Sunday, March 24, 2013

Al Jazeera — Cyprus clinch last-minute bailout deal

EU finance ministers have agreed a deal on a bailout for island nation to prevent its banking system collapsing.
No general deposit levy.

A meeting of eurozone finance ministers which started six hours late reached an agreement in the early hours of Monday morning to finalise the fine print of the deal. Savers with deposits of less than €100,000 (£85,000) would be spared, but it was thought there would be heavy losses inflicted on the deposits of the wealthy.
Laiki, or Cyprus Popular Bank, is to be closed, with its good assets transferred to Bank of Cyprus, the country’s biggest bank, where savers would suffer big losses in return for equity shares. Those with more than €100,000 in Laiki would also be hit hard.
Negotiations got under way amid a hardening of the stance by the IMF and Germany, which insisted that depositors must take the hit for bailing out the eurozone’s latest crisis economy. 
There were signs of panic in Cyprus as a €100 limit was imposed on ATM withdrawals, with more stringent capital controls to follow if the deal is finalised.






3 comments:

Matt Franko said...

From a Reuters story at Yahoo:

"Cyprus clinched a last-ditch deal with international lenders to shut down its second-largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians, in return for a 10 billion euro ($13 billion) bailout."

this should be interesting to see how the Ruskies react... hey they could have done the loan but I guess they were afraid of losses on the loans...

if they ever thought they could be invited into NATO they probably just missed a golden opportunity to make a big step towards that goal... IF that is a Russian goal... they chickened out on the loan... the loan would have put them in a leadership position in the region, but with such leadership comes some risk...

"Deposits above 100,000 euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki's debts and recapitalize Bank of Cyprus through a deposit/equity conversion.
The raid on uninsured Laiki depositors is expected to raise 4.2 billion euros, Eurogroup chairman Jeroen Dijssebloem said.
Laiki will effectively be shuttered, with thousands of job losses. Officials said senior bondholders in Laiki would be wiped out and those in Bank of Cyprus would have to make a contribution.
An EU spokesman said no across-the-board levy or tax would be imposed on deposits in Cypriot banks, although the hit on large account holders in the two biggest banks is likely to be far greater than initially planned. A first attempt at a deal last week collapsed when the Cypriot parliament rejected a proposed levy on all deposits.
Cyprus government spokesman Christos Stylianides said: "We averted a disorderly bankruptcy which would have led to an exit of Cyprus from the euro zone with unforeseeable consequences."

You can just feel the "gold standard" mentality throughout this paragraph... ie "govt has to get the money..." like we are still using metal coins carried around in clay pots.... what a bunch of morons...

Looks like austerity for Cyprus...

Dan Kervick said...

Well since Cyprus doesn't have its own currency, their situation is functionally similar to being on the gold standard.

Matt Franko said...

Point taken on Cyprus Dan but these officials are at the EU level... it's like they think they have to "raid" the island to "get the money" (metal coins) out of depositors accounts (clay jars) in Cyprus...

"The raid on uninsured Laiki depositors is expected to raise 4.2 billion euros, Eurogroup chairman Jeroen Dijssebloem said."

Ancient mentality... very Viking-like... this guy's pagan Viking ancestors must be proud of him looking down on him from Valhalla....

rsp,