Cyprus bail out deal

Amberman

Scofflaw wrote: »

It seems to me the likely safest place for your money is in your own domestic banks, because one feature of the more dramatic bank actions in this crisis has been that when the chips are down, national governments have looked after their own citizens' money first.

When the chips were down AND they were in a position to protect domestic depositors. That ship, my friend, has sailed...quite some time ago at that.

You said as much yourself in this thread. No government can stand behind their deposit guarantees.

So, you can't come up with a good reason. At least you tried.

Rightwing

Scofflaw wrote: »

There's a wide borderland between caution and paranoia. Speaking of which, where is the supposed market panic this should be generating? Is everybody all panicked out, or was this already factored in?

cordially,
Scofflaw

I'm quite surprised how resilient the markets are. I've shorted the €, and the overall markets, made profits, but nowhere near as big a fall as I would have thought.

FOMC tonight in the US, bernanke speaks, so the market probably expecting bullish statements about QE and the American economy. Market distortion.

Amberman

Rightwing wrote: »

I'm quite surprised how resilient the markets are. I've shorted the €, and the overall markets, made profits, but nowhere near as big a fall as I would have thought.

The initial knee jerk reaction isn't surprising, it initially looked bad...but why would the markets sharply sell off when the banks have just been green light to dip into depositors assets, thereby protecting sovereigns and Frau Merkel from going to the German parliament with cap in hand in an election year??

If anything, I think going long peripheral soverigns is a good play here.

Scofflaw

All of which seems to boil down to the supposed contagion risks of this deal being perhaps overstated. But we'll have to wait to see whether there's much deposit flight.

Amberman wrote:

When the chips were down AND they were in a position to protect domestic depositors. That ship, my friend, has sailed...quite some time ago at that.

You said as much yourself in this thread. No government can stand behind their deposit guarantees.

So, you can't come up with a good reason. At least you tried.

Like I said - not a financial advisor, and don't purport to be. Still, I won't be surprised when those who hop their money around looking for a safe haven come out little if at all better off than those who left it in place.

cordially,
Scofflaw

Rightwing

Amberman wrote: »

The initial knee jerk reaction isn't surprising, it initially looked bad...but why would the markets sharply sell off when the banks have just been green light to dip into depositors assets, thereby protecting sovereigns and Frau Merkel from going to the German parliament with cap in hand in an election year??

If anything, I think going long peripheral soverigns is a good play here.

Loose monetary policy is what's holding this together, as soon as the market sees this coming to an end, there will be a massive crash imo.

Amberman

Amberman wrote: »

I suppose it depends on your risk profile. Me, I prefer to be cautious.

You've spent half the thread promoting the use of bitcoin... And you're going to lecture us re: being cautious financially? Give us a break, I mean, surely even you can see the irony.

Scofflaw

Rojomcdojo wrote: »

You've spent half the thread promoting the use of bitcoin... And you're going to lecture us re: being cautious financially? Give us a break, I mean, surely even you can see the irony.

Different definitions of safe, I think - to a libertarian, "safe" seems primarily to mean "safe from government exactions".

cordially,
Scofflaw

Larbre34

Cypriot protestors placard:

'If they won't let us dream, we won't let them sleep.'

Quite brilliant.

Go on Cyprus, time to bring down this house of cards and restore democracy. Pain will be endured but at least this time it wont take a world war to do it. Probably.

Rightwing

Larbre34 wrote: »

Cypriot protestors placard:

'If they won't let us dream, we won't let them sleep.'

Quite brilliant.

Go on Cyprus, time to bring down this house of cards and restore democracy. Pain will be endured but at least this time it wont take a world war to do it. Probably.

Maybe that placard should read:

'If they won't let us live beyond our means, we'll try not to let them sleep'.

Amberman

Rojomcdojo wrote: »

You've spent half the thread promoting the use of bitcoin... And you're going to lecture us re: being cautious financially? Give us a break, I mean, surely even you can see the irony.

Theres a difference between volatility and safety. I think you're confusing the two. Volatility doesn't really matter if you have strong, patient hands.

Amberman

Scofflaw wrote: »

Different definitions of safe, I think - to a libertarian, "safe" seems primarily to mean "safe from government exactions".

cordially,
Scofflaw

Precisely, whether through outright theft of private property, currency debasement, or capital controls. All three look to be happening now inside Cyprus. That might be the reason BTC has gone from 46 to 60.25 so far this week...but I cant say for sure.

Edited to correct BTC price: Apologies, its now $62.26.

Amberman

Please, no more BTC talk. Scofflaw has politely asked that we don't discuss it in this thread.

Rightwing

Amberman wrote: »

Please, no more BTC talk. Scofflaw has politely asked that we don't discuss it in this thread.

Go over to in the investment section and set up a thread on it, that's where some of us post trades etc.

KyussBishop

bbsrs wrote: »

Would a country whose main industry is tourism be better off with a weaker currency than that of visiting tourists. Why did they even want to join the euro in the first place?

Good questions, I'm not entirely sure, though Cyprus has a significantly sized financial industry, which probably made being in Europe advantageous to them (as it has been and is to us).

Scofflaw wrote: »

Because we're suddenly about to need a second bailout?

amused,
Scofflaw

Not today, but we better hope we don't ever need assistance from the EU again, either as the crisis in Europe continues to unfold over the rest of the decade, or during the next economic crisis.

I could easily see the mistakes that led to this crisis, being repeated again in a decade or two, if not sooner; thus far through history, economic crisis has always been present at some point, and it would be extraordinary to think it will never happen again.

KyussBishop

Cross-posting from another thread:
Another good Golem XIV post, on how this is likely to affect Europe in the future, and noting other countries already considering deposit levies:
http://www.golemxiv.co.uk/2013/03/plunderball-the-new-euro-banking-game/

Sponge Bob

Banks shut till ( at least ) next tuesday

http://www.bbc.co.uk/news/world-europe-21855163

Cypriot officials have said the country's banks, which were closed to prevent mass withdrawals, will remain shut until at least Tuesday.
On Wednesday afternoon the cabinet began an emergency meeting to discuss alternatives to an EU-IMF bailout deal rejected by parliament on Tuesday.
Germany says banks in Cyprus may never reopen if a bailout is not agreed.

Thats the thing about bank rescues....you get one shot at it and if you ask me Cyprus missed the target completely. This situation will certainly contage if one will pardon the liberty with the lingo.

The deposits are still over 3x GDP but the government will need to park them in an IBRC type wrapper before they open.....and get the solution past the ESM as well.

carpejugulum

Amberman wrote: »

If the Troika sticks to its guns and the banks fail, the the bond holders and shareholders get wiped out. All depositors are safe under 100k...not sure about those over 100k. Other banks come in and picks up the parts of the business of the banks in bankruptcy at a price that makes commercial sense. Banks reopen in days.

The gvt is broke so no depositors are safe.

Amberman wrote: »

Of course, this is very unlikely to happen. Zee bond holders must be protected to ensure "stabliiteeeeeee"

How ironic.
One of the biggest problems of Cypriot banks has been their exposure to Greek economy and banking.
Cypriot banks were among the bondholders burnt when a deal with Greece was made.
So be careful what you wish for.

Sponge Bob

Effectively there are no Cypriot Bank bondholders, Cypriot banks were financed largely by deposits. Sadly much of their Tier 1 capital was Greek Government debt instruments and these were bonfired in the 2 Greek rescues of 2011 and 2012. The next domino could be another country with a structurally bloated banking sector ...eg Malta or I think Bulgaria have a lot of deposits stashed pro rata.

hmmm

Reports of them looking for a Russian loan leads to an interesting problem I've seen no-one discussing. The reason the troika would only lend 10 billion was because they felt that otherwise Cyprus's debt would rise to 160% of GDP, which the considered to be unsustainable. If Cyprus goes off and gets a loan for the extra 6 billion, will the troika be willing to lend the whole 10 billion?

Rightwing

hmmm wrote: »

Reports of them looking for a Russian loan leads to an interesting problem I've seen no-one discussing. The reason the troika would only lend 10 billion was because they felt that otherwise Cyprus's debt would rise to 160% of GDP, which the considered to be unsustainable. If Cyprus goes off and gets a loan for the extra 6 billion, will the troika be willing to lend the whole 10 billion?

Yes.

pipie

hmmm wrote: »

Reports of them looking for a Russian loan leads to an interesting problem I've seen no-one discussing. The reason the troika would only lend 10 billion was because they felt that otherwise Cyprus's debt would rise to 160% of GDP, which the considered to be unsustainable. If Cyprus goes off and gets a loan for the extra 6 billion, will the troika be willing to lend the whole 10 billion?

That has been thought about a long time ago.
It's a 16bn would be asked, plus extensions on existing loans.

The outcome will be very interesting if this will be the route.

Up for serious discussion will be at least.

Gas Ownership
Possible Naval Base in replacement of the Syrian Port / Exit from the EU
Names of Large Russian Account holders to be released to Moscow....

pipie

Rightwing wrote: »

Yes.

No

touts

hmmm wrote: »

Reports of them looking for a Russian loan leads to an interesting problem I've seen no-one discussing. The reason the troika would only lend 10 billion was because they felt that otherwise Cyprus's debt would rise to 160% of GDP, which the considered to be unsustainable. If Cyprus goes off and gets a loan for the extra 6 billion, will the troika be willing to lend the whole 10 billion?

Now we are into geo-politics. Does ths EU want Russian influence or maybe even bases in the Mediterranean? Does the US want Syria's main backer increasing influence in the region? And what will Israel think of it? If the Cypriot natural resources are up for auction surely China will come sniffing with their massive reserves. I'd say the President of Cyprus is getting friendly phonecalls just called for a chat from people he normally only sees from 15 rows back at a popes funeral.

pipie

Word is they will go back in tomorrow and make a vote on a bill with lower rates on a depositors "haircut".

While the Cypriot FM is in Moscow...

Fun and games!

hmmm

Despite all the chest beating from the little Irelanders congratulating Cyprus on "standing up to the Germans", it looks to me like Cyprus has backed itself into an impossible corner. There's so much chatter now that no-one will leave money in the country if the chance presents - chatter about currency controls and nationalising pensions.

It was the Cypriot politicians who decided that they didn't want their rich friends getting hit too hard and who scuppered the entire deal. It's incompetence, not bravery that has got them into this mess.

Damien360

hmmm wrote: »

It was the Cypriot politicians who decided that they didn't want their rich friends getting hit too hard and who scuppered the entire deal. It's incompetence, not bravery that has got them into this mess.

The cypriot politicians (in my opinion) were trying to have a one time hit on it's people and not prolong a recession.

We decided to do the same as cyprus but spread the pain in to taxes and over many years and thereby extended the recession. Not that I would ask for same here it should be added.

I would hazard a guess that taxpayers here are paying considerably more than taxpayers of cyprus assuming that this is indeed a one time hit.

All my opinion before I get leaped on.

carpejugulum

Rightwing wrote: »

Yes.

No. Cyprus needs a 6bn cash injection.

pipie wrote: »

Possible Naval Base in replacement of the Syrian Port

Easy now. The UK has sovereign bases in Cyprus and Turkey would not like it either.

Chucky the tree

Damien360 wrote: »

The cypriot politicians (in my opinion) were trying to have a one time hit on it's people and not prolong a recession.

We decided to do the same as cyprus but spread the pain in to taxes and over many years and thereby extended the recession. Not that I would ask for same here it should be added.

I would hazard a guess that taxpayers here are paying considerably more than taxpayers of cyprus assuming that this is indeed a one time hit.

All my opinion before I get leaped on.

Is it not a one time hit on top of impending taxes raises/spending cuts?

ArmaniJeanss

Damien360 wrote: »

The cypriot politicians (in my opinion) were trying to have a one time hit on it's people and not prolong a recession.

We decided to do the same as cyprus but spread the pain in to taxes and over many years and thereby extended the recession. Not that I would ask for same here it should be added.

I would hazard a guess that taxpayers here are paying considerably more than taxpayers of cyprus assuming that this is indeed a one time hit.

All my opinion before I get leaped on.

A 'one-time-hit' in the sense that it would bring their deficit into line with that of Irelands about 4 years ago.
Unfortunately they would still have to go through all the follow-up multi hits that we have had.

clairefontaine

Scofflaw wrote: »

All of which seems to boil down to the supposed contagion risks of this deal being perhaps overstated. But we'll have to wait to see whether there's much deposit flight.



Like I said - not a financial advisor, and don't purport to be. Still, I won't be surprised when those who hop their money around looking for a safe haven come out little if at all better off than those who left it in place.

cordially,
Scofflaw

The politcians have protected the bondholders first. That is who they care about. They wont even name them.

Seriously if a bank held onto my money for a week the trust would be absolutely shatterred. I'd take every cent out I could. Who would leave their money there?

Secondly, Cyprus is now seeking help from the Russians.

http://www.reuters.com/article/2013/03/20/us-cyprus-parliament-idUSBRE92G03I20130320

Scofflaw

ArmaniJeanss wrote: »

A 'one-time-hit' in the sense that it would bring their deficit into line with that of Irelands about 4 years ago.
Unfortunately they would still have to go through all the follow-up multi hits that we have had.

Not sure - their deficit isn't that bad.

cordially,
Scofflaw

Scofflaw

Rightwing wrote: »

Reports of them looking for a Russian loan leads to an interesting problem I've seen no-one discussing. The reason the troika would only lend 10 billion was because they felt that otherwise Cyprus's debt would rise to 160% of GDP, which the considered to be unsustainable. If Cyprus goes off and gets a loan for the extra 6 billion, will the troika be willing to lend the whole 10 billion?

Yes.

As far as I know, no. The IMF wouldn't lend on that basis, and while the EU itself was originally in favour of trying a non-IMF bailout, the northern countries won't do it.

All of this is why the Cypriot bailout has been under discussion since late 2011 - this is the only round that's reached the parliament before being rejected.

cordially,
Scofflaw

pipie

carpejugulum wrote: »

No. Cyprus needs a 6bn cash injection.

Easy now. The UK has sovereign bases in Cyprus and Turkey would not like it either.

Turkey would not like it? Exactly why it would be so popular in Cyprus, the mere thought of an army based on the Island to A. Protect their/shared Russian Gas, and B. a Strong military reserve which could back up their own in the case of a war, would make many Cypriots happy.

....and you are talking about the UK sovereign bases, that the UK agreed in 1960 to pay rent on the land, but has paid zero to date...

mmmmm

Scofflaw

clairefontaine wrote: »

The politcians have protected the bondholders first. That is who they care about. They wont even name them.

Seriously if a bank held onto my money for a week the trust would be absolutely shatterred. I'd take every cent out I could. Who would leave their money there?

Secondly, Cyprus is now seeking help from the Russians.

http://www.reuters.com/article/2013/03/20/us-cyprus-parliament-idUSBRE92G03I20130320

Sure, there are always going to be people who go "omg I must move my money out of peripheral banks immediately" - but I was under the impression that they had all pretty much done so a couple of years back. Certainly round the web it's pretty much the same people as back then saying they'll move their money - either they have moved their money, in which case I can't really see the point of them saying it again, or they didn't, in which case I can't really see the point of them saying it again.

cordially,
Scofflaw

clairefontaine

Scofflaw wrote: »

Sure, there are always going to be people who go "omg I must move my money out of peripheral banks immediately" - but I was under the impression that they had all pretty much done so a couple of years back. Certainly round the web it's pretty much the same people as back then saying they'll move their money - either they have moved their money, in which case I can't really see the point of them saying it again, or they didn't, in which case I can't really see the point of them saying it again.

cordially,
Scofflaw

Well I would think you would put your money where your mouth is once the bank has actually cut you off from your own money for over a week. How are people living?

pipie

clairefontaine wrote: »

Well I would think you would put your money where your mouth is once the bank has actually cut you off from your own money for over a week. How are people living?

The ATMs are working...

clairefontaine

pipie wrote: »

The ATMs are working...

Does that also mean they can move their money electronically?

pipie

clairefontaine wrote: »

Does that also mean they can move their money electronically?

As far as I know... still no...

Also as I mentioned already word has it that the Ministry of Finance is darfting a bill to "curb the out flow" of cash when the banks eventually do open.

Scofflaw

clairefontaine wrote: »

Does that also mean they can move their money electronically?

No, no electronic transfers, apparently. And bear in mind that the banks are currently closed as a result of parliament saying no.

cordially,
Scofflaw

clairefontaine

pipie wrote: »

As far as I know... still no...

Also as I mentioned already word has it that the Ministry of Finance is darfting a bill to "curb the out flow" of cash when the banks eventually do open.

hmmm... wonder what that means...

Scofflaw

pipie wrote: »

As far as I know... still no...

Also as I mentioned already word has it that the Ministry of Finance is darfting a bill to "curb the out flow" of cash when the banks eventually do open.

AKA capital controls.

cordially,
Scofflaw

AlmightyCushion

Scofflaw wrote: »

AKA capital controls.

cordially,
Scofflaw

Isn't that illegal under EU law though?

Hotblack Desiato

clairefontaine wrote: »

Seriously if a bank held onto my money for a week the trust would be absolutely shatterred. I'd take every cent out I could. Who would leave their money there?

Last year, Ulster Bank was badly messed up for a lot longer than a week. Most customers didn't leave.

clairefontaine

ninja900 wrote: »

Last year, Ulster Bank was badly messed up for a lot longer than a week. Most customers didn't leave.

That's true, but they didn't close their doors did they? And threaten to confiscate a percentage of your money?

pipie

AlmightyCushion wrote: »

Isn't that illegal under EU law though?

Classic....
Isn't EU law that the 100k of the ordinary depositor was state guaranteed...
Isn't EU law the right to enjoyment of your property. (Ok legally the depositors cash in the bank is bank property - but most people are not made aware of that and will claim property rights).

If its EU law, the EU can break it....

Scofflaw

AlmightyCushion wrote: »

Isn't that illegal under EU law though?

No, there's an exception for exceptional circumstances.

clairefontaine wrote:

That's true, but they didn't close their doors did they? And threaten to confiscate a percentage of your money?

I originally gave up on Ulster Bank because they were far too fond of confiscating my money via 'bank charges'.

cordially,
Scofflaw

clairefontaine

pipie wrote: »

Classic....
Isn't EU law that the 100k of the ordinary depositor was state guaranteed...
Isn't EU law the right to enjoyment of your property. (Ok legally the depositors cash in the bank is bank property - but most people are not made aware of that and will claim property rights).

If its EU law, the EU can break it....

The same EU that pressures countries to keep doing votes till they get the result they want.

Did the wall come down or just keep moving west?

Scofflaw

pipie wrote: »

Classic....
Isn't EU law that the 100k of the ordinary depositor was state guaranteed...
Isn't EU law the right to enjoyment of your property. (Ok legally the depositors cash in the bank is bank property - but most people are not made aware of that and will claim property rights).

If its EU law, the EU can break it....

EU law is basically a set of agreements between the Member States - they wrote the treaties. In this case, the Commission was opposed to depositor levies for the same reason it was opposed to bondholder burning, but the IMF and the solvent Member States won't lend to Cyprus without Cyprus coming up with €5.8bn in cash - not loans, the Russians would have to give them the money, or the IMF won't lend, and the Member States won't lend without the IMF.

As for the Deposit Guarantee Directive, the point is that it's a Directive, which means that national deposit guarantee schemes may be all one shape, but they're all national schemes.

Whether you have strong or weak property rights depends on your national constitution, not the EU, but personal rights are invariably subject to the common good. It may be hard to see bank rescues as serving the common good, but that's the basis on which they're done.

cordially,
Scofflaw

K-9

pipie wrote: »

As far as I know... still no...

Also as I mentioned already word has it that the Ministry of Finance is darfting a bill to "curb the out flow" of cash when the banks eventually do open.

A few Russian private jets parked in Nicosia Airport according to C4 news.

AlmightyCushion wrote: »

Isn't that illegal under EU law though?

Well we got pretty draconian laws passed for the IBRC so I'd assume there are exceptions to competition law.

K-9

Scofflaw wrote: »

EU law is basically a set of agreements between the Member States - they wrote the treaties. In this case, the Commission was opposed to depositor levies for the same reason it was opposed to bondholder burning, but the IMF and the solvent Member States won't lend to Cyprus without Cyprus coming up with €5.8bn in cash - not loans, the Russians would have to give them the money, or the IMF won't lend, and the Member States won't lend without the IMF.

This is the problem they have, and why anybody saying the Cypriots have achieved anything is a false dawn, way too quick to call it.

The Cypriots are looking for bailout money from the Russians, who they already did that with a couple of years ago, in a bid to stave of a Troika bailout. 2 years later, here we are. The Russians will want their pound of flesh too, regardless of influential deposit holders, it will come at a high price.

The EU has some interest in this, as seen in not suggesting a tax on deposit holders under 100k. The Cypriot PM wanted that, and here we are.