days to come up with its own bailout plan, or a eurozone lifeline to its struggling banks will be severed.

The ultimatum comes after Cypriot lawmakers on Tuesday rejected a highly unpopular proposal put forward by the European Central bank, the European Commission and the International Monetary Fund to give the country’s banks half of a $13 billion bailout package if they can raise the other half from a steep levy on the country’s personal savings accounts.

Since then, the Cyprus government has been struggling to come up with a “Plan B” that will satisfy international lenders. If Cyprus can’t do it by Monday, the ECB will pull the plug on Cypriot banks, which would likely precipitate a collapse of the island’s financial institutions and send shock waves through European and world markets.

Update at 2:40 p.m. ET: Cyprus Bank To Be Restructured:

NPR’s Joanna Kakissis reports that the governor of Cyprus’ central bank, Panicos Demetriades, says country’s second largest bank, Cyprus Popular Bank, will be restructured to forestall its imminent collapse next week. Cyprus Popular Bank has placed a $336 (260 euro) limit on ATM withdrawals.

Our original post:

Kakissis, reporting from the Cypriot capital Nicosia, says the country’s banks were drained by exposure to the Greek debt crisis. But EU and IMF leaders see the island as a haven for offshore investment, especially by wealthy Russians, and want depositors to pay for part of a bailout.

Banks have been closed until Tuesday to prevent a bank run, but ATMs have been restocked so people can withdraw money, Kakissis says.

The Parliament in Cyprus could vote on a plan to raise the $7.5 billion as early as Thursday

Read Full Article Here

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Of course people  will protest. They  have  closed the  banks and block  access to their money.  I  would dare  say  it  is  a  very  logical reaction to  being robbed,wouldn’t you ?

And yet  it  is typical of this type of strong  arm tactic  for  the victim to be treated as the  criminal,while the  criminal is protected.   Truly  ironic is it  not ?

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Hundreds protest despite postponement

Published on March 19, 2013
Demonstrators outside the House of Representatives yesterday wearing Angela Merkel masks

AROUND 1,000 people gathered outside Parliament yesterday despite a vote on the proposed haircut being postponed until  today at 6pm.

Around half of the protesters dispersed quite quickly after receiving news that the vote had been put back, planning on regrouping outside the House today.

“I’m here for the same reason as everyone else to protest the bill and we will come tomorrow and the next day if required,” 56-year-old insurance salesman Lambros Kannaouros said.

“The decision to make the people pay is unfair,” he added.

Petros Heracleous a 26-year-old unemployed protester believed that attempts to restructure the haircut were pre-planned to make the people think that the politicians were trying to change something. “We prefer to keep our pride instead of suffering the repercussions of a haircut,” he said.

Forty-year-old telecommunications regulator, Yiannos Demetriou felt that a haircut would go against human rights and against the Cyprus constitution. “They are trying to take advantage of us so they can take our natural gas and impose a solution to the Cyprus problem that will suit foreign powers,” he said. “If Anastasiades is assuming the political cost of the haircut then he should call for a referendum or even call a general election,” he added.

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Cyprus chaos continues as banks stay closed

– last updated Thu 21 Mar 2013

Cyprus finance minister Michalis Saris arrives to meet his Russian counterpart in Moscow. Photo:

Banks in Cyprus are to remain closed on Thursday and Friday, the government has said, amid continuing uncertainty over an EU bailout that required a 10 per cent tax on savings.

President Nicos Anastasiades will chair a meeting with the parliamentary party leaders tomorrow at 9.30am at the Presidential Palace.

ITV News Europe Editor James Mates reports:

Russian Prime Minister Dmitry Medvedev has criticised the EU and Cyprus’ handling of the country’s ongoing economic crisis, saying they are acting “like a bull in a china shop”, the state-run news agency RIA Novosti reported.

Meanwhile, Prime Minister David Cameron has reaffirmed that any British military or government personnel in Cyprus would not lose their savings due to the crisis.

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Thursday, March 21, 2013

UPDATE: Cyprus Protesters and Bank Employees Clash With Police

Dees Illustration

Activist Post

Local news in Cyprus is reporting an escalation in the protests that have begun in the wake of attempts by EU chiefs to confiscate the savings of depositors. The news of possible bank closures has enraged the public. It appears that in order to keep things under control, the Central Bank is discussing a possible bank merger rather than a full shut down.

The Central Bank of Cyprus today intervened to quash frantic reports that Cyprus Popular Bank is to be closed down.

The reports sent hundreds of Cyprus Popular Bank employees and holders of the bank’s bonds out into the streets. Police deployed a strong force outside the Bank’s headquarters in the capital Nicosia to prevent them smashing into the building. (Source)

Here is a video showing police in riot gear on the scene:

Cyprus Broadcasting Corporation says the following:

The European Central Bank today said it had decided to allow the Central Bank of Cyprus to keep providing banks with emergency funding until this coming Monday.

An ECB statement said that thereafter, Emergency Liquidity Assistance can only be considered if a rescue programme is in place that would ensure the solvency of the banks involved. (Source)

Meanwhile, President Anastasiades supposedly has a Plan B ready:

Cyprus’s political leadership today decided on a package of measures dubbed “plan B” to avert a financial meltdown, as the finance minister is engaged in rescue talks with Russian officials in Moscow….

No details of the plan were immediately announced, but Averof Neophytou, a close associate of President Nicos Anastasiades said that there had been a unanimous decision to establish a “Solidarity Fund”. (Source)

Recent photos of the protests were posted at ZeroHedge, which you can see HERE. One protester can be seen holding a sign that says, “Where is the solidarity?”

We’ll keep you posted as this develops. Previous updates and videos can be found below…

ATMs in Cyprus were drained over the weekend, electronic transfers were halted, and riots ensued following a decision by European Union chiefs to raid private savings accounts to help pay for the country’s $13 billion bailout. It was believed that there were plans to stretch a bank holiday to at least one week, while the exact measures were decided upon. However, yesterday the Cypriot parliament rejected the scheme outright, leading many to speculate that this would be the start of something even worse.
Sure enough, much like the U.S. Federal Reserve threatened martial law and blood in the streets if Congress didn’t accept sweeping bailouts in 2008, now Germany is saying that Cypriot banks might never reopen after parliament’s decision:

Germany’s finance minister, Wolfgang Schaeuble said major Cypriot banks were “insolvent if there are no emergency funds,” according to a BBC report, meaning savers might lose all their money if no deal was reached. (Source)

There is extreme worry that if the banks do reopen, capital flight is all but assured. Meanwhile, similar confiscation schemes are being proposed for Italy and New Zealand (more on that below), spurring questions about which other nations are in line for a “haircut” . . . perhaps better called “the chopping block.”

Whether or not Cyprus gets its bailout in one form or another — perhaps from Russia — this is a precedent-setting crisis that is already leading to such a level of distrust in Cyprus that merchants are even refusing credit card payments. This is indeed shaping up to be a potential “Lehman Brothers Moment” with ramifications that could extend even beyond the troubled nations of Europe.

Previous updates and videos can be found below…

Reuters reported earlier that,

The euro zone agreed on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion), but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risk of a wider run on savings.
….
In a radical departure from previous aid packages – and one that gave rise to incredulity and anger across the country – euro zone finance ministers forced Cyprus’ savers to pay up to 10 percent of their deposits to raise almost 6 billion euros.

Cyprus president Nicos Anastasiades agreed to the deal, which completely reversed his previous assurances that it would not happen. It sets a very dangerous precedent for future bailouts. As if brutal austerity wasn’t enough, the EU is now demanding a bailout tax making citizens and expat depositors alike personally liable for government and private bank debts. Reuters also notes that according to a draft of the legislation, criminal penalties of up to 3 years in jail and 50,000 euros could be imposed upon anyone who doesn’t comply.

The New York Times reports:

Most of the 10 billion euros will go to bail out Cypriot banks, which took a blow when their substantial holdings of Greek government bonds were written down as part of that country’s second bailout.

Britain has 60,000 depositors in Cypriot banks, including thousands of military and government personnel stationed on the island. George Osborne highlighted that Cypriot banks in England would not be subjected to the tax (originally proposed at 6.75% for accounts under 100,000 Euros; 9.9% for those over 100,000), but expat depositors apparently will government and military excluded:

George Osborne vowed today that those serving in Britain’s military or government in Cyprus will be protected after European finance chiefs ordered an unprecedented raid on personal bank accounts.

Up to 60,000 British savers are to lose thousands of pounds each as expats in Cyprus have their savings decimated in part of a painful bid to bail out the bankrupt island.

The Chancellor said the financial situation in Cyprus was ‘an example of what happens if you don’t show the world that you can pay your way’, adding: ‘We are not part of the bailout.’ (Source)

The tax is being justified as a last-ditch effort to raise money and keep Cyprus from supposedly causing a domino effect across the Eurozone as indebted nations begin to collapse. Cyprus had set itself up as a strong banking center for investors, but many are outraged over Anastasiades’ about-face:

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.

ZeroHedge reports that it is those “rich Russians” who could wind up angriest. Eurogroup had suggested that depositors under 100,000 euros should maintain their insurance against such a scheme, but it is possible that larger depositors will absorb their percentage by moving the top percentage tax to 15.6%.

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.

….

(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. (Source)

However, the changes continue today, 3/19. 

The President just proposed the ‘levy’ on deposits begin at EUR 20,000 just hours ahead of today’s planned vote. 

CYPRUS REVISED BILL SEES NO LEVY ON DEPOSITS UP TO EU 20,000

However, it is still theft of private property which appears to be the philosophical stumbling block for the parties involved and therefore today’s vote appears to be delayed:

ANASTASIADES TO MEET PARTY LEADERS 9 AM TOMORROW: SPOKESPERSON

CYPRUS PARLIAMENT BANK-LEVY VOTE MAY HAPPEN TOMORROW, CYBC SAYS (Source)

Read Full Article Here

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Deposit haircut back on the table

Published on March 21, 2013
Cyprus Mail
Members of the troika of international lenders arrive at the Presidential Palace yesterday (Christos Theodorides)

THE government yesterday ordered banks to stay shut until next week as it toyed with the idea of re-submitting a proposal on tax deposits – at a much lower rate than the previous scheme – as it scrambled to avert a financial meltdown.

The government was yesterday trying to find alternative solutions after parliament on Tuesday rejected the terms of a bailout from the European Union and turned instead to Russia for a lifeline.

“We don’t have days or weeks, we have only hours to save our country,” Averof  Neophytou, ruling DISY deputy chairman, told reporters as crisis talks in Nicosia dragged into the evening.

Neophytou tried to get the message through to other parties.

“I believe we will not be the cursed generation of politicians who will let our country go bankrupt,” Neophytou added.

It was suggested yesterday that the government may submit a bill today proposing a haircut on deposits but at lower rates than legislation that was rejected by parliament on Tuesday.

MPs threw out a proposed tax on bank deposits in exchange for a €10-billion bailout from the EU, a stunning rejection of the kind of strict austerity accepted over the past three years by crisis-hit Greece, Portugal, Ireland, Spain and Italy.

The tax — 6.7 per cent on deposits under €100,000 and 9.9 per cent on deposits over €100,000 — was designed to fetch the government €5.8 billion.

The shortfall from the lower rates could be covered by nationalising the provident funds of semi-state companies.

Bank of Cyprus vice president Evdokimos Xenophontos said the situation could be reversed but warned against touching foreign deposits.

“We cannot do it to foreign depositors who trusted us. This could be theft,” he told reporters after meeting President Nicos Anastasiades last night.

Xenophontos said only Cypriots must foot the bill in exchange for bank warrants, better interest rates, etc.

“If we protect them (foreigners) even if they leave, they will come back. We lived through an invasion and we overcame the difficulties on our own,” he said.

Read Full Article Here

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Deposit haircut would affect tens of thousands of non-Cypriots

Published on March 21, 2013

THE NUMBER of non-Cypriots living on the island number over 170.000, the vast majority of whom would have Cypriot bank accounts and are would be affected by a deposit haircut.

The full figure of 170,383 is from the population census carried out by the statistical services in October 2011, published in January this year.

Of the 170,383 non-Cypriots living in Cyprus at the time, 106,270 were EU citizens and 64,113 were non-European. From the European citizens, statistics show that the number of Greeks was the highest at 29,321, then Britons at 24,046, Romanians 23,706, and Bulgarians 18,536.

From the non-European citizen, Filippinos numbered 9,413, Russians 8,164, Sri Lankans 7,269, and Vietnamese 7,028.

Greeks, Romanians and Bulgarians mainly resided in Nicosia while most UK citizens resided in coastal areas such as, Paphos during the research period. The majority of Russian citizens resided in Limassol.

From the non-European citizens the majority lived in Nicosia.

“The population census is carried out once every ten years,” Georgia Ioannou, a statistics officer said. “Since 1982, we have been conducting this survey on October 1. We do not do the survey during the summer period as many people are on holiday and we also do not want to visit people’s homes during Christmas or Easter,” she said.

“We use the traditional method of going from home to home with a questionnaire. We mark down all residents of Cyprus who have been in the country for more than one year or are planning to stay for over a year,” Ioannou said.

The population of Cyprus during the latest population census was 840,407 people, 431,627 were women compared to 408,780 men. From the 106.270 European citizens, 53,607 were men and 52,663 were women. From the 64,113 Non-European citizens, the women were 41,114 and men were 22,999.

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Post image for UPDATE: Germany Warns That Banks In Cyprus May Remain Closed Permanently

ATMs in Cyprus were drained over the weekend, electronic transfers were halted, and riots ensued following a decision by European Union chiefs to raid private savings accounts to help pay for the country’s $13 billion bailout. It was believed that there were plans to stretch a bank holiday to at least one week, while the exact measures were decided upon. However, yesterday the Cypriot parliament rejected the scheme outright, leading many to speculate that this would be the start of something even worse.

Sure enough, much like the U.S. Federal Reserve threatened martial law and blood in the streets if Congress didn’t accept sweeping bailouts in 2008, now Germany is saying that Cypriot banks might never reopen after parliament’s decision:

Germany’s finance minister, Wolfgang Schaeuble said major Cypriot banks were “insolvent if there are no emergency funds,” according to a BBC report, meaning savers might lose all their money if no deal was reached. (Source) There is extreme worry that if the banks do reopen, capital flight is all but assured. Meanwhile, similar confiscation schemes are being proposed for Italy and New Zealand (more on that below), spurring questions about which other nations are in line for a “haircut” . . . perhaps better called “the chopping block.”


Whether or not Cyprus gets its bailout in one form or another — perhaps from Russia — this is a precedent-setting crisis that is already leading to such a level of distrust in Cyprus that merchants are even refusing credit card payments. This is indeed shaping up to be a potential “Lehman Brothers Moment” with ramifications that could extend even beyond the troubled nations of Europe.

Previous updates and videos can be found below…

Reuters reported earlier that,

The euro zone agreed on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion), but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risk of a wider run on savings.
….
In a radical departure from previous aid packages – and one that gave rise to incredulity and anger across the country – euro zone finance ministers forced Cyprus’ savers to pay up to 10 percent of their deposits to raise almost 6 billion euros.

Cyprus president Nicos Anastasiades agreed to the deal, which completely reversed his previous assurances that it would not happen. It sets a very dangerous precedent for future bailouts. As if brutal austerity wasn’t enough, the EU is now demanding a bailout tax making citizens and expat depositors alike personally liable for government and private bank debts. Reuters also notes that according to a draft of the legislation, criminal penalties of up to 3 years in jail and 50,000 euros could be imposed upon anyone who doesn’t comply.

The New York Times reports:

Read Full Article Here

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Central bank denies Cyprus Popular Bank to close down

Last updated Thu 21 Mar 2013

The Cypriot central bank has denied reports today that stricken Cyprus Popular Bank, the island’s second-largest lender, is to be closed down, Reuters is reporting.

“We deny these reports. Efforts are under way right now to find the best possible solution for this bank,” Central Bank spokeswoman Aliki Stylianou told state television.

A man reads a note on the shutters of a Cyprus Popular Bank (CPB) branch informing customers that the bank will remain closed. Credit: Reuters

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Cyprus pins hopes on creation of solidarity fund as ECB threatens to cut off lending

Political leaders in Cyprus have agreed that their country should form an investment fund to raise the capital needed to agree a bailout with the eurozone and International Monetary Fund and avert a collapse of its banking system.

The deputy leader of Cyprus’s conservative DISY party Averof Neofytou announced the agreement within a few hours of the European Central Bank saying that it was set to cut off lending to insolvent Cypriot banks on Monday.

“We will find a solution,” said Neofytou. “We have no other choice. We are making a united effort to avoid our country’s bankruptcy and I think we will succeed.”

Nicosia plans to create a fund collateralized by state assets, possibly including natural gas revenues, church property and social security fund reserves. A proposal is due to be submitted to the House of Representatives on Thursday evening.

A government official who declined to be named told Bloomberg that some kind of deposit tax was not being ruled out.

Meanwhile, Finance Minister Michalis Sarris continued talks in Moscow, with Cyprus hoping there would be Russian interest in Cypriot banks or in contributing to the investment fund being created.

Sarris told Cypriot state broadcaster that he would meet two Russian ministers on Thursday evening and that the main aim would be to convince Moscow to invest in the wealth fund to be set up by the Nicosia government.

“We are asking for help clearly, but something that would make also economic sense for Russia,” Sarris told reporters earlier.

Cyprus is also asking Moscow to extend the maturity of an existing 2.5-billion-euro loan. Sarris said that Russia was unable to provide Cyprus with a new loan.

Neofytou said that Cyprus would welcome Russian assistance but still needed to balance this against the requirements of remaining in the eurozone.

“We cannot reject any form of help but we are in the euros and we need the continue support of the ECB for liquidity,” he said. “Any support is welcome but we should not forget that we are in Europe and we need European institutions to stabilize our economy.”

Read Full Article Here

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I seem to recall a country   that  was also  being  pressured to accept  the  terms of  a bailout. Its people were  upset  and   angered  over the  aspect  of  having to   bailout a bank for their  fiscal irresponsibility.  The government  listened to  it’s People and  rejected the terms of  the bailout.  Lo and behold the   world  did not implode and they are  still there. Doing quite  nicely  I  might  add….

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Iceland’s Stand Against Bailout Repayment Will Hurt

Halah Touryalai, Forbes Staff

 Forbes

When I first heard Iceland was allowing its taxpayers to vote on whether or not they should repay $5.7 billion that one of its defunct banks owes the U.K. and Netherlands, the angry taxpayer in me took hold and I hoped that they’d vote against repaying.

Turns out the Icelanders felt the same the resentment and said so today when they voted down a deal to repay the British and Dutch. Their rejection essentially revolts against the idea that taxpayers should be held responsible for banks’ financial problems.

Think about it this way, if given the choice back in 2008, would you have paid your share to save AIG, or any other financial institution, and in turn its creditors?

The situation in Iceland is a little trickier than that since the institution in question was a bank, Landsbanki Islands, whose depositors included folks from Britain and the Netherlands. When Landsbanki Islands blew up in 2008 leaving depositors without their money, the British and Dutch government stepped in and bailed out their respective depositors to keep them from panicking.

Now though, those governments want that money back. And since whatever assets are left of  Landsbanki Islands are not enough to recover the total $5.7 billion,  the people of Iceland are left footing what remains of the bill–estimated to be around $2 billion.

Read Full Article Here

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Nordic nations join Iceland bailout

  • Story Highlights
  • Help comes from Finland, Norway, Denmark and Sweden
  • The IMF will pump about $827 million into the Icelandic economy immediately
  • The goal is to stabilize the country’s finances and shore up its currency
  • Iceland is facing severe recession after a series of bank failures in October

(CNN) — Nordic countries agreed to lend struggling Iceland $2.5 billion to help it recover from a series of crippling bank failures, bolstering a $2.1 billion aid package from the International Monetary Fund, their governments announced Thursday.

Prime Minister Geir Haarde has been trying to drum up support for Iceland's bailout.

Prime Minister Geir Haarde has been trying to drum up support for Iceland’s bailout.

“This is a first step to get Iceland out of its current serious financial and economic situation,” the governments of Finland, Norway, Denmark and Sweden announced in a joint statement. “The banking crisis in Iceland is of unprecedented proportions and has serious implications for the country’s economy.”

The statement follows the IMF’s decision on Wednesday to pump about $827 million into the Icelandic economy immediately, with another $1.3 billion coming in eight installments. Both moves are aimed at stabilizing Iceland’s finances and shoring up its currency, which plummeted after a series of bank failures in October.

Iceland sought IMF help after its government was forced to nationalize three banks to head off a complete collapse of its financial system. Trading on the country’s stock market was suspended for nearly a week, economic growth nearly flatlined and inflation jumped to more than 12 percent.

“As a result,Iceland is facing a severe recession, given the high debt level in the economy and significant dependence of the private sector on foreign currency and inflation-indexed debt,” John Lipsky, the IMF’s acting chairman, said in a statement announcing the decision.

Read Full Article Here

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Global Economics

Russia Basks in Iceland Bailout Request

By on October 20, 2008

Bloomberg Business Week

A look at what Putin gains—newfound economic might

It’s mere coincidence, of course. But to Vladimir Putin, the man who called the Soviet Union’s demise the “greatest geopolitical catastrophe” of the 20th century, just the thought of saving Iceland’s hide must seem like redemption.

In 1986 Iceland hosted the Reykjavik summit between Ronald Reagan and Mikhail Gorbachev, a meeting momentous for its unplanned evolution into a conversation on nuclear disarmament between the two leaders—but also as a catalyst for the 1991 August coup against Gorbachev that sparked the USSR’s implosion.

“It was a sign of change in the Soviet Union, in many ways in the decline of the Soviet Union,” says Shamil Yenikeyeff, a Russia expert at the Oxford Institute for Energy Studies.

ARC DE TRIOMPHE

Now Reykjavik is asking Moscow for a $5.5 billion emergency loan to prop up its economy after its banking system collapsed two weeks ago amid the global credit disaster. And Russia is positioned, as a revitalized once-superpower flush with cash, to rescue Iceland, a NATO member praised for its chart-topping living standard! To Putin and the Kremlin, could there be a sweeter arc to the last two decades of Russian history?

That may be putting it a bit too strongly: even if Moscow grants the loan, Iceland will need a lot more cash, probably from the International Monetary Fund’s pocket. Still, Putin’s famous lament suggests a partial answer to the question that’s abounded since reports of the loan surfaced: What’s Russia after here?

True, $5.5 billion isn’t a staggering sum for a country with around 100 times as much in cash reserves. Nor is the loan a done deal: agreement wasn’t reached in the first round of negotiations last week. But the gesture alone—even the possibility—is significant. After all, Russia was a financial and political basket case just 10 years ago and has its own economic woes at the moment.

Pride, surely, isn’t the only prize: the seas of the “High North” are rich in fish and energy resources, and Moscow needs to show the world it’s a good global citizen after trouncing Georgia this summer. But for a leadership keenly aware of Russia’s less than auspicious place in modern history texts, this is an opportunity to further demonstrate that indeed there is a new world order, and it’s not the one George H.W. Bush foresaw in 1990.

Read Full Article Here

….

Related

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