March 25, 2013

INSIGHT-Money fled Cyprus as president fumbled bailout

Confusion over just how much money was pulled out of Cyprus' banks is illustrative of the confusion surrounding the negotiations as a whole. Representing just 0.2 percent of the euro zone economy, Cyprus nevertheless threatened to reignite the bloc's debt crisis. Cyprus' problems began in Greece - it is heavily exposed to the euro zone's first bailout casualty.

No one knows exactly how much money has left Cyprus' banks, or where it has gone. The two banks at the centre of the crisis - Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus - have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks' largest depositors.

While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money.

Companies that had to meet margin calls to avoid defaulting on deals were granted funds. Transfers for trade in humanitarian products, medicines and jet fuel were allowed.

http://www.reuters.com/article/2013/03/25/eurozone-cyprus-muddle-idUSL5N0CG13920130325

March 25, 2013

Cyprus faces years of suffering: analysts

Cypriots face years of economic hardship due to a harsh eurozone bailout deal, while the Mediterranean island's future in the single currency remains deeply uncertain, analysts said Monday.

The fallout will begin immediately with food and medicine shortages likely in coming weeks as businesses struggle with a lack of cash in Cypriot banks, which were hammered by the agreement, said economic experts.

The tiny nation then faces two years of deep recession coupled with soaring unemployment, with few hopes of longer-term recovery as Russians and other foreign investors will steer clear of its devastated financial sector.


Mullen, a partner at Strata Insight energy policy risk consultancy, said capital controls including drastic limits on withdrawals from bank ATMs were likely for several weeks.

"That means it's difficult for businesses to pay salaries and buy goods and things like that," Mullen said, adding that the impact of this had "not been thought through."

http://www.globalpost.com/dispatch/news/afp/130325/cyprus-faces-years-suffering-analysts-0

March 25, 2013

IT'S OFFICIAL: Banks In Europe May Now Seize Deposits To Cover Their Gambling Losses

Although deposits under 100,000 euros will be spared, deposits over 100,000 euros will be seized and subjected to an as-yet undetermined haircut--with the confiscated money going to bail out the gambling losses of the aforementioned reckless idiots who run some of Cyprus's banks.

This seizure, needless to say, will dampen the enthusiasm of rich depositors for keeping money in banks that get themselves into financial trouble.

And because many, many banks in Europe have gotten themselves into financial trouble, this will create a general state of unease among rich depositors throughout the Eurozone.
And it should wig out some bank lenders, as well.

After all, never before in the history of this global financial crisis has a major banking system allowed depositors to lose money, no matter how reckless and stupid and greedy their bank managers have been. And only rarely have bank lenders--those who hold bank bonds--been asked to pony up.


Read more: http://www.businessinsider.com/implications-of-the-cyprus-bailout-2013-3#ixzz2OYftUkW4

March 25, 2013

Cyprus bailout: Kremlin 'could punish Europe' in reprisal for bank levy

http://www.guardian.co.uk/world/2013/mar/23/cyprus-bailout-kremlin-reprisal-bank-levy

Fears are growing of Russian reprisals against European businesses as EU authorities desperately seek a deal to save the Cypriot economy by imposing a 25% levy on bank deposits of more than €100,000.

As the island scrambled to put together a rescue programme, its finance minister, Michalis Sarris, said "significant progress" had been made on the latest levy plan in talks with officials from the European Union, the European Central Bank and the International Monetary Fund.

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However, with Russian investors having an estimated €30bn (£26bn) deposited in banks on the island, the growing optimism about a deal was accompanied by fears of retaliation from Moscow. Alexander Nekrassov, a former Kremlin adviser, said: "If it is the case that there will be a 25% levy on deposits greater than €100,000 then some Russians will suffer very badly.

"Then, of course, Moscow will be looking for ways to punish the EU. There are a number of large German companies operating in Russia. You could possibly look at freezing assets or taxing assets. The Kremlin is adopting a wait and see policy."

March 25, 2013

'Russia prefers Cyprus out of the euro area'

Jorgo Hatzimarkakis, the German Euro deputy of Greek origin told Skai television on Sunday morning that Russia did not want Cyprus to stay in the eurozone.

“Cyprus’s alternative plan was only a half-plan that also relied on Moscow’s help. However Russia preferred a Cyprus outside the eurozone, but inside the European Union,” stated Hatzimarkakis.

Cypriot Finance Minister Michalis Sarris returned to Cyprus on Friday after his week-long effort to convince Russian authorities to lend some support to the Republic in the form of a new interstate loan, contribution to a bailout fund or even the extension of the 2.5-billion-euro loan from 2011, but to no avail.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_24/03/2013_489616

March 25, 2013

Financial Times: Russians prepare to quit Cyprus

http://t.co/Z8OyICscyx

While last week saw dozens of well-heeled Russians and their representatives fly down to Cyprus to check on bank accounts and confer furiously with Cypriot officials, they are being closely followed by another wave of visitors: the European bankers who hope Cyprus’s loss will be their gain.

One Cypriot lawyer with Russian clients said he had already been approached by half-a-dozen European banks in locales ranging from Latvia to Switzerland to Germany, some of them promising they could open new bank accounts for his clients in under an hour.


While it remains to be seen how Cyprus’s many Russian businessmen will be affected by the proposed bailout and what comes after, most appear to have one foot out the door already. They are now considering to which jurisdiction they will move their businesses and how.

“The Cypriots killed their country in one day,” says Mr Mikhin, referring to Friday March 15, when President Nicos Anastasides accepted the EU’s proposal to seize €5.8bn in emergency funds from Cyprus’s local and foreign depositors.

March 24, 2013

Krugman...Cyprus: The Sum of All FUBAR

What can be done? First off, Cypriot banks cannot honor their debts, which unfortunately overwhelmingly take the form of deposits. So a default on deposits is inevitable.

As I now understand it, the initial screwup was a joint error of the Europeans and the Cypriots. Europe didn’t want an explicit bank resolution, which would among other things have given clear seniority to small insured deposits; instead, it wanted this essentially fictitious tax scheme. Meanwhile, the Cypriot government still has the illusion that its banking model can survive, and wanted to limit the hit to the big overseas depositors. Hence the debacle of the small-deposit tax.

In the end this probably comes, in some version, to what it should have been from the start — a big haircut on deposits over 100,000.

But even then the situation is by no means under control. There’s still a real estate bubble to implode, there’s still a huge problem of competitiveness (made worse because one major export industry, banking, has just gone to meet its maker), and the bailout will leave Cyprus with Greek-level sovereign debt.

http://krugman.blogs.nytimes.com/2013/03/21/cyprus-the-sum-of-all-fubar/

March 23, 2013

OECD: China forecast to overtake U.S. by 2016

(Financial Times) - China is on track for a fourth consecutive decade of rapid growth and will overtake the US as the world's biggest economy in 2016 after accounting for price differences, according to a new report by the OECD.

Having slouched to 7.8 per cent growth last year, its slowest in more than a decade, China's economy will rebound to 8.5 per cent growth this year and 8.9 per cent next, the OECD said.

It forecast that China would average 8 per cent growth in per capita terms during the current decade, provided Beijing can implement a series of economic, financial and regulatory reforms, many of which are already in train.

"There is significant scope for further catch-up in China; China has a strong record with respect to several of the key factors for sustaining growth and is well positioned to emulate the record of earlier stellar Asian performers," the OECD said in its survey of the world's second-biggest economy.

http://www.cnn.com/2013/03/22/business/china-us-oecd-2016/

March 23, 2013

The promised savings of $2500 per family in the ACA aren't supposed to happen til 2019.

Rising Health Costs Undermine Obama's Pledge

Last year, I asked White House deputy chief of staff Nancy-Ann DeParle about that $2,500 in savings the president pledged. She insisted families will see that savings seven years after the president said it would be achieved - by 2019.

"Many of the changes in the Affordable Care Act are starting this year, and in succeeding years," DeParle told ABC News, "and by 2019 we estimate that the average family will save around $2,000."

DeParle said that the "big increases that occurred (in 2010) were probably driven by insurance plans overestimating what the impact would be and maybe trying to take some profits upfront before some of the changes in the Affordable Care Act occur."

Administration officials say they never claimed health care costs would go down, only that they would grow at a slower rate than they would have without the Affordable Care Act.

http://abcnews.go.com/m/blogEntry?id=17321046

March 23, 2013

Health Insurers Warn on Premiums

Health insurers are privately warning brokers that premiums for many individuals and small businesses could increase sharply next year because of the health-care overhaul law, with the nation's biggest firm projecting that rates could more than double for some consumers buying their own plans.

The projections, made in sessions with brokers and agents, provide some of the most concrete evidence yet of how much insurance companies might increase prices when major provisions of the law kick in next year—a subject of rigorous debate.

The projected increases are at odds with what the Obama Administration says consumers should be expecting overall in terms of cost. The Department of Health and Human Services says that the law will "make health-care coverage more affordable and accessible," pointing to a 2009 analysis by the Congressional Budget Office that says average individual premiums, on an apples-to-apples basis, would be lower.

The gulf between the pricing talk from some insurers and the government projections suggests how complicated the law's effects will be. Carriers will be filing proposed prices with regulators over the next few months.

http://m.us.wsj.com/articles/a/SB10001424127887324557804578374761054496682?mg=reno64-wsj