Report: Cyprus's Parliament Rejects Bank Deposit Tax
by Bill McBride on 3/19/2013 02:28:00 PM
Read more at http://www.calculatedriskblog.com/2013/03/report-cypruss-parliament-rejects-bank.html#JX24uduvWzBjXfsy.99
From Business Insider: CYPRUS VOTES AGAINST CONTROVERSIAL BANK BAILOUT DEAL
The Cypriot parliament has voted against the bank bailout deal, with 36 votes against, reports Bloomberg.Back to the drawing board.
19 abstained from voting.
The vote was held in a show of hands.
Read more at http://www.calculatedriskblog.com/2013/03/report-cypruss-parliament-rejects-bank.html#JX24uduvWzBjXfsy.99
Former Central Bank of Cyprus chief Anthanasios Orphanides was on Tom Keene's show on BloombergTV this morning.
In his interview, he goes off on the EU for its treatment of Cyprus, and says the European project is dying.
You can watch the full video here.
Below is a partial transcript provided to us by Bloomberg TV.
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Orphanides on Cyprus bailout:
"We are witnessing historic times. What we are witnessing is the slow death of the European Project. We are in a situation that some European governments are essentially taking actions that are telling citizens of other member states that they are not equal under the law."
"What we have seen in the last few days is a very serious blunder by European governments that are essentially blackmailing the government of Cyprus to confiscate the money that belongs rightfully to depositors in the banking sector in Cyprus. It is not clear how this can affect in a positive matter the European project going forward."
On EU making a mockery of Banking Union
"Cyprus did not have a problem before earlier blunders that were made by European governments."
"We have had decisions taken by the strongest government in Europe that is spreading misery sequentially to citizens in Greece, Ireland, Portugal, in Spain, in Italy and this is not going to end the way that European governments are handling this. We need to have a decision making process where governments are asked to care for citizens in other states."
"In order for the EU area to stay together they needed to form a banking union which meant, they needed to have a common credible deposit insurance guarantee for everybody in the EU area. Indeed by making a mockery of that right now, the governments who pushed for this measure are sending a message that they want no part of a banking union."
On the possibility of bank runs across Europe
"I would hope not… we have finance ministers from a number of countries who should have known better and they have taken a decision that has encouraged bank runs across Europe."
Read more: http://www.businessinsider.com/former-cyprus-central-banker-athanasios-orphanides-says-the-european-project-is-dying-2013-3#ixzz2O1f9ns2u
You can watch the full video here.
Below is a partial transcript provided to us by Bloomberg TV.
-----------------------------------------------------------------------------------------------------------
Orphanides on Cyprus bailout:
"We are witnessing historic times. What we are witnessing is the slow death of the European Project. We are in a situation that some European governments are essentially taking actions that are telling citizens of other member states that they are not equal under the law."
"What we have seen in the last few days is a very serious blunder by European governments that are essentially blackmailing the government of Cyprus to confiscate the money that belongs rightfully to depositors in the banking sector in Cyprus. It is not clear how this can affect in a positive matter the European project going forward."
On EU making a mockery of Banking Union
"Cyprus did not have a problem before earlier blunders that were made by European governments."
"We have had decisions taken by the strongest government in Europe that is spreading misery sequentially to citizens in Greece, Ireland, Portugal, in Spain, in Italy and this is not going to end the way that European governments are handling this. We need to have a decision making process where governments are asked to care for citizens in other states."
"In order for the EU area to stay together they needed to form a banking union which meant, they needed to have a common credible deposit insurance guarantee for everybody in the EU area. Indeed by making a mockery of that right now, the governments who pushed for this measure are sending a message that they want no part of a banking union."
On the possibility of bank runs across Europe
"I would hope not… we have finance ministers from a number of countries who should have known better and they have taken a decision that has encouraged bank runs across Europe."
Read more: http://www.businessinsider.com/former-cyprus-central-banker-athanasios-orphanides-says-the-european-project-is-dying-2013-3#ixzz2O1f9ns2u
Europe News
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Cyprus’s parliament rejected an unprecedented levy on bank deposits, dealing a blow to European plans to force depositors to shoulder part of the country’s rescue in a standoff that risks renewed tumult in the euro area.
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The euro fell to a three-month low against the dollar as Cyprus’s parliament voted down an unprecedented bank-deposit levy, fueling speculation the nation’s bailout will falter.
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The European Union’s decision to force Cypriot savers into a bailout came after banks grew so large that they dwarfed the nation’s economy, resembling Iceland’s finance industry before its collapse.
http://www.zerohedge.com/contributed/2013-03-19/impact-imminent
The folks at FTAlphaville have some thoughts on the state of play:
I've been following the Press coverage of Cyprus, the talking heads are saying that Cyprus is a manageable issue. Nothing to worry about at all.
A bank run spreading to Spain looks a non-starter in the short term.
The risk of any wider bank run looks pretty small so far, with market reaction relatively benign.
I'm going to disagree with FTA and the TV folks. The chances of a bank run have never been higher. Tyler's right. We're looking at a black hole.
The "Other" scenario for Cyprus is a shell shocker. Forget the shareholders or the senior bond guys - they will end up with Dick's hat band. Those Russians who were at risk of losing as much as 15% of their deposits - They get zip too. At best, they are getting an IOU. That IOU will have a value of 10 cents on the dollar.
Those small depositors that were going to get hit for an unfair loss of 6% now face a vacuum. Their bank statements may not reflect a loss of principal, but they won't be able to withdraw a dime from those accounts. The local banks will remain closed, when they do reopen those deposits will be converted to some new currency. It's possible that the new currency will be the Turkish Lira. You thought the poor folks in Cyprus were getting a bad deal on Monday? Wait till Friday before you pass judgement.
What happens if Cyprus does a "drop out" of the EU? That result immediately makes a lie of Mario Draghi's words that the Euro was Uber-Ales. This is precisely what Super Mario said "would never happen".
If Cyprus goes turtle and leaves the Euro, the credit spreads on peripherals will widen. This sets up a market "call" on the ECB. But remember, for Mario Draghi to give the market the "put" that it will demand, the government's of Spain and Italy will be forced to get down on their knees and beg the gods in Brussels and Berlin for a helping hand. To do that means that they would have to have very harsh terms imposed on them. An IMF team would run the finances of the countries involved.
Given that there is zero chance that Italy and Spain will do the necessary begging, the value of the promised Draghi "put" is now zero.
There is a chance that something can be done to stop what looks like a slide into an abyss. Those chance are now well below 50-50. The markets/seers are calling for a soft landing, while at the same time that outcome is looking less and less likely. The markets seem poorly positioned for what could result in a crisis. And this story is running at hyper speed. That' a very bad combo of events. Seat belts on - Impact Imminent!
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