Don’t Think For A Second That The Crisis In Cyprus Is Over. The Banking Meltdown Is Just Getting Started, And The Consequences Could End Up Being Far More Dramatic Than Any of Us Could Possibly Imagine.
European Funding Pressures Spike Most In 14 Months
One of the most important indicators of stress in the financial markets of Europe during the heady days of the crisis was the EUR-USD basis swap. Simply put it is an indication of the trouble that European banks are having funding themselves. Thank to the LTRO and a wash from the ECB, it has been largely off the radar for most media types. However, we note that today the 1Y EUR-USD basis swap smashed lower (more stressed) by the most since December 2011 and is at its most stressed since November. It seems trouble, no matter how much Draghi promises, is not too far under the surface…
CYPRUS: Two Possibilities For What Happens Next
The next stage now that the bailout has been rejected
REPORTS: Banks In Cyprus Could Be Closed For Another Week, ECB Working On ‘Insane’ Plan
They were originally supposed to re-open their doors today after a bank holiday Monday.
Then, it was reported that they would remain closed until Thursday.
A new report from Dow Jones suggests that Cypriot banks now won’t be re-opened until next Tuesday.
Europe Weighs Cyprus’s Fate After Lawmakers Reject Bailout Deal
European policy makers must weigh how far to push Cyprus after lawmakers in the Mediterranean nation rejected an unprecedented levy on bank deposits, throwing into limbo a rescue package designed to keep it in the eurozone.
FRENCH BUDGET MINISTER RESIGNS AFTER BANK REVELATIONS, AFP SAYS
Is Spain Preparing For Its Own Deposit “Levy”?
While Spain’s economy minister Luis De Guindos proclaimed in the Senate today that bank deposits under EUR100,000 are “sacred”and that “Spanish savers should stay calm,” Spain, it would appear, has changed constitutional rules to enable a so-called ‘moderate’ levy on deposits – as under previous Spanish law this was prohibited. For now, they claim the ‘levy’ will be “not much higher than 0%” and is mainly aimed at regions in Spain that have “made no effort to collect taxes” based on new revenue expectations. As El Pais reports, the minister of finance and public administration, Cristobal Montoro, defends the need for such a ‘levy’ in their constitution on the basis of standardizing taxes across regions (and is preparing a proposal on the amounts to be paid) and although it would appear that while the European Commission could previously argue that such a ‘tax’ would violate the free movement of capital in Europe, it now leaves the door open to eventually effectively taxing the deposits. We can’t help but remember the Tequila crisis and the constant reassurances from Zedillo up until even the night before Mexico devalued…
The Minister of Finance and Public Administration, Cristobal Montoro, has advanced on Tuesday that the government will impose a type “moderate” to bank deposits to compensate communities that saw their tax autonomy canceled after the Executive created a state tax 0% rate. This tax on bank deposits, which has nothing to do with Cyprus, does not affect savers but requires credit institutions to pay for that capture deposits.
Nigel Farage Message To Europeans: “Get Your Money Out While You Can”
Nigel Farage – Cyprus Rejection Sets Up A Crash In Markets
Cyprus moves closer to financial collapse, as bailout talks falter
Posted on March 19, 2013by The Extinction Protocol
March 19, 2013 – CYPRUS – In the early hours of Saturday, Cyprus agreed to a “bailout” with the EU and IMF that is very controversial because it imposes an immediate one-time tax on everyone with money in a Cypriot bank before banks reopen on Tuesday (Monday is a holiday). The deal still needs to be passed by Parliament and that’s not a sure thing. Ekathimerini has this report: The Cypriot government is now sweating over a possible rejection by the island’s parliament of the shocking set of measures imposed on Nicosia for the eurozone to bail its economy out of a likely default, announced in the early hours of Saturday. The Cypriot government is preparing the bill to be tabled in Parliament probably on Sunday in an emergency session, as everything will have to be voted by Monday night for Cypriot banks to open on Tuesday. The stakes are incredibly high. Here’s a statement from Cypriot President Nicos Anastasiades warning of total financial collapse and euro exit if there’s no deal.“It is well known that the deep economic crisis and the state of emergency in which the country has found itself did not come about in the last fortnight since we have undertaken the administration of the country. The state of emergency and critical nature of the times does not allow me, as they do not allow anyone, to embark on a blame game. On Tuesday, March 19 we would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy…(without a deal) Such an uncontrolled situation would push the whole banking system into collapse with all the attendant consequences. As a result of the above, the service sector would be led to a complete collapse with a possible exit from the euro. That, in addition to the national weakening of Cyprus, would lead to devaluation of the currency by at least 40%.” –BI
Cyprus vote raises more doubt over euro membership
The Cypriot parliament’s rejection of a plan to bail out the country’s banking sector has opened the door a bit wider to the possibility of its exit from the currency bloc, say analysts.
Still, markets appear to be taking the rejection of the 10 billion euro ($13 billion) bailout plan — which had at its center a controversial deposit tax — in their stride at present. U.S. stocks had mostly ended mildly lower on Tuesday, and Asian stocks were split between gains and losses Wednesday.
The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.
Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.
“Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman.
After The Banksters Steal Money From Bank Accounts In Cyprus They Will Start Doing It EVERYWHERE
Cyprus is a beta test. The banksters are trying to commit bank robbery in broad daylight, and they are eager to see if the rest of the world will let them get away with it. Cyprus was probably chosen because it is very small (therefore nobody will care too much about it) and because there is a lot of foreign (i.e. Russian) money parked there. The IMF and the EU could have easily bailed out Cyprus without any trouble whatsoever, but they purposely decided not to do that. Instead, they decided that this would be a great time to test the idea of a “wealth tax”. The government of Cyprus was given two options by the IMF and the EU – either they could confiscate money from private bank accounts or they could leave the eurozone. Apparently this was presented as a “take it or leave it” proposition, and many are using the world “blackmail” to describe what has happened. Sadly, this decision is going to set a very ominous precedent for the future and it is going to have ripple effects far beyond Cyprus. After the banksters steal money from bank accounts in Cyprus they will start doing it everywhere. If this “bank robbery” goes well, it will only be a matter of time before depositors in nations such as Greece, Italy, Spain and Portugal are asked to take “haircuts” as well. And what will happen one day when the U.S. financial system collapses? Will U.S. bank accounts also be hit with a “one time” wealth tax? That is very frightening to think about.
Cyprus is a very small nation, so it is not the amount of money involved that is such a big deal. Rather, the reason why this is all so troubling is that this “wealth tax” is shattering confidence in the European banking system. Never before have the banksters come directly after bank accounts.
If everything goes according to plan, every bank account in Cyprus will be hit with a “one time fee” this week. Accounts with less than 100,000 euros will be hit with a 6.75% tax, and accounts with more than 100,000 euros will be hit with a 9.9% tax.
How would you feel if something like this happened where you live?
Will The Banking Meltdown In Cyprus Be A “Lehman Brothers Moment” For All Of Europe?
Cyprus lawmakers may have rejected the bank account tax, but the truth is that the financial crisis in Cyprus is just getting started. Right now, the two largest banks in Cyprus are dangerously close to a meltdown. If they fail, depositors could end up losing virtually all of their money. You see, the banking system of Cyprus absolutely dwarfs the GDP of that small island nation. Cyprus is known all over the world as a major offshore tax haven, and wealthy Russians and wealthy Europeans have been pouring massive amounts of money into the banking system over the last several decades. Yes, those bank deposits are supposed to be insured, but the truth is that there is no way that the government of Cyprus could ever come up with enough money to cover the massive losses that we are potentially looking at. This is a case where the banking system of a nation has gotten so large that the national government is absolutely powerless to stop a collapse from happening. If those banks fail, depositors may end up getting 50 percent of their money or they may end up getting nothing. We just don’t know how bad the damage is yet. And considering the fact that many of the largest corporations and many of the wealthiest individuals in Europe have huge mountains of cash stashed in Cyprus, the fallout from a banking collapse could potentially be absolutely catastrophic.
Cash Confiscation Begins Now! Gregory Mannarino
SCHIFF: ‘Banks Are Just A Few Rate Hikes From Insolvency’
Great clip. Schiff battles CNBC bank bailout drones.
Peter Schiff on Closing Bell this afternoon. Start watching right at 1:00. Other guests are Jason Pride of Glenmede, and Hank Smith of Haverford Investments.
One of the buy-side tools exclaims:
I think everyone agrees TARP saved the banking system.
The banks are in the worst shape they’ve even been. They are a just a few interest rate hikes from insolvency.
South Park Bailout Episode – “And…It’s Gone!”
Banks in South Park are in trouble.
Santelli On Cyprus: “Our Leaders Are No Different Than Europe”
‘Cyprus reminds me of GM’s bailout. The rule of law should transcend crisis, politicians and political cycles.’
Both clips are from yesterday and run about 3 minutes each.
Rick talks with Zach Karabell about Cyprus:
Santelli nails it in the 2nd half of this clip:
“Bottom line. Our leaders are no different from Europe. You don’t bend on principle. You don’t bend on the Constitituion. And you most certainly don’t bend on the rule of law.”
Next: Capital Controls
As is painfully clear to even the most naive observer, the biggest threat for Europe from this point on, now that Cyprus is officially “unfixed” is what happens when… if the Cyprus banks reopen – will the deluge of bank withdrawals drain 10% of the savings as the country’s central banker warned earlier today, 20%, 50% or all of it? It is certain that any and all foreign “oligarch” accounts will be promptly pulled never to be heard of again, and after being treated like third grade European citizens, we doubt the locals will care much for having their cash in a banking system that Europe has shown is equal to all the other “united” banking systems, which however also happen to be just that much more equal. And once foreign TV crews show lines of people scrambling to pull money in Cyprus to the local viewers in Greece, Italy and Spain, will those countries also get comparable ideas? That is precisely the Pandora’s box that Europe has now opened, and which it is scrambling to close. How? With the dreaded “contingency plans”, among which are such last ditch efforts as capital controls, including “imposing limits on daily withdrawals from bank accounts; capping the amount of money that can be electronically taken out of the country and making these transactions slower to clear; and introducing border checks to cap the amount of cash leaving in the country,” most recently utilized in the banana-est of republics such as Argentina.
The contingency measures, described by three European officials, may not need to be implemented if the deposit outflow looks containable. But the plan includes imposing limits on daily withdrawals from bank accounts; capping the amount of money that can be electronically taken out of the country and making these transactions slower to clear; and introducing border checks to cap the amount of cash leaving in the country.