One could tell from the rise in the futures this evening that a deal was reached, but conflicting reports had me wondering “what deal?”
The story now is that president Nicos Anastasiades threatened to resign if the terms were not acceptable (a nice strategy), and euro leaders agreed to a 10 billion euro bailout.
Reuters reports Revamped Cyprus deal to close bank, force losses.
Cyprus clinched a last-ditch deal with international lenders on Monday for a 10 billion euro ($ 13 billion) bailout that will shut down its second largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians.The agreement emerged after fraught negotiations between President Nicos Anastasiades and heads of the European Union, the European Central Bank and the International Monetary Fund – hours before a deadline to avert a collapse of the banking system.
Deposits above 100,000 euros, which under EU law are not guaranteed, will be frozen and used to resolve debts, and Laiki will effectively be shuttered, with thousands of job losses.
An EU spokesman said no levy would be imposed on any deposits in Cypriot banks. A first attempt at a deal last week collapsed when the Cypriot parliament rejected a proposed levy on all deposits.
A senior source involved in the talks said Anastasiades had threatened to resign at one stage if he was pushed too far.
EU diplomats said the president, flown to Brussels in a private jet chartered by the European Commission, had fought to preserve the country’s business model as an offshore financial centre drawing huge sums from wealthy Russians and Britons.
The revised bailout plan many not require further parliamentary approval since the idea of a levy was dropped.
Damage Done
As I mentioned previously, haircuts on deposits above 100,000 euros are likely to be hammered by anywhere from 30% to 90%. I expect the mid-to-upper end of that range as noted in Bad Bank Losses 30-90%; Food Supplies Down to Two Days; Plenty of Fuel, Not enough Cash.
Regardless, the damage has been done. There should be and can be no trust. Anyone who keeps more money in Southern European banks than they need to pay immediate bills is a fool.
This crisis was resolved, at the last minute, like every other crisis, but I have a prediction. The next significant crisis will not be resolved easily, if at all, no matter how much blackmail and pressure the nannycrats apply.
In the meantime, the safe thing to do in Southern Europe is to get your money out of banks immediately. Nigel Farage says the same thing. For details, please see UKIP Leader Nigel Farage Says “Get Your Money Out of Spain While You’ve Still Got a Chance”
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Mish’s Global Economic Trend Analysis
Deal Reached, Damage Done
No comments:
Post a Comment