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  1. #1
    Senior Member AirborneSapper7's Avatar
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    EU Does It Again: Cyprus Depositor "Bailout" Turns Into Saver "Panic", Bank Runs, Bro

    Europe Does It Again: Cyprus Depositor Haircut "Bailout" Turns Into Saver "Panic", Frozen Assets, Bank Runs, Broken ATMs

    Submitted by Tyler Durden on 03/16/2013 10:33 -0400

    Europe has done it again.

    Late last night, after markets closed for the weekend, following an extended discussion the European finance ministers announced their "bailout" solution for Russian oligarch depositor-haven Cyprus: a €13 billion bailout (Europe's fifth) with a huge twist: the implementation of what has been the biggest taboo in European bailouts to date - the impairment of depositors, and a fresh, full blown escalation in the status quo's war against savers everywhere.

    Specifically, Cyprus will impose a levy of 6.75% on deposits of less than €100,000 - the ceiling for European Union account insurance, which is now effectively gone following this case study - and 9.9% above that. The measures will raise €5.8 billion, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, said.

    But it doesn't stop there: a partial "bail-in" of junior bondholders is also possible, as for the first time ever the entire liability structure of a European bank - even if it is a Cypriot bank - is open season for impairments. The logical question: why here, and why now? And what happens when the Cypriot bank run that has taken the country by storm this morning spreads everywhere else, now that the scab over Europe's biggest festering wound is torn throughout the periphery as all the other PIIGS realize they too are expendable on the altar of mollifying voters and investors in the other countries that make up Europe's disunion.

    Bloomberg's take on the sacrifice of Cyprus' savers:

    Officials have struggled to find an agreement that would rescue Cyprus, which accounts for just half of a percent of the euro region’s economy, without unsettling investors in larger countries and sparking a new round of market contagion. Policy makers began meeting at 5 p.m. yesterday in a hastily convened gathering, seeking to overcome differences on bondholder losses while financial markets were closed.

    “Further measures concern the increase of the withholding tax on capital income, a restructuring and recapitalisation of banks, an increase of the statutory corporate income tax rate and a bail-in of junior bondholders,” according to a communique released by ministers after the talks. It didn’t specify whether bank or sovereign bond holders could be affected.

    The European Central Bank will use its existing facilities to make funds available to Cypriot banks as needed to counter potential bank runs. Depositors will receive bank equity as compensation.

    Finance Minister Michael Sarris said the plan was the “least onerous” of the options Cyprus faced to stay afloat.

    “It’s not a pleasant outcome, especially of course for the people involved,” said Sarris. The Cypriot parliament will convene tomorrow to vote on legislation needed for the bailout.
    Needless to say, the locals are delighted:
    In the coastal town of Larnaca, where irate depositors queued early to withdraw money from cash machines, co-op credit societies that are normally open on Saturdays stayed closed.

    "I'm extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans," said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.

    "They call Sicily the island of the mafia. It's not Sicily, it's Cyprus. This is theft, pure and simple," said a pensioner.
    For the real response, look to Russia:
    The island's bailout had repeatedly been delayed amid concerns from other EU states that its close business relations with Russia, and a banking system flush with Russian cash, made it a conduit for money-laundering.

    "My understanding is that the Russian government is ready to make a contribution with an extension of the loan and a reduction of the interest rate," said the EU's top economic official, Olli Rehn.

    Almost half of [Cyprus'] depositors are believed to be non-resident Russians, but most of those queuing on Saturday at automatic teller machines to pull out cash appeared to be Cypriots.

    While "saving", pardon the pun, yet another insolvent country merely has the intent of keeping it in the Eurozone, and thus preserving Europe's doomed monetary block and bank equity for a little longer, this idiotic plan will achieve two things: i) infuriate not just Russians but very wealthy, and very trigger-happy Russians. The revenge of Gazpromia will be short and swift, and we certainly would not want to be Europeans next winter when the average heating level of Western European will depend on the whims of Russian natural gas pipeline traffic; ii) start a wave of bank runs first in Cyprus and soon everywhere else that has the potential of being the next Cyrpus.

    Sure enough, here come the bank runs:

    While the tax on deposits will hurt wealthy Russians with money in Cypriot banks, it will also sting ordinary citizens. Some ATMs in the country have run out of cash, Erotokritos Chlorakiotis, general manager of the Cooperative Central Bank, told state-run CYBC.

    Forzen assets and "national bank holidays" are baaaaack:

    Funds to pay the levy were frozen in accounts immediately
    , ECB Executive Board Member Joerg Asmussen said. The levy will be assessed before Cypriot banks reopen on March 19 after a March 18 national holiday. Sarris said electronic transfers will also be limited until then.

    Europe's response: this is a unique situation. Just like the Greek bailout was unique; just like the Irish and Portuguese bailouts were unique; just like the bailout of Spanish banks was unique.

    “As it is a contribution to the financial stability of Cyprus, it seems just to ask a contribution of all deposit holders,” Dijsselbloem said, noting the country’s financial industry was five times the size of its economy. The plan includes “unique measures” that address the “exceptional nature” of Cyprus and show “inflexible commitment to financial stability and the integrity of the euro area.”

    Curiously, even everyone's favorite liar, former Eurogroup president, Jean-Claude Juncker, has a warning that this "bailout" is the worst thing Europe could have done:

    Skeptics including Luxembourg’s Jean-Claude Juncker had said that imposing investor losses in Cyprus risked reigniting the financial crisis that has so far pushed five of the euro zone’s 17 members to seek aid. Last year, the euro area took what officials called a unique step to ask Greek bondholders to absorb losses.

    But fear not: Europe has promised this absolute resolution taboo won't repeat itself...

    When asked if a deposit assessment could be ruled out for future rescues, Rehn said in an interview: “It can and there is no concrete case where it should be considered.”

    ... Until it does repeat itself of course - after all the fundamental problem for Europe has never been resolved: the continent is still broke, and it still is running out of good, unencumbered assets (which as being repledged by the banking oligarchy) with every passing day.

    Now the only thing unknown is Russia's response:

    Corporate tax rates in Cyprus will rise to 12.5 percent to 10 percent as part of the deal, Dijsselbloem said. Rehn told reporters that Russia, whose banks have loaned as much as $40 billion to Cypriot companies of Russian origin, would ease terms on its existing loans to Cyprus as the rescue unfolds. Cyprus’s finance minister is scheduled to fly to Moscow on March 20.

    What is known, however is that Cypriots have taken the news in stride.... and to their local ATM machine, which sadly is showing the following message: "Your transaction has been cancelled due to a technical issue. This ATM cannot complete withdrawals at this time" (courtesy of Yannis Mouzakis).

    It didn't take long before the Cyrpus Cooperative bank issued a statement saying "some ATMs run out of cash" - by some they likely mean all as the entire country is now gripped in a full force depositor run.

    Some other snapshots of what is currently happening in Cyrpus, where locals are using excavators if not to force the ATMs into "compliance" then to block bank entrances out of blind fury.

    From Philenews:
    Indignant citizen who has the testimony of the Cooperative Credit Society Kyperoundas, cut the morning the entrance of the branch of the SEA, located on Avenue Nikos and Despina Pattichi in Limassol.

    He said he believes that deceived by the assurances that the relevant deposits are insured citizens and decided how to express his protest, parking the excavator outside the entrance of the branch of SEA


    And more from iefimeirda:

    With the first light of day after the unprecedented decision to the Eurogroup on the terms of the Memorandum of Agreement and the taxation of savings, hundreds of people flocked to Cyprus stores credit cooperatives Larnaca to withdraw their deposits.

    With the opening of stores found they could not withdraw all their money, because the electronic system of credit cooperatives was not working. And when it became possible, writes the Daily Cyprus, the system seemed to finally hit the appropriate amount of the new tax, which provoked strong reactions. Even after the government ordered the stores eventually closed.

    At the same time, according to information or ATMs of banks give no money so that there is a huge inconvenience.

    After lunch return to Cyprus President Papadopoulos Nikos Anastasiadis from Brussels in the morning reached political agreement on the rescue of the economy, while in the meantime the Presidential prepares emergency meeting of ministers of the government.

    According to all the information, will this weekend be submitted and voted on bills in the form of urgency, before the banks opened Tuesday morning.

    In the text of the agreement, with the characteristic title "We caught napping," the website says Sigma Live Nicosia agreed terms "under threat of closing banks." painful Describing the agreement, Sigma relies on sources from Brussels you speak of night thriller and roll jams, and the Cypriot delegation warned even withdrawal from the negotiations.

    Congratulations Cyprus savers - you were just betrayed by both your politicians, and by Europe - sorry, but you are the "creeping impairments" in the game known as European bankruptcy.And so is anywhere between 6.75% and 9.9% of your money, which you were foolish enough to keep with your banks (where at least you were compensated with a savings yield of... 0%).

    More importantly, as of this morning Europe has finally grasped that there is a 6.75% to 9.9% premium to holding physical cash in your mattress rather than having it stored with your local friendly insolvent bank.

    Luckily Cyrpus is so "small" what just happened there will never happen anywhere else: after all in Europe nobody has ever heard of "setting an example". Or so the thinking among Europe's unthinking political elite goes.

    And congratulations Europe: just when people almost believed you things are "fixed" you go ahead and prove to the world that you are as disunified (because size doesn't matter in a true union), as confused, as stupid and as broke as ever.


    Europe Does It Again: Cyprus Depositor Haircut "Bailout" Turns Into Saver "Panic", Frozen Assets, Bank Runs, Broken ATMs | Zero Hedge

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  2. #2
    Senior Member AirborneSapper7's Avatar
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    Senior Member AirborneSapper7's Avatar
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    Saxo Bank CEO: "This Is Full-Blown Socialism And I Still Can't Believe It Happened"

    Submitted by Tyler Durden on 03/16/2013 15:59 -0400

    Authored by Lars Seier Christensen, CEO Saxo Bank; originally posted at his blog at TradingFloor.com,

    It is difficult to describe the weekend bailout package to Cyprus in any other way. The confiscation of 6.75 percent of small depositors' money and 9.9 percent of big depositors' funds is without precedence that I can think of in a supposedly civilised and democratic society. But maybe the European Union (EU) is no longer a civilised democracy?
    I heard rumours about this when I visited Limassol last week, but dismissed them as completely outlandish. And yet, here we are. The consequences are unpredictable, but we are clearly looking at a significant paradigm shift.
    This is a breach of fundamental property rights, dictated to a small country by foreign powers and it must make every bank depositor in Europe shiver. Although the representatives at the bailout press conference tried to present this as a one-off, they were not willing to rule out similar measures elsewhere - not that it would have mattered much as the trust is gone anyway. It is now difficult to expect any kind of limitation to what measures the Troika and EU might take when the crisis really starts to bite.
    If you can do this once, you can do it again. if you can confiscate 10 percent of a bank customer's money, you can confiscate 25, 50 or even 100 percent. I now believe we will see worse as the panic increases, with politicians desperately trying to keep the EUR alive.
    Depositors in other prospective bailout countries must be running scared - is it safe to keep money in an Italian, Spanish or Greek bank any more? I dont know, must be the answer. Is it prudent to take the risk? You decide. I fear this will lead to massive capital outflows from weak Eurozone countries, just about the last thing they need right now. Even from the EU as a whole, I suspect, as the banking union is in place in most countries already.
    Another open question is what will happen to the huge number of brokerages based in Cyprus? There is about 100 or more FX and other brokers currently operating under the relatively light Cypriot regulation. How will this impact the trustworthiness of these many small institutions? What IS the exact impact on the client deposits they might be holding in Cyprus? Will anyone dare to do business with them going forward?
    This is a major, MAJOR game changer and the fallout will be with us for a long time to come. I believe it could be the beginning of the end for the Eurozone as this is an unbelievable blow to the already challenged trust that might be left among investors. Talk about a possible own goal.
    Market reaction? it must be very good for gold - and for safe-haven countries like Switzerland, Singapore and economically more healthy non-Euro countries in, for example, Scandinavia. I would think the EUR and associated markets will be undermined by increasing lack of confidence when the full implications become clear for investors.
    This is full-blown socialism and I still cannot believe this really happened.
    Be careful out there...

    Saxo Bank CEO: "This Is Full-Blown Socialism And I Still Can't Believe It Happened" | Zero Hedge

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    Senior Member AirborneSapper7's Avatar
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    IMF: Eurozone Banks Are In Trouble, Trample Taxpayers and Democracy To Bail Them Out!

    Submitted by testosteronepit on 03/16/2013 16:23 -0400

    Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter

    Eurozone nations have to fundamentally reorganize themselves and shift sovereignty away from national parliaments to new layers of centralized, transnational, beyond-control bureaucracies that can decide at will when to extract untold wealth from taxpayers. That’s what the Eurozone has to do, according to the “first ever European Union-wide assessment of the soundness and stability of the financial sector,” released Friday by the institution that the world couldn’t do without, the IMF.
    “Financial stability has not been assured,” the report stated flatly about the fiasco in the Eurozone, despite ceaseless hope-mongering by Eurocrats and politicians, and banks remain “vulnerable to shocks.” The report, which never mentioned banks or countries by name, discussed a number of “risks” that could topple these banks, with some of these “risks” already having transitioned to reality:
    “Declining growth.” Banks with “excessive leverage, risky business models, and an adverse feedback loop with sovereigns and the real economy” are particularly vulnerable. Hence, most banks. A number of European countries have been in a deep recession, some of them for years. So “declining growth” is a reality, and these “shocks” are happening now, said the IMF in its more or less subtle ways.
    Further drop in asset prices.” Real estate prices are now dropping in some countries that didn’t see a collapse during the first wave, including France and the Netherlands—where it already took down SNS Reaal, the country’s fourth largest bank [A Taxpayer Revolt Against Bank Bailouts In the Eurozone]. So hurry up and do something, the IMF said.
    The report points at other risks for banks. Pressures in wholesale funding markets could dry up liquidity and tighten refinancing conditions. And the market could lose confidence in the sovereign debt that banks hold. For example, an Italian bank, loaded with Italian government debt, would topple if that debt lost value—but of course, the report refuses to name names.
    And in “several countries,” the heavy concentration of megabanks “creates too-big-to-fail problems that could amplify the country’s vulnerability.” So Germany, France, and the UK. Alas, in Europe too-big-to-fail doesn’t necessarily mean big. In tiny Cyprus, fifth country to get a bailout, the banks, though minuscule by megabank standards, are getting bailed out anyway. It’s psychological. A fear. If even a small bank were allowed to go bankrupt, the confidence in all banks across the Eurozone would collapse. That’s how fragile Eurocrats and politicians fear their banks have become—despite their reassurances to the contrary.
    And so “policymakers and banks need to intensify their efforts across a wide range of areas” to save these banks, the IMF exhorts these Eurocrats and politicians.
    Big priorities: “bank balance sheet repair”; banks should build larger capital buffers to be able to absorb shocks. And “credibility” repair of these balance sheets. In an admission that bank balance sheets still aren’t worth the paper they’re printed on, the IMF calls for stiffening the disclosure requirements, “especially of impaired assets” that are decomposing in hidden-from view basements.
    The new Single Supervisory Mechanism (SSM), the EU-wide banking regulator under the ECB, to be operational by early 2014, would have to have real teeth, along with expertise, the IMF pointed out. It should regulate all banks in the Eurozone “to sustain the currency union” and in the entire EU to sustain “the single market for financial services.” In other words, without the SSM, the currency union won’t make it.
    But the IMF’s killer app is the Banking Union, a “single framework for crisis management, deposit insurance, supervision, and resolution, with a common backstop for the banking system.” Under this system, taxpayers in all Eurozone countries would automatically be responsible for bailing out banks, their investors, bondholders, counterparties, and account holders in any Eurozone country.
    For the most hopeless cases, the Single Resolution Mechanism would step in to dissolve banks “without disrupting financial stability”—hence bail out investors, disrupting financial stability being a term that’s commonly used to justify anything. The medium would be the transnational taxpayer-funded ESM bailout fund; it would bail out banks directly, rather than bail out countries afterthey bail out their own banks—which is the rule today.
    In the process, countries would surrender much of their authority over banks—and how or even whether to bail them out—to this new instrument. Decision makers would be Eurocrats, far removed from any popular vote. Victims would be the people who’d end up paying for it. Investors and speculators would profit. Other beneficiaries would be politicians who’d no longer have to bamboozle voters into bailing out banks because it would be done by a distant power.
    The dictum that there is never an alternative to bailouts would be cemented into the system. Democracy, which always gets trampled during bailouts, would be essentially abolished when it comes to transferring money from citizens to bank investors. And that’s of course the ultimate goal of the banking industry.
    The stark reality facing millions of Spaniards, Italians, Greeks, and Portuguese is hidden—buried deep under a mountain of economic data, massaged to suit the purposes of the central planners-in-chief. But this is the story of a dying breed: self-made entrepreneurs and small business owners here in Spain. Read.... The Reality Of Doing Business In Spain: A Personal Account.


    IMF: Eurozone Banks Are In Trouble, Trample Taxpayers and Democracy To Bail Them Out! | Zero Hedge

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