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Cypriot Bailout Sends Shivers Throughout the Euro Zone

nytimes.com

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Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#41

Post by Swizec »

Nux wrote: post #33
InclinedPlane wrote: post #8

Earlier quoted context omitted.

It's just another example of what's fundamentally wrong with the Euro. If you compare to the US, which is a continent sized country with a lot of diversity, you'll see some big differences. For one, the economic differences between regions in the US aren't nearly as large as in the eurozone. For another, the authority which regulates currency is also in control of taxation and government spending at a federal level,…

Well, Europe has different dynamics, rooted in ancient times... and a lot of inertia. It's hard to steer all people in a certain direction, especially from quite different cultures. We're not Europeans; we're Romanians, Greeks, French, Cypriots and so on. We have a sense of belonging, not to each other, but to our individual nations. It is a "hodgepodge", but we must keep it together somehow. What happened last centu…

Remember, most of our countries formed in the 19th and early 20th century. Before that Germans for instance were Prussians, Bohemians, Moravians, Bavarians and so on. (39 states)

The French for instance only commonly adopted the same language in 1914. (When literacy rates were high enough for everyone to know French instead of regional languages).

Most countries in Europe were the same less than 200 years ago. I can easily see us being Europeans 100 years from now.

I know Slovenians (where I'm from) still considered it a novelty to think of themselves as Slovenians as late as the 1840's.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#42

Post by pavlov »

chestnut-tree wrote: post #5

People across Europe will react with horror to this latest development in the Eurozone crisis. This will not strengthen the case for stronger European integration but turn many more against it. Notice too how the supporters of these measures attempt to frame the debate around wealthy foreign tax evaders while minimizing the plight of ordinary Cypriots. This extract from an opinion piece in The Guardian says it all ".…

Reading British newspapers for Eurozone financial commentary is like reading Soviet Pravda for its poignant analysis of American life. The rhetoric is so thick and the motivation so obvious that it's easy to forget that there's always someone who will take it seriously.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#43

Post by hippich »

From fbme.com (large bank in Cyprus):

16 Mar 13 2.00pm 17 March 2013

The authorities in Cyprus have announced the delay of a Parliamentary debate on the provisional agreement signed by European Union finance ministers for a bailout package for the Government of Cyprus. Though there is considerable media speculation on the detail, some of it no doubt unfounded, the Cyprus authorities have yet to confirm arrangements within the agreed package and the implications for the banking industry and its customers. These are under discussion at the present time.



FBME Bank is in close contact with the authorities in Cyprus and is monitoring the situation with regard to Parliamentary and Regulatory Authority discussions. We will keep our customers informed as to developments and expect to update this statement each day in the coming period as soon as information becomes available. Please refer to our website www.fbme.com for the latest statement, which we expect to update during the course of Monday, 18 March 2013 and thereafter.

At this moment, we wish to assure all our customers that the financial condition of FBME Bank is sound and depositors’ monies benefit from the strength of the Bank’s dynamic and well diversified Balance Sheet, which at all times meets European Capital Adequacy and Liquidity Standards. It continues to be the Bank’s intention to keep a very high liquidity and strong solvency position. If there is further information required please email pr@fbme.com

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#44

Post by chestnut-tree »

Atropos wrote: post #14
mixmax wrote: post #7

"After five years of bailouts financed largely by austerity-weary European taxpayers, wealthy nations like Germany and the Netherlands have decreed that from now on when a bank or country fails, it will be bond investors and perhaps even bank depositors who will be forced to pick up a big share of the bill. " This is so incredibly stupid that it would be funny if it wasn't so tragic. They're basically telling everyon…

Smug US/UK commentators have now been shouting for 3+ years about how incredibly stupid the EU is, how the Euro will break up in two weeks... But why is the Euro up 16% against the USD and 23.3% against the UK pound over the last 10 years? Why are German bond yields lower than the US bond yields, and why do some stable eurozone countries still possess a triple AAA rating by all credit agencies, in opposition to the U…

"...the EU shouldn't and doesn't really care if they go under."

The EU should care. Do European officials and politicians think they are immune from the opinion of people in their own countries?

I expect this measure will generate a lot more hostility towards the EU among the European populace.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#45

Post by hippich »

samstave wrote: post #4
uvdiv wrote: post #2

The government also extended a bank holiday that was put in place to try to stop a run on the banks. The holiday was supposed to end Monday night. Now, banks will not be opening their doors Tuesday, as planned. There was talk that they might not open Wednesday, either. [...] “As soon as banks in Cyprus reopen, people will rush to take all their money out, because they don’t believe this is a one-off deal,” he said. “…

There was a comment that a lot of russian mob money is held in Cyprus banks. I wonder if this is actually an attack on them in an effort to take the money from the russian mob. I also predict acts of vandalism on the banks. Where the goal is to cost the banks money to repair their facilities given the situation.

Regarding talks about russian mobs: there is indeed a lot of russian money in cyprus, but not all of it are from criminal activity. The way business works in post-USSR countries forces businessmen to never keep money in the country. And Cyprus banks happened to be most friendly with russian business.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#46

Post by Atropos »

jpdoctor wrote: post #38
Atropos wrote: post #23

Earlier quoted context omitted.

What exactly is your point? If we see market prices as reasonably efficient, the current Euro price shows that the typical "Stupid Eurocrats idiotic mismanagement of the flawed Euro project will lead to European collapse in 2 weeks" simply doesn't have a base in reality. Individual (small) countries may fail, the system will be fine, and misinformed doomsayers will - as always - end up making fools of themselves.

> What exactly is your point? The euro is up 16% because there are more dollars in circulation chasing the same number of euros. Same for the pound. A deflationary environment in Europe (what are prices doing in Greece? What is the Spanish unemployment rate?) is exactly what you would expect, and the Euro up 16% against the USD and 23.3% against the UK pound is evidence of that. Or to put it another way: You quote ev…

You do realize that I quoted numbers for the last 10 years? Since the Eurocrisis started, the Euro has losses of around 6-10% against the other major currencies, so your deflationary argument isn't really sound.

All I wanted to say is that in the long run, foreign exchange rates express some form of judgment about the soundness of a currency. The markets still consider the Euro a very sound and safe currency - at least more so than the USD and the UK pound. A weaker exchange rate might be preferable, but that is not a way Europe wants to go. Instead of printing money, the idea is to restructure the economy. In the short run this will of course be super painful and allow commentators to shout "Look, austerity has failed". Let's talk again in 2025, bond yields for Greece,Italy,Spain are already down...

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#47

Post by Nux »

Swizec wrote: post #41
Nux wrote: post #33

Earlier quoted context omitted.

Well, Europe has different dynamics, rooted in ancient times... and a lot of inertia. It's hard to steer all people in a certain direction, especially from quite different cultures. We're not Europeans; we're Romanians, Greeks, French, Cypriots and so on. We have a sense of belonging, not to each other, but to our individual nations. It is a "hodgepodge", but we must keep it together somehow. What happened last centu…

Remember, most of our countries formed in the 19th and early 20th century. Before that Germans for instance were Prussians, Bohemians, Moravians, Bavarians and so on. (39 states) The French for instance only commonly adopted the same language in 1914. (When literacy rates were high enough for everyone to know French instead of regional languages). Most countries in Europe were the same less than 200 years ago . I can…

Well, if this goes on for long enough, with open borders and such there's going to be a lot of mixing..

I'm not sure what we're going to call ourselves, but if nothing "explosive" happens in the next 2-3 centuries, I predict we'll be mostly brown-skinned and speak some sort of English.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#48

Post by samstave »

Lazare wrote: post #17
samstave wrote: post #4

Earlier quoted context omitted.

There was a comment that a lot of russian mob money is held in Cyprus banks. I wonder if this is actually an attack on them in an effort to take the money from the russian mob. I also predict acts of vandalism on the banks. Where the goal is to cost the banks money to repair their facilities given the situation.

Definitely not. The confiscation is 6.75% on small accounts (mostly EU savers and pensioners) who are covered by deposit insurance, and 9.9% on large accounts (yes, a lot of which is Russian money). Overall it will collect a total of around €6B. If you wanted to get €6B from just the accounts that aren't covered by deposit insurance you'd need to confiscate around 30%. So, basically, the EU had a choice of either tak…

Thanks for that info.

What was the potential impact of doing nothing? As this action "makes the collapse of the EU financial system... much more likely" -- what would the impact have been to the EU financial system had nothing been done at all.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#49

Post by pavlov »

jpdoctor wrote: post #40
pavlov wrote: post #34

Earlier quoted context omitted.

The ECB does effectively print money by buying commercial banks' bonds with newly created money. Draghi said last year that the ECB is prepared to purchase "unlimited amounts", so if there is a bank run, the central bank will fill up the banks' balance sheets as necessary (in theory).

> with newly created money. No. This is exactly the problem: The echoes of the German hyperinflation of the 1930s are still being heard, so Merkel and crowd have repeatedly stood against printing. As for the ECB purchases, those were "sterilized" as opposed to "quantitative easing", which is what the Fed does. http://blogs.wsj.com/eurocrisis/2012/09/06/the-ecb-steriliza...

The linked article is about ECB buying government bonds. But the ECB also buys bonds from Eurozone commercial banks, and this is where new money is being created.

It does end up on the central bank's balance sheet, but there's no event that would force the bank to ever write it down. Those hundreds of billions in loans can stay unpaid for hundreds of years if necessary.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#50

Post by cft »

mixmax wrote: post #7

"After five years of bailouts financed largely by austerity-weary European taxpayers, wealthy nations like Germany and the Netherlands have decreed that from now on when a bank or country fails, it will be bond investors and perhaps even bank depositors who will be forced to pick up a big share of the bill. " This is so incredibly stupid that it would be funny if it wasn't so tragic. They're basically telling everyon…

I believe the decision was based on German unwillingliness to bail out Russian "hot money" , which they believe is the majority of Cypriot bank cash deposits. They grossly miscalculated the public reaction however.
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