Here's my summary of the key news overnight in 90 seconds at 9 am, including news Cyprus remained locked in talks with international creditors in an effort to rescue the country from economic collapse ahead of a crucial meeting with euro zone finance ministers tomorrow.
The latest plan is, no haircut for deposits under €100,000 and a 20% cut on the rest. Russia is fuming. Others worry about contagion.
In the meantime, Cypriots can only withdraw €100 a day from ATMs. There are 'only hard choices' left for Cyprus now.
We should watch the crisis in Cyprus, not because it affects us directly, but we should prepare to avoid the mistakes they are making if we ever get into banking or fiscal stress. Lessons are being learned, it is hoped.
Meanwhile, the IMF is reported to be about to cut its forecast for US growth to 1.7% in 2013 from 2.0% due to government spending cuts and increased taxes.
A situation to watch in Asia: South Korea and Japan are at odds over Japan's monetary policy.
And big bond investor PIMCO has said world markets would tolerate a delay by New Zealand to return to a fiscal surplus, provided the extra spending targeted economic growth.
The kiwi dollar starts today at its highest level in a month at 83.6 USc, 80.0 AUc, and the TWI is at 76.5.
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The Newport Beach, California-based company’s holdings of New Zealand and Australian bonds are about 4 percent to 5 percent over a neutral position, which Mather said is a “notable overweight” for the manager of $2 trillion in assets. Prime Minister John Key’s government has shown a commitment to returning to a budget surplus in 2015 after posting a record deficit in 2011.
“That’s why investors such as ourselves are increasing their exposures to government debt in the region,” Mather said. “What you want as an investor is a good credit growth profile and a government that has a sustainable balance. It doesn’t mean they have to be always in balance but they have a path toward balance and a commitment to it.”
Why would Pimco pump the price ahead of it's dealer's best efforts to gain cheap position, unless....?
Good piece highlighting that Europe has a much bigger crisis than Cyprus on its hands - the Eurozone economy is sinking:
http://au.businessinsider.com/europes-economic-crisis-is-much-bigger-th…
andyh - Mish Shedlock made similar comments recently:
http://globaleconomicanalysis.blogspot.co.nz/2013/03/eurozone-downturn-…
It may well be that France is the next shoe to drop. Will Germany have enough funds to bail out France?
Cyprus reached an outline deal with international lenders for a 10 billion euro bailout that would shut down its second largest bank and inflict heavy losses on uninsured depositors, Reuters says.
http://www.reuters.com/article/2013/03/25/us-cyprus-parliament-idUSBRE9…
And here's Bloomberg's take on it: "Cyprus agreed to the outlines of an international bailout, paving the way for 10 billion euros of emergency loans and eliminating the threat of default.
The accord between Cyprus and the “troika” representing international lenders was reached in overnight talks in Brussels and ratified by finance ministers from the 17-nation euro area.
“It’s in best interest of the Cyprus people and the European Union,” Cyprus President Nicos Anastasiades told reporters.
The euro rose after the provisional agreement was struck that would make Cyprus the fifth country to tap a rescue since the euro debt crisis broke out in Greece in 2009. The European currency rose 0.3 percent to $1.3023 at 2:15 a.m. Brussels time."
http://www.bloomberg.com/news/2013-03-24/cyprus-said-to-reach-tentative…
A 40% haircut? ouch....I'd wonder on some wealthy russians emplying some ex-russian mil types to saw testicles off with blunt knives at that haircut....
"My employer, he sayz, haircut our money, we return favour, understand?"
"Big depositors in Cypriot banks stand to lose circa 40 per cent of their money here, which has drawn plenty of fury and veiled threats from Russia."
ftalphaville.ft.com/2013/03/22/1435062/cyprus-just-pop-the-red-pill-please/
http://krugman.blogs.nytimes.com/2013/03/22/cyprus-update/
regards
Spetsnaz
CYPRUS
Emergency talks have wrapped up
EU says insured bank deposits safe.
Small (un-insured?) account-holders are covered by the EU's deposit guarantee legislation, which runs to the 100,000-euro threshold
Those above that level face a hefty haircut.
This would come at a massive price for investors
One senior EU source said the haircut could be as high as 40 per cent
I read a while back that in the Uk %85 money on deposit was held by less than %10 of the depositors, is NZ the same? Suspect so.
The curious thing about this Cyprus calamity is this
Russian Oligarchs and (presumably) wealthy nationals from other countries have been pouring loot into Cypriot banks for a long time to take advantage of Cyprus Tax Haven Status. This was going on before Cyprus became a member of the EU. The EU mandarins knew all along.
The Cypriot Banks, flooded with hot money invested it south of the Border in Greek Banks
The Huge Greek Bail-Out happened 12 months ago.
Creditors of the Greek Banks agreed to a huge haircut.
Cypriot Banks were Creditors of the Greek Banks
That means the Cypriot Banks were the victims of that haircut
The interesting thing is
The Russians never knew where their money was going.
Thay have been kept in the dark
The time taken for the roll-through domino effect to emerge has been 12 months
Wonder if some of the Oligarchs were given a heads up to use the time to insure
Wonder who the insurers were.
Maybe this guy lost all his money?
http://www.telegraph.co.uk/news/worldnews/europe/russia/9951385/Berezov…
No. He lost his money in a court case with Roman Abramovich
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