Posted on 03/17/2013 11:48:42 AM PDT by whitedog57
The European debt crisis was rumored to be over. But the recent warning shot from Cyprus indicates otherwise.
Europe braced for renewed turmoil as outrage in Cyprus over an unprecedented levy on bank deposits threatened to derail the nation’s bailout and spark a new round in the debt crisis.
Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros and 9.9 percent above that.
The decision to impose losses on Cypriot depositors is the latest erosion of bondholder protection at European banks and an “ominous” sign of how bailouts are being handled, Barclays Plc said.
Investors need to be better aware of national resolution frameworks, with Switzerland, Britain, the Netherlands and Germany being the riskiest for bondholders, Barclays, Britain’s second-largest bank by assets, said in a report.
“The imposition of a levy on depositors in Cyprus is a material development that furthers the erosion of bondholder protection at European banks,” London-based Barclays said in the report. “We believe the expropriation of SNS Reaal subordinated bonds, the imposition of losses on Anglo Irish senior bonds and the haircuts of depositors in Cyprus form an ominous trend.”
Euro-area finance ministers early Saturday morning agreed to an unprecedented tax on Cypriot bank deposits as part of a 10 billion-euro ($13 billion) rescue plan for the country, the fifth since Europe’s debt crisis broke out in 2009.
Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros — the ceiling for European Union account insurance — and 9.9 percent above that. The measures will raise 5.8 billion euros, in addition to emergency loans.
Cyprus’s International debt is already rated at an anemic (or Greek-like) CCC+ with a 26% yield.
The “good news?” Cyprus’ credit default swaps are at their lowest since last year. “Good news” if you are NOT a depositor in Cyprus banks, that is.
This is not all that surprising for an economy with a YoY GDP growth rate of -3.40% and an unemployment rate of 14.70%.
At least their increase in CPI is under 2%.
The European debt crisis and economic downturn is not over.
Let’s hope that the IMF doesn’t levy a similar tax on US banks and their depositors.
All the people in Cyprus need to organize. If it works there, it will work anywhere.
this sounds incredibly incompetent. to go right in and steal from people’s bank accounts. (when all they need to do is print themselves more money, like USA does... which is, of course, also destructive and immoral but a bit less likely to provoke immediate mass violence in the streets.... ergo: the European politicians sound incompetent...)
They’re on the euro and can’t print it. Only Brussels has the ability to print Euros.
Money under their mattresses just became worth more than money in their banks.
maybe they need to just print some of their own fiat currency then?
it does sound like they may be shafted in the Euro thing.
a nation which can’t manage its own currency has lost a major, major part of its sovereignty
what a shame
You misunderstand the facts. Those banks are BROKE, BANKRUPT. There are NO assests left for the account holders. So what is actually happening here is that these people are getting 90+% of their lost (by the bank) money back from other people, i.e. the tax payers of those countries funding the bailout.
The DOW in the U.S. should go up about 200 points on this news and all bank stocks will also jump up significantly. It’s a modern day market.
Of course the European debt crisis is not over. One has only to look at the declining birth rates and the ever-increasing lifespan of Europeans to see that the whole social welfare scheme is going to collapse. There simply aren’t enough young people to support the old people who get money and services for nothing. At some point their money will run out and no one is going to be able to or willing to rescue them.
Any bets on how much the stock market will soar next week because Cyprus didn’t burst into flames?
I wonder if the US will burst into flames if they try that here?
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