Posted on 03/17/2013 8:52:16 AM PDT by blam
ANALYST: The Cyprus Deal Could Be The 'Trigger' We Were Waiting For In Europe
Matthew Boesler
March. 17, 2013, 10:41 AM
Stephen Z on Flickr
On Thursday, Société Générale analysts made a prescient call on Europe.
"It is far too early to dismiss euro area crisis as a key [market] driver," wrote SocGen's Vincent Chaigneau. "We fear another shockwave in the spring."
As it turns out, they may not have had to wait very long. News this weekend that the ECB, EU, and IMF bailout of the Cypriot banking system will include an instant 10 percent "tax" on bank deposits before banks re-open following Monday's holiday has already triggered runs on ATMs there.
Now, the banks have a problem on their hands. "The Cypriot cabinet has declared Tuesday a bank holiday, for fear of capital flight, and this may even be stretched to Wednesday, as depositors are certain to withdraw huge sums from the Cypriot banks after the haircut imposed," reports Greek newspaper Kathimerini.
Many market observers are expressing concerns that the decision could have a ripple effect throughout Europe come Monday when markets open. After all, if European leaders have decided to violate the unspoken rule of bank bailouts – that deposits are sacrosanct – what's to say it can't happen in a bigger eurozone country, like Spain?
In a Sunday morning note to clients, Morgan Stanley economist Joachim Fels wrote, "I view this as a worrying precedent with potentially systemic consequences if depositors in other periphery countries fear a similar treatment in the future."
"This will probably go down as an ill-thought-out rescue plan with consequences for peripheral Europe," says Galy. "It breaks a cardinal rule — namely, public trust on which money relies."
The decision, therefore, has everyone scratching their heads.
(snip)
(Excerpt) Read more at businessinsider.com ...
They may not realize it by the Cypriots' euros are backed by their land, cities, buildings, industries, what have you.
What a convenient way for the Russians to step in, "for safety's sake"
Cyprus is the preferred offshore banking center for Russian billionaires. It's banking system is all out of proportion to its domestic economy. This action was a slap in the face to the Russians.
Figuring 9% average, weighting the EU 5.8 Billion ‘rake’ for a preponderance of larger size accounts, my math says the banks are holding upwards of UE5 Trillion in deposits. That’s a lot of banking for a country whose GNP is a paltry fraction of that amount.
I would consider it more a slap to the ordinary working (or unemployed or retired) people -- the little guys.
The Russians will consider a 10% penalty on their hot money to be a screaming good deal. It's basically a green light to them: An ALL CLEAR.
Pure evil.
Indeed and they wonder why nobody trusts them.
I did not mean to minimize the impact on Cypriot savers. I was answering a comment about the small size of Cyprus's economy by pointing out its status as a European tax haven.
The Russians will consider a 10% penalty on their hot money to be a screaming good deal. It's basically a green light to them: An ALL CLEAR.
Perhaps, but don't you find it odd that Putin, himself found it necessary to condemn the action today?
Yes. This was a terrible decision and the markets showed their displeasure today. But it was also the EU elite's passive-aggressive reaction to Putin's general bellicosity.
I’ll wait until Wednesday for the blood in the streets. If none, on to the next big distraction.
Heh. A visit to a mall by the new Pope will probably do it.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.