Showing posts with label EU bailouts. Show all posts
Showing posts with label EU bailouts. Show all posts
May 19, 2017
April 01, 2013
SPIEGEL ONLINE INTERNATIONAL: Should the Cypriot bailout become a model for the future? The mere suggestion sent markets tumbling last week. But increasing numbers of European politicians would like to see bank shareholders and investors bear a greater share of crisis risk. The EU may be changing its strategy. By SPIEGEL Staff
Jeroen Dijsselbloem's original game plan was to just keep a low profile. When the 47-year-old Dutch finance minister became head of the Euro Group three months ago, the first thing he did was deactivate his Twitter account. In meetings of the finance ministers of the 17 euro-zone states, he let his counterparts do most of the talking. And whenever he appeared before reporters in Brussels afterwards, he would start with sentences like: "Maybe it's good, if I say something."
Dijsselbloem seemed determined to become the most boring of all the boring bureaucrats in Brussels -- until last Monday, that is, when he did something no one would have anticipated: He detonated a bomb. The way that large depositors and creditors were being drawn into the bailout of Cypriot banks, he said, could become a model for the entire euro zone. In future aid packages, he said, one must look into whether bank shareholders, bond holders and large depositors could participate so as to spare taxpayers from having to foot the bill. He was announcing nothing less than a 180 degree about face.
Cyprus as a model? Dijsselbloem had hardly finished his comments before international news agencies began registering its impacts. Markets around the world nosedived, the euro sank to a four-month low and EU leaders had to rush into damage-control mode, as did the man who triggered the storm himself. Dijsselbloem backtracked by saying that Cypriot banks were obviously "a special case." Germany's top-selling daily tabloid, Bild, scoffed that Dijsselbloem would get a new nickname in Brussels: "Dusselbloem," the rough equivalent of "Dimwit-bloem."
But the ridicule might prove premature. In reality, Dijsselbloem merely expressed something that many Europeans already think. Whether at the European Parliament or in several Continental capitals, many are saying that the time is ripe for the financial sector to assume a greater share of the costs for rescuing ailing banks. » | Martin Hesse, Michael Sauga, Cornelia Schmergal and Christoph Schult | Translate from the German by Josh Ward | Monday, April 01, 2013
March 29, 2013
SPIEGEL ONLINE INTERNATIONAL: In Luxembourg, leaders are warning that applying the Cypriot bailout model -- a levy on bank deposits -- to other crisis-plagued countries could lead to a flight of investors from Europe. But the EU is considering the option anyway.
The debate over this week's "bail in" of bank account holders in Cyprus as part of the country's debt crisis bailout is continuing to simmer in Europe. In Luxembourg, Finance Minister Luc Frieden has warned that the example set in Cyprus by taxing people holding €100,000 ($129,000) or more in their accounts could drive investors out of Europe.
"This will lead to a situation in which investors invest their money outside the euro zone," he told SPIEGEL. "In this difficult situation, we need to avoid anything that will lead to instability and destroy the trust of savers."
Earlier this week, Euro Group President Jeroen Dijsselbloem sparked an enormous controversy after stating that the solution found in Cyprus could be applied throughout the euro zone in the future. » | dsl/SPIEGEL | Friday, March 29, 2013
March 19, 2013
THE DAILY TELEGRAPH: Bank runs and financial panic could spread across Europe after Cyprus proposed raiding people's savings for a new bail-out, Alistair Darling has said.
The former Chancellor said Cyprus is doing "everything you should not do" after the tiny country decided to seize around 6.75 per cent from smaller deposits and almost 10 per cent from larger ones.
The country is currently deciding whether to make richer savers pay a bigger proportion of the bill but Mr Darling said the whole idea of taking money from ordinary savers is dangerous.
He said EU should not be letting Cyprus "blow apart" the principle of protecting deposits under €100,000, as people will start pulling their cash out of banks if they fear this elsewhere.
"It seems to me to make it more likely that if you’re a saver in Spain or Italy, if you have a sniff of the EU or the IMF coming your way you’ll take your money out and you’ll get a run on the bank," he told BBC Radio Four's Today programme.
"So what they’re doing is everything you should not do when you’re trying to solve a problem like this." » | Rowena Mason, Political Correspondent | Tuesday, March 19, 2013
March 18, 2013
THE WALL STREET JOURNAL: The Cypriot decision to tax bank depositors EUR5.8 billion as part of a bailout deal with the euro zone has broken a "taboo" and risks a "complete loss of confidence in the financial system."
Over the weekend, it emerged that Cyprus would issue a tax on all Cypriot bank deposits, including savers who thought they were protected by a guarantee of savings below EUR100,000.
Previous sovereign bailouts in the euro zone have required investor participation, but this only involved bondholders. Holders of some Greek government bonds suffered haircuts in its restructuring last year, while Ireland's bailout in 2010 was contingent on holders of debt from nationalised Irish bank bonds suffering big losses.
Senior market participants said that the Cyprus bailout could prove to be dangerous.
Jon Mawby, senior portfolio manager at GLG Partners, said: "In the medium term this could be one of the key policy errors of the entire crisis, affecting the reaction functions of populations across Europe."
Chris Iggo, chief investment officer in global fixed income at Axa Investment Managers, said: "The potential for a complete loss of confidence in the financial system is huge."
He said the levy on deposits had broken "another taboo," pointing to the fact that depositors have never before been required to participate in the funding of a bailout package.
"It's thrown up in the air the natural ranking of creditors and you just don't know where that's going to land." » | Matthew Attwood | Financial News | Monday, March 18, 2013
BOSTON.COM: Cypriot Deposits Grab Shocks Savers Across Europe: NICOSIA, Cyprus — A plan to seize up to 10 percent of people’s savings in the small Mediterranean island nation of Cyprus sent shockwaves across Europe on Monday as households realized the money they have in the bank may not be safe. » | Menelaos Hadjicostis | Associated Press | Monday, March 18, 2013
MAIL ONLINE: Until now it was felt that however bad the crisis in the euro area became, governments would move heaven and earth to protect ordinary bank depositors.
Over the weekend that Rubicon was crossed, as policymakers imposed an immediate tax on all deposits held in Cyprus, as part of a rescue package for the island’s failing economy.
This brutal decision by euroland finance ministers and the International Monetary Fund threatened a run on the whole financial system as depositors rushed to try to get their money out.
And the reverberations could reach beyond further Cyprus to hard-pressed euroland countries including Italy and Spain. Read on and comment » | Alex Brummer | Monday, March 18, 2013
BBC: Reform of how to mend broken banks, which has been negotiated globally and in Europe since the Crash of 2007-8, has been based on two central principles.
First, that the savings of ordinary people should be protected, up to a high threshold - or 100,000 euros in the European Union for example.
And that financial institutions which lend to banks by buying their bonds should incur losses when banks are bailed out: bondholders should, to use the jargon, be bailed in, as part of resolution plans.
The logic behind these tenets is simple: financial institutions ought to be sophisticated enough and informed enough to assess the risks of lending to a bank, and therefore deserve to be punished when their judgement is awry; most of the rest of us can't possibly know if our high street banks are making reckless gambles. » | Robert Peston, Business Editor, BBC | Monday, March 18, 2013
BBC: Cyprus' parliament is due to hold an emergency session to discuss a big bailout, which has angered the public.
It is by no means certain that the deal, reluctantly endorsed by the president, will get enough support to pass in parliament.
Under the bailout's terms, people in Cyprus with less than 100,000 euros in their accounts would have to pay a one-time tax of 6.75%.
Those with sums over that threshold would pay 9.9% in tax.
It could affect more than 25,000 British expats living on the island.
Sue Hall runs a wedding business in Cyprus. She spoke to BBC Breakfast from Paphos about how the situation was affecting her. Watch BBC video » | Monday, March 18, 2013
March 17, 2013
CYPRUS MAIL: THE ONE-OFF levy on bank deposits agreed between Nicosia and international creditors will impact all Cypriot account holders.
In addition to Cypriot commercial and co-operative banks, Barclays, Russian Commercial Bank and Societe Generale, among others, would be affected.
“As we understand it, anything with credit will be subject to the levy, be it a deposit or current account,” bank sources said.
The Cyprus deal means the country’s savers, almost half of whom are believed to be non-resident Russians, are asked to pay up to 10 per cent of their deposits to raise some €5.8 billion for the government.
International lenders will put up around €10 billion to help the island pay back its debt. People with less than €100,000 in Cypriot bank accounts will have to pay a one-time tax of 6.75 per cent, while those with more will have to pay 9.9 per cent.
Euphemistically dubbed a “solidarity levy,” what it amounts to is a haircut on deposits, economic analysts said.
Savers will be ‘compensated’ in the form of bank shares of an equal value to the amount contributed, finance minister Michalis Sarris told the state broadcaster.
In addition to the levy, Sarris said, a 20 to 25 per cent tax will be imposed on the interest on deposits.
And in return for emergency loans, Cyprus additionally agreed to increase its corporate tax rate by 2.5 per cent to 12.5 per cent.
The deal was reached after late-night discussions in Brussels with the International Monetary Fund (IMF).
In return for the €10 billion bailout, Cyprus has been asked to reduce its deficit, shrink its banking sector and increase taxes.
Bank sources said a run on bank ATMs started from Friday night – while the Eurogroup was in progress –peaking yesterday morning as soon as news broke from Brussels.
“The ATMs are running out of cash,” a source said.
The frenzy of withdrawals was triggered by savers likely thinking that by reducing their bank balance they would reduce their taxable amount.
However understandable, it was probably an exercise in futility, because the taxable amount will apply retroactively, from the moment the deal was struck in Brussels. » | Elias Hazou | Sunday, March 17, 2013
THE GUARDIAN: Cypriots rush to ATMs before savings are docked as part of a bailout deal agreed in Brussels
Cypriots reacted with shock that turned to panic on Saturday after a 10% one-off levy on savings was forced on them as part of an extraordinary 10bn euro (£8.7bn) bailout agreed in Brussels.
People rushed to banks and queued at cash machines that refused to release cash as resentment quickly set in. The savers, half of whom are thought to be non-resident Russians, will raise almost €6bn thanks to a deal reached by European partners and the International Monetary Fund (IMF). It is the first time a bailout has included such a measure and Cyprus is the fifth country after Greece, the Republic of Ireland, Portugal and Spain to turn to the eurozone for financial help during the region's debt crisis. The move in the eurozone's third smallest economy could have repercussions for financially overstretched bigger economies such as Spain and Italy.
People with less than 100,000 euros in their accounts will have to pay a one-time tax of 6.75%, Eurozone officials said, while those with greater sums will lose 9.9%. Without a rescue, president Nicos Anastasiades said Cyprus would default and threaten to unravel investor confidence in the eurozone. The Cypriot leader, who was elected last month on a promise to tackle the country's debt crisis, will make a statement to the nation on Sunday.
The prospect of savings being so savagely docked sparked terror among the island's resident British community. At the Anglican Church's weekly Saturday thrift shop gathering in Nicosia, Cyprus's war-divided capital, ex-pats expressed alarm with many saying that they had also rushed to ATMs to withdraw money from their accounts. "There's a run on banks. A lot of us are really panicking. The big fear is that there soon won't be cash in ATMs," said Arlene Skillett, a resident in Nicosia. "People are worried that they're automatically going to lose ten present [sic] [of their savings] in deposit accounts. Anastasiades won elections saying he wouldn't allow this to happen." » | Paul Gallagher and Helena Smith | Saturday, March 16, 2013
March 16, 2013
THE DAILY TELEGRAPH: Cyprus is to receive a €10 billion (£8.7 billion) bail-out from the eurozone to recapitalise its ailing banking system in return for a series of drastic measures which will hit the country’s savers.
The Mediterranean island nation becomes the fifth country to turn to the eurozone, following in the footsteps of Ireland, Greece, Portugal and Spain.
The emergency funding will be used to prop up the country’s banks which were hit by the financial restructuring of nearby Greece.
The Cypriot banking system had grown to be eight times the size of the country’s fledgling economy - which accounts for just 0.2pc of the eurozone’s gross domestic product.
But in a departure from previous bail-outs, the country’s savers are being asked to make sacrifices.
The terms of the deal mean that Cyprus’s savers will sacrifice up to 10pc of their deposits in a move which will raise as much as €6 billion.
The move, which is likely to prove unpopular with the country’s 1m citizens - and the Russian non-residents who reportedly account for half of deposits in Cyprus’s banks - will be enacted almost immediately.
Following a bank holiday in the country on Monday, March 18, the levy on bank deposits will come into force on Tuesday, March 19. » | James Quinn and Ben Leach Saturday, March 16, 2013
SPIEGEL ONLINE INTERNATIONAL: Hitting the Savers: Euro Zone Reaches Deal on Cyprus Bailout – After fraught negotiations, euro-zone finance ministers reached a deal early Saturday to provide up to €10 billion ($13 billion) bailout funds to Cyprus, which faces bankruptcy in May. For the first time, deposits at banks in a country are being seized to assist in the rescue. » | dsl -- with wires | Saturday, March 16, 2013
THE GUARDIAN: Cyprus eurozone bailout prompts anger as savers hand over possible 10% levy: Angry Cypriots try in vain to withdraw savings as eurozone bailout terms break taboo of hitting bank depositors » | Reuters | Saturday, March 16, 2013
September 27, 2011
THE DAILY TELEGRAPH: Germany's top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum, vastly complicating plans to boost the EU's rescue machinery to €2 trillion (£1.7 trillion).
Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.
"The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution)," he said.
"There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people," he told newspaper Frankfurter Allgemeine. » | Ambrose Evans-Pritchard, International Business Editor | Monday, September 26, 2011
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