Vlad n U 2
Blue Crack Addict
- Joined
- Jul 6, 2008
- Messages
- 28,386
I think we all know what happened the last time Europe bathed together with fascism.
I think we all know what happened the last time Europe bathed together with fascism.
Aygo, I've heard that a lot of Catalan nationalism has stemmed from Catalonia being relatively better off than the rest of Spain, which has created resentment in Catalonia about the amount of money flowing out of Catalonia to the rest of Spain. Do you think that that is a fair assessment of what is happening?
The Cypriot government tried to do a one-time tax on savings of up to nearly 10% to fund that, but that would be disastrous, and public outcry pretty much shut that down.
I don't think number 1 will happen.
so i guess there needs to be a number 3 option
Looks like I was bang on and #1 is happening at a rate of at least 20%, maybe as much as 40%.
The bank restructuring deal
Full details of the Cyprus deal are still emerging this morning, but the top line is that wealthy depositors are being hit much harder than in the original plan.
Here's what we understand:
• All deposits under €100k have been protected.
• Laiki Bank (or Popular Bank) will be wound down and split into a 'good' and 'bad' bank. Thousands of jobs are likely to be lost.
• The 'good' bit of Laiki (smaller savers) will being moulded into Bank of Cyprus.
• The bad bit, containing its uninsured deposits and toxic assets, will be wound down over time.
• Those with savings over €100,000 at Laiki, along with bond holders and shareholders, will all make a "full contribution" to the restructuring. That is being taken as a signal that wealthy depositors could be wiped out completely - but the full picture may take a while to emerge.
As Gary Jenkins of Swordfish Research put it:
Whilst there was no official confirmation I assume that deposit holders over €100k in Laiki Bank will be totally wiped out, but that is just an assumption from the language used.
• Uninsured deposits (€100k and above) in Bank of Cyprus will be frozen, and remain suspended until the bank has been recapitalised. It's not clear what haircut they will suffer -- there was talk of 40% plus in Brussels last night.
Dijsselbloem: Cyprus deal is template for the future
Eurogroup head Jeroen Dijsselbloem has sent the euro tumbling by declaring that the Cyprus rescue should be seen as a template for the rest of the eurozone.
In an interview with reporters in Brussels after the Cyprus plan was agreed, Dijsselbloem argued that Europe could now take a new approach to tackling struggling banks.
Dijsselbloem said (via Reuters):
What we've done last night is what I call pushing back the risks.
If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?'.
If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders.
Dijsselbloem, who began his term as Eurogroup president by presiding over the botched original bailout for Cyprus, argues that it's fair for big depositors to take the hit:
If we want to have a healthy, sound financial sector, the only way is to say, 'Look, there where you take on the risks, you must deal with them, and if you can't deal with them, then you shouldn't have taken them on....
The consequences may be that it's the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take
That last line is a concern -- are we really in calm waters now? With no stable government in Italy (or even an instable one), Greece trudging through another year of recession, Portugal and Ireland striving to exit their bailout. And don't even mention France.
The key to Dijsselbloem's comments is that he's suggesting that Europe will no longer need the ESM -- the €700bn bazooka that was meant to be on standby to prevent a banking collapse, by injecting new capital when needed.
He said:
We should aim at a situation where we will never need to even consider direct recapitalisation.
If we have even more instruments in terms of bail-in and how far we can go on bail-in, the need for direct recap will become smaller and smaller.
The interview has sent the euro sliding, and pushed shares down across Europe. Trading in several Italian banks have just been temporarily suspended (for dropping more than 5%).
I don't know why anyone with $ in a Spanish, Portuguese, Italian bank (just to name a few) would keep any of it in there given that comment.
Cypress is an island with less than 11 million people. Why give (lend) them more money? They are super broke and in way over their head in debt now. Where does it go? It's not like they have an income stream that is capable or paying more debt back? is it?
Maybe they should become part of Africa.
Cypress is an island with less than 11 million people. Why give (lend) them more money? They are super broke and in way over their head in debt now. Where does it go? It's not like they have an income stream that is capable or paying more debt back? is it?
Maybe they should become part of Africa.
Cypress is an island
Europe desperately needs a banking union.