Live blogging the Cyprus deposit situation | 283 comments (283 topical, editorial, 0 hidden)

Re: This is stupid beyond belief. Or not? (none / 1)

"Why on earth do you think these people are my friends, or that I'd have anything to do with them?"

Because you are watching about their interests, and smear the most harmless efforts to let them bear the results of their misguided investments.

And you clearly don't understand what fascism is, where it comes from, who it affects, or how damaging it is.

Oh come on. Compared to your primitive "uh huh corporations" nonsense even Dimitroff had a good fascism theory. No, your fascism is anything I dom't like rhetoric hides perfectly any knpwledge you might have.

"It's fine to write off Ireland and Cyprus as tax havens if you want to."

But that was and is exactly their economic strategy of the last decade, if not longer.

"But if they're bust - which is arguable in the case of Cyprus, given its alleged resources -"

Oh, in this case they can save their banks themselves.

"I doubt it's because widows and orphans were spending money they couldn't afford."

What the hell are you talking about? I didn't say anything about widows and orphans.

I'd be perfectly happy to see the senior bond holders scalped in Cyprus.

The way I see it we are talking about on ore two insolvent banks. It would be right to pay out the amounts guaranteed by the deposit insurance and let all other creditors - junior bondholders, senior bondholders, depositors, other creditors, suffer the consequences of an insolvency. In other words you get 23.5% of your money

Now an actual insolvency isn't possible because an insolvency of any bank of some size would be to damaging. Then Cyprus should make a law that creditors of rescued but insolvent banks should be treated as if an insolvency has has happened. So losses being borne first by share-holders, then by junior bond-holders, then equally by senior bond-holders and depositors. So that the bigger depositors would get 23.5% in the end. (or 33.6% or 0.2% or whatever)

Now you may call that fascism. I think that is quite just.

Now ECB, EU and the cypriots, being not fascist at all but rather much to soft, will let escape the creditors with 90.1% instead of 34.5% or whatever of their money.

That the protected smaller depositors are hit too seems to be mostly the fault of the cypriot government, being like you to soft on big creditors.

by IM on Mon Mar 18th, 2013 at 12:17:03 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 0)

What on earth are you talking about? And how on earth did you decide that I'm being soft on big creditors when I've said no such thing and have been arguing the opposite?

You're saying that stealing money from that majority of un-wealthy depositors who keep meagre savings in their high street banks is 'harmless'?

Then Cyprus should make a law that creditors of rescued but insolvent banks should be treated as if an insolvency has has happened. So losses being borne first by share-holders, then by junior bond-holders, then equally by senior bond-holders and depositors. So that the bigger depositors would get 23.5% in the end. (or 33.6% or 0.2% or whatever)

Yes of course. As long as smaller depositors are fully protected. (Is there really no independent deposit insurance in Cyprus?)

Now - let me know when someone from the German financial establishment suggests this is the way to solve the problem.

In the meantime there's nothing 'soft' about nuking a cornerstone of modern banking and destroying both investor and depositor confidence in order to backstop the risky investments of financial professionals.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Mar 18th, 2013 at 02:56:18 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 0)

>You're saying that stealing money from that majority of un-wealthy depositors who keep meagre savings in their high street banks is 'harmless'?<

Where exactly have I said that?

>Is there really no independent deposit insurance in Cyprus?)<

>in order to backstop the risky investments of financial professionals.>

As long as you demand that every depositor - deposit one euro, one million euro, a billion euro - is paid out in full you are demanding the backstop.

by IM on Mon Mar 18th, 2013 at 03:32:50 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 1)

IM:

That the protected smaller depositors are hit too seems to be mostly the fault of the cypriot government

If our only source here is Schäuble, what he said was:

Germany would have protected insured deposits: Schaeuble | Reuters

"But those who did not want a bail-in were the Cypriot government, also the European Commission and the ECB, they decided on this solution and they now must explain this to the Cypriot people."

And considering it was ECB that set the time table on this, they are a far more important player. So even if we believe Schäuble here, reducing his list to the cypriot government is not very accurate.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Mon Mar 18th, 2013 at 02:59:06 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 0)

If our only source here is Schäuble, what he said was:

And you assume that why?

by IM on Mon Mar 18th, 2013 at 03:38:03 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 0)

Well, do you have a better source?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 18th, 2013 at 05:02:19 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 0)

Look, I understand that this sub-thread has got a bit of tension in it. Still, I don't think why I assume something is likely to carry the discussion forward. But sure I can answer the question: I assume that because he is a source quoted numerous times in this thread.

Now, do we have another source to who pushed what? And more importantly for my remark, do we have any source pointing out the Cypriotic government rather then the EC or ECB as the main agent behind the bail-in for deposits under 100k euros?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Mar 19th, 2013 at 07:50:56 AM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 1)

http://www.eurotrib.com/comments/2013/3/17/908/97754/254#254

Let's see:

"Cyprus could have offered full protection to those with insured deposits up to 100,000 euros and still reached the 5.8 billion euro target by taxing uninsured deposits at a rate above 15 percent.

...

But when the plans were presented to Anastasiades, several participants said, he balked at any suggestion that uninsured depositors should pay more than 10 percent."

I assume they base their reporting on sources other then Schäuble.

"And more importantly for my remark, do we have any source pointing out the Cypriotic government rather then the EC or ECB as the main agent behind the bail-in for deposits under 100k euros?"

We do. Now you could say the other governments want to shift the blame to Cyprus, but it is not just Schäuble.

by IM on Tue Mar 19th, 2013 at 08:06:43 AM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 1)

"And more importantly for my remark, do we have any source pointing out the Cypriotic government rather then the EC or ECB as the main agent behind the bail-in for deposits under 100k euros?"

Let's review some of the sources linked in this thread...

Cyprus Rescue Risks Backlash (WSJ)

Mr. Rehn was the first to make a specific proposal. To raise funds, Cyprus should impose a special levy on deposits, taxing accounts of less than €100,000 at 3%, those up to €500,000 at 5% and those above at 7%. Such a "solidarity levy "--the brainchild of Thomas Wieser, an Austrian who chairs technical discussion among euro-zone finance officials, and Mr. Asmussen-- could avoid a straight "haircut" on deposits, which they feared could be too destabilizing for Cyprus and the rest of Europe. The tax would be applied to all Cypriot banks, not just the two in deep trouble.

CYPRUS DISASTER: Open dissent in Merkel's CDU as Schäuble's attempt to avoid responsibility for Cyprus depositors dismissed as "bare-faced lie". (The Slog. 3-D bollocks deconstruction)

Says a well-placed Berlin source, "It is completely ridiculous for [Schäuble] to suggest that his was a dissenting vote on the question of small customers in Cyprus. In fact, he was from the start enthusiastic when Brussels came up with this `tax levy' scheme as a way round the EU's deposit guarantee. Every German MP will recognise this as classic Wolfgang Schäuble behaviour. The high esteem in which he is held by the German people is in no way reflected inside the Bundestag."

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Tue Mar 19th, 2013 at 08:18:26 AM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (4.00 / 2)

See also an update on The Slog:

But even as Schäuble continued to defend his position, claiming "The levy on deposits under €100,000 was not an invention of the German government", the Eurogroup begged to differ. Although last Sunday in an interview on public tv ARD, Schäuble directly blamed the European Central Bank, the European Commission and the Cypriot government for involving tax small savers (anyone but him, basically) ECB board member Joerg Asmussen rejected Schäuble's accusations.
He countered: "In the last days it was not the ECB that pushed for this special structure that was chosen, it was the result of the negotiations in Brussels." And pushing hard for 40% in that meeting (with no transcript record of anyone batting for the little guy) was....Wolfgang Schäuble.
Then again, it seems Mr Asmussen himself is being economical with the truth: "One should not, through the wrong actions in Cyprus, put in risk what has been achieved at high political and financial risk in the eurozone in recent years," Asmussen pronounced pompously. But the WSJ writes this morning that Asmussen was the one who, in the early hours of Saturday threatened to cut off Cyprus' two largest banks from the ECB's emergency funding if a deal was not achieved.

Are these meetings really not minuted?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 19th, 2013 at 08:36:46 AM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 1)

If there are minutes they will be released in 50 years' time...

Now seriously, the secrecy of Council deliberations (and even of the results of votes in the Council, given that Governments have made a habit of blamit "Brussels" for decisions they voted for at Council) has been a sticking point for a long time, given the legislative function of the Council.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Tue Mar 19th, 2013 at 10:05:58 AM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 1)

Since the important negotations happened in smaller circles anyway, minutes of the big official meetings wouldn't have helped much.

According to this report titled a scapegoat named Schäuble - it happened this way:

http://www.sueddeutsche.de/wirtschaft/belastung-von-kleinsparern-in-zypern-ein-schwarzer-peter-namen s-schaeuble-1.1627975

the commission proposed a tax of 3% up to 100,000 euro, up to 500,000 5%, above that 7%. Netting two-three billion euro
Largarde proposed to take 30-40% from accounts higher then 100,000 euro. Same with senior bonds. That would have resulted in seven billion euro.

Schäuble supported Largarde because he wanted the seven billion.

In the end Schäuble did go down to something like higher then 18%.

And then they compromised on the commission proposal just with higher rates, getting the famous 5.8 billion

by IM on Tue Mar 19th, 2013 at 10:43:05 AM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 1)

IM, the problem is that the victims in Cyprus had almost no agency in creating the problem. That was done by a political elite who probably had little understanding of what they were doing, but those who voted for them mostly had none. My understanding is the reason the bond holders are being exempt is that they are largely banks in core EMU countries, chiefly Germany. It is for that reason that I would like to see Cyprus reject the bailout. If Russia wants to make German and French bankers whole in return for sparing the Cypriots misery and if the Cypriots agree that would seem fair.

My own preference would be for Russia to not only give tax avoiders hiding in Cypriot banks a huge haircut but also to wipe out the bond holders. If the ECB objected, Russia could offer Cyprus solvency in rubles as a stepping stone to reintroduction of their own currency. But if the ECB isn't coming up with any money what authority do they have to dictate how the banking insolvency is resolved. Converting bond holders to stock holders is traditional. Perhaps Russia could offer the new stock holders rubles for their stock.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Mar 18th, 2013 at 05:54:21 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 1)

The reason bondholders are exempt is that senior bondholders represent such a small amount (0.5 bn) so "burning" them would have brought little money and (another) worrying precedent. Given the amount, that seems like a plausible argument, even if the overall package makes it an appallingly bad-looking one.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 18th, 2013 at 06:19:28 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 0)

Are there any bondholders other than 'senior' bondholders?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Mar 18th, 2013 at 08:10:29 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (4.00 / 2)

From the story linked by Jerome in a top-level comment: Levy plan `bleak day for banking union' (FT.com, March 18, 2013)

There is an added irony to the situation in the fact that, to the casual observer, the Cypriot banking system looked like a model for others to follow in the wake of the financial crisis. The island's banks have about €68bn of deposits, which they use to fund their lending, with only minimal reliance - less than €3bn - on so-called wholesale funding in the bond markets.
People who defend the Cypriot plan say the funding structure was the reason why there was no alternative to hitting depositors - junior bonds, which are being wiped out, amounted to just €2.5bn, while the €0.2bn of senior unsecured bonds have been left alone, on the grounds that to give them a haircut would generate a negligible economic contribution but undermine investor sentiment.
Since Lehman Brothers collapsed more than four years ago, deposit-funded balance sheets like Cyprus's have been the envy of many banks around the world. Burnt by the realisation that in times of crisis bond markets dry up, leaving long-term lending commitments potentially unfunded, banks have frantically shrunk non-essential lending and tried to boost deposits as their core funding mechanism.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Mon Mar 18th, 2013 at 08:17:44 PM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 1)

Er - how did the banks lose €68bn in deposits?

Is there a breakdown of lending and other payments anywhere?

And I suppose it's worth pointing out that only two banks are in trouble, but the Troika appear to have decided that for some reason this means the entire economy of Cyprus is in danger of total collapse.

It would be a bit like the Bank of England taking money from all domestic British depositors because Northern Rock was in trouble.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 19th, 2013 at 08:42:18 AM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (4.00 / 2)

Er - how did the banks lose €68bn in deposits?

Just because the banks have €68bn in deposit liabilities doesn't mean they have €68bn in cash assets on their balance sheet.

The main cause of the current troubles is the large losses sustained by the Cypriot banks on their large stock of Greek sovereign bonds. Which, by the way, makes sense if you have a large number of Greek nonresident depositors. You owe the Greek citizens and the Greek government owes you.

eKathimerini: Cyprus deposits yielded more than German ones (March 18, 2013)

"Banks in countries like Cyprus and Greece can pay higher interest rates as they also earn more on loans," Dirk Becker, head of banking industry research at Kepler Capital Markets in Frankfurt, said by phone. "In addition, Cyprus banks invested a lot in high-yielding Greek debt in the past."

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Tue Mar 19th, 2013 at 10:11:28 AM EST
[ Parent ]

Re: This is stupid beyond belief. Or not? (none / 0)

Yes, there are usually unsecured bondholders. Not sure how much they amount to in this case.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Mar 18th, 2013 at 08:27:30 PM EST
[ Parent ]

Live blogging the Cyprus deposit situation | 283 comments (283 topical, 0 editorial, 0 hidden)

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