Dopo Nicosia, Londra e Lussemburgo!

di Nicola Melloni
da Liberazione

Ed infine si trovò un accordo a Cipro. Dopo una settimana di isterie, proposte assurde e piani fatti e passati alla rinfusa, finalmente si è trovata una soluzione, per quanto parziale, ai problemi più pressanti dell’isola.
La differenza fondamentale rispetto al primo piano è che tutti i conti correnti sotto i 100 mila euro saranno garantiti e salvati. Non è una cosa da poco, per una volta non si colpiscono, almeno in maniera diretta, i più poveri e si vanno a cercare i soldi dai più ricchi. Ovviamente, subito dopo si inizierà con i soliti programmi di austerity e privatizzazione, quindi non c’è da brindare per l’accordo raggiunto – e tantissime imprese rischiano ora la chiusura vedendosi i loro conti drasticamente tagliati. Ma l’accordo di ieri è sicuramente un deciso passo avanti rispetto alla settimana scorsa.
Inoltre, una sostanziale fetta dei prelievi dai conti correnti più ricchi verrà dai depositi degli stranieri che hanno usato Cipro come un centro off shore, soprattutto i famosi e famigerati oligarchi russi, ma anche inglesi e tedeschi che hanno sfruttato i vantaggi fiscali concessi dall’isola. Una soluzione, dunque, che ricorda in parte l’Islanda dove le perdite delle banche vennero coperte da prelievi forzosi sui conti esteri – in quel caso soprattutto inglesi (ancora!) ed olandesi. Conseguentemente, i giorni di Cipro come paradiso fiscale sono sostanzialmente finiti. Il settore bancario, così enorme rispetto all’economia di Cipro (quasi 8 volte il valore del Pil) si sgonfierà velocemente e gli investitori esteri, appena le banche saranno riaperte, se ne andranno di gran furia.
Per andare dove però? Perché che le banche cipriote fossero da normalizzare non ci sono dubbi, ma non è certo un caso unico in Europa. Il Lussemburgo ha un sistema bancario che vale 24 volte il Pil del paese senza che nessuno abbia nulla da dire al proposito – forse perché molti capitali sono tedeschi, o più in generale europei e quindi è conveniente per tutti tenere aperto un bel paradiso fiscale nel cuore dell’Europa. E che dire della City di Londra che, in un paese di 60 milioni di abitanti, e non in una piccola isola, ha delle passività quattro volte superiori al Pil della Gran Bretagna? Anche lì con molti russi, oltre arabi e tanti altri capitali di dubbia provenienza. Come mai ora tutti puntano il dito contro Nicosia e le sue allegre pratiche finanziarie e nessuno ha nulla da dire su quello che succede nel resto d’Europa?
Se la Ue avesse intenzione di riportare la finanza sotto controllo non potremmo che rallegrarcene. Nuovamente, però, a Bruxelles sembrano procedere a tentoni, senza nessun piano strategico. Oggi si punisce Cipro, dopo aver colpito la Grecia e già si aspetta un prossimo intervento in Slovenia. Ma di una riforma organica non si sente proprio parlare. Della famosa unione bancaria si sono per ora perse le tracce, osteggiata dai tedeschi, il che ovviamente mette in difficoltà le banche dei Piigs esposte a potenziali fughe di capitale. Più in generale si continua a non discutere degli altri passi fondamentali per dare una struttura stabile all’area monetaria: una banca centrale che sia un vero prestatore di ultima istanza; un sistema che intervenga sui disequilibri macroeconomici sia dalla parte dei debitori (come ora) che dei creditori (cosa che invece non avviene); ed infine un governo che possa organizzare trasferimenti fiscali per alleviare le conseguenze sociali dei suddetti disequilibri e delle crisi.
Senza tutto questo la soluzione ideata per Cipro sarà solo l’ennesima pezza per tappare un buco ben più grande. Deprimerà l’economia dell’isola e sposterà in avanti il redde rationem a livello continentale. In attesa della prossima crisi.

La Germania affonda l'Europa?

Nei tre articoli che proponiamo di seguito il leit motif è la posizione della Germania nella crisi Europea. Nel primo pezzo Luigi Zingales spiega quello che in fondo in Italia già sapevamo, che lo spread nell'ultimo anno è stato messo sotto controllo non da Monti ma da Draghi - e questo spiega come mai, con Monti in carica, i tassi di interesse fossero molto più alti di ora, senza governo e con due partiti anti-europeisti che hanno conquistato la maggioranza dei voti. L'intervento della BCE è stato decisivo, ma non può risolvere per sempre i problemi. Prima o poi arriveranno i tempi delle scelte. Il problema è sempre il solito: i governanti tedeschi, di destra e sinistra, sembrano essere più interessati al loro consenso elettorale che al bene dell'Europa ed impongono condizioni strettissime per il bail out - ma così facendo aumentano la rabbia ed il discontento dei popoli dell'Europa meridionale, che rischiano di ritrovarsi nella situazione di un protettorato tedesco, democrazie a sovranità limitata.
Questo è il sentimento diffuso anche a Cipro, come riporta Paul Mason della BBC: rifiutando di mettere tutto il denaro richiesto per il salvataggio dell'isola Merkel e Schauble hanno di fatto imposto un prelievo forzoso sui depositi, scatenando la furia dei cittadini ciprioti. Il ricatto, le minacce, l'agguato teso al presidente cipriota non fanno che accrescere la frustrazione della popolazione. Ora anche il piano B, con i soldi presi dai depositi di gas e dai fondi pensione viene rifiutato da Berlino che richiede garanzie più sostanziali che il debito venga ripagato - e dunque, agli occhi di molti, richiede azioni punitive contro i cittadini degli stati responsabili della crisi, a Cipro come in Grecia, con il risultato che ora nell'isola mediterranea minacciano di lasciare l'Eurozona.
Il problema, però non è solo Cipro. L'uscita dall'euro rischia di essere un precedente disastroso, ma ancora di più rischia di esserlo la richiesta di tassare i depositi, sostanzialmente contravvenendo l'assicurazione sui depositi sotto i 100 mila data dall'Europa. Il rischio prospettato da Mahoney è che queste azioni tedesche rischino di trasformare l'Europa meridionale in una nuova America latina, con un continuo drenaggio di fondi dal Sud - a rischio - verso il Nord - per ora immune dalla crisi finanziaria. In pratica, i depositi dei cittadini, in Spagna come in Italia, sarebbero a rischio, incentivando una fuga di capitali verso la Germania, portando all'impoverimento progressivo dei PIIGS e, forse, al collasso della zona Euro. 

Mario Draghi’s Opiate of the Markets

di Luigi Zingales

da Project Syndacate

From the standpoint of European stability, the Italian elections could not have delivered a worse outcome. Italy’s parliament is divided among three mutually incompatible political forces, with none strong enough to rule alone. Worse, one of these forces, which won 25% of the vote, is an anti-euro populist party, while another, a Euro-skeptic group led by former Prime Minister Silvio Berlusconi, received close to 30% support, giving anti-euro parties a clear majority.

Despite these scary results, the interest-rate spread for Italian government bonds relative to German bunds has increased by only 40 basis points since the election. In July 2012, when a pro-European, austerity-minded government was running the country, with the well-respected economist Mario Monti in charge, the spread reached 536 basis points. Today, with no government and little chance that a decent one will be formed soon, the spread sits at 314 points. So, are markets bullish about Italy, or have they lost their ability to assess risk?

A recent survey of international investors conducted by Morgan Stanley suggests that they are not bullish. Forty-six percent of the respondents said that the most likely outcome for Italy is an interim administration and new elections. And they regard this outcome as the worst-case scenario, one that implies a delay of any further economic measures, deep policy uncertainty, and the risk of an even less favorable electoral outcome.

The survey also clearly indicated why the interest-rate spread for Italian government bonds is not much wider: the perceived backstop provided by the European Central Bank. Although investors believe that the backstop is unlikely to be used, its mere presence dissuades them from betting against Italy. In other words, the “outright monetary transactions” (OMT) scheme announced by ECB President Mario Draghi last July has served as the proverbial “bazooka” – a gun so powerful that it does not need to be used.

Then-US Treasury Secretary Hank Paulson sought a bazooka during the 2008 financial crisis. He failed, because he believed that even a fake gun would work if it looked scary enough. Not falling for the trick, speculators repeatedly called his bluff. Draghi, with his famous pledge to do “whatever it takes” to ensure the euro’s survival, succeeded where Paulson did not. After all, he controls the monetary spigot.

But even Draghi’s bazooka is partly a bluff. Draghi designed it to relieve the ECB of the huge political responsibility of deciding when to save a country from default. For this reason, triggering the OMT mechanism requires the unanimous consent of eurozone governments. But, if the bazooka is needed, how likely is it to be fired before the German election in September? The Morgan Stanley survey did not ask this question, probably because everybody knows the answer: not likely at all.

Thus, markets remain calm because they expect the bazooka not to be needed. In that case, the fact that it cannot be triggered easily does not pose a significant problem. Its presence is enough to support a benign self-fulfilling prophecy. In other words, Draghi’s bazooka has anesthetized markets, impairing their ability to assess risk.

But as with all anesthetics, Draghi’s cannot and will not last forever. Either the underlying problem is fixed before the patient wakes up, or the pain will be devastating.

The investors surveyed by Morgan Stanley put the chance of a renewed crisis in Italy below 25%. I believe that it is higher than 50%. Even after Germany’s election, I am not sure that the government will be willing to support an Italian rescue program without asking for major guarantees concerning the objectives – and even the composition – of Italy’s ruling coalition.

Indeed, German Chancellor Angela Merkel will face a serious dilemma following her likely re-election. Without strict conditionality, she would risk shifting the domestic consensus in favor of Germany’s emerging Euro-skeptic mood. But, by insisting on such conditionality, she would trigger a huge political crisis in Europe. If the German government gets to decide who governs Italy, why should Italians bother voting? The eurozone will look like a German protectorate, rather than a voluntary union of sovereign countries. The political backlash would be enormous.

The only hope is that the eurozone makes strong progress toward establishing fiscal-redistribution mechanisms, such as European unemployment insurance, before Draghi’s anesthetic wears off. Otherwise, Europe will face a very rude awakening indeed.

fonte: http://www.project-syndicate.org/commentary/why-the-ecb-s-omt-bazooka-is-not-enough-by-luigi-zingales#tirMk60kg3rPk6J6.99

Will Germany Turn Europe Into Latin America?

di Christopher T. Mahoney

da Project Syndicate

The headline in today's Journal is "Merkel's Hard Line, Vilified In Nicosia, Cheers Germany". Some quotes:
"Cyprus lives off a banking sector with low taxes and lax regulation that is completely out of whack. As a result, Cyprus is insolvent and no one outside of Cyprus is responsible for that…We've taken measures in all countries to protect ourselves against contagion effects."
--Wolfgang Schaueble, Finance Minister
"Merkel has nothing to lose in Cyprus."
--Ulrike Guerot, European Council on Foreign Relations

Germany is happy about the Cyrpus banking crisis because it will punish Cypriot sinfulness. I guess the sin is that the eurozone is no place for an offshore banking center/tax haven, which is debatable. But that decision should have been made before Cyprus was admitted into the eurozone. Now its banks have EUR 50 or 60 billion in euro-denominated deposits which Germany wants it to default on. The Journal says that "one reason that Berlin is taking such a hard line on Cyprus now is that it sees the country's crisis as a unique opportunity to end its reliance on tax refugees". This is punishing shoplifting with the death penalty.

Germans are very skilled at making things and being thrifty. They are economically admirable in every way except one: they have never accepted modern capital markets. They have resisted anglosaxon capitalism for forty years, and they still don't accept it. Germany (like France) believes in intermediated financial markets which can be controlled by the authorities in order to ensure financial stability. They don't trust independent market actors like hedge funds, US investment banks or rating agencies. You can make an argument that they are right, but it's way too late. They lost that battle and global finance is now substantially anglosaxonized.

A large percentage of European capital flows today are disintermediated, especially cross-border. And anyway, foreign banks are no more controllable than hedge funds. The creation of the eurozone by itself substantially reduced the power of national authorities. Consequently, the European capital market is now more powerful than the European national authorities. Germany doesn't like this for good reasons, but it is a fact that she can't change. Causing Cyprus to default is not a good way to deal with this issue.

So where's the black swan here? What did everyone miss? The markets knew that the Cyprus banks were insolvent because of Greece’s default. They knew that Cyprus had billions in offshore deposits. They knew that the Cypriot political system (like Greece's) is politically incapable of accepting any form of IMF-style austerity. Everyone has known about this witches' brew. But, everyone figured, the Cyprus problem is a rounding-error, and Europe always manages to kick the can down the road. It’ll get fixed. That’s certainly what I’ve been predicting.

What we didn't know was that Germany wants a crisis in Cyprus. Germany wants Cyprus to default on its bank deposits. That wasn’t understood until now. That’s the black swan. In retrospect, we can see the explanation: bailout fatigue on the part of the thrifty German people; the desire to disallow the enabling of tax evasion by a eurozone member; and outspoken distaste for the Russian kleptocracy. But the truly dangerous part of the German rationale is the mistaken opinion that a Cyprus banking collapse is manageable. This is the same stupid complacency that led to Lehman.

A Cypriot banking collapse will have unpredictable consequences; it’s a shot in the dark. It will inevitably create contagion--maybe not immediately, but eventually. Credit committees work on schedules. If Cyprus goes, risk limits for southern Europe will be reduced. Investments, deposits and capital flows will be redirected. Southern European banks will lose deposits not just from foreigners, but also from domestic investors and corporations.

A deposit freeze affects every bank, not just the weak. A Spanish millionaire is no safer in Banco Santander's headquarters office in Madrid than in the tiny caja down the street. Remember: if Cyprus blows up, Cypriots with deposits in foreign banks will not be affected. The key is getting your money out of the country.

This is a classic Latin American banking discussion. I’ve sat through scores of them. Southern Europe is at risk of going back to a Latin American-style financial system. Latin American depositors instinctively understand that you must keep your company's money and your family's wealth in a hard-currency deposit in a big bank in a strong country. Southern Europeans used to know this: it was called a numbered Swiss bank account. They are relearning this lesson. Let me be clear about what is happening here: we already have within the eurozone billions of nonconvertible euros. That’s a word you haven’t heard lately, unless you live in Venezuela or Cuba.

The West has spent the last sixty years building an institutional framework to allow global trade and capital flows. This has meant the dismantling of currency controls, capital controls, trade barriers and barriers to foreign investment. As this structure has been built, lessons have been learned: Don't lend or borrow foreign currency. Don't build up short-term foreign debt. Capital inflows can go both ways. The eurozone was supposed to be an enhancement to the globalization of finance. It was supposed to do for the eurozone what the dollar zone has done for the Americans.

If eurozone bank deposits now become subject to sovereign risk, that will reverse the whole process. No one can be that reckless, and the Germans aren't supposed to be reckless. They are what economists call "a serious country". Let's hope they stick to that tradition.

A Brief Note on Deposit Freezes
Deposit freezes almost never end well. They are imposed during banking crises in order to stop bank runs. Unless the reason for the lack of depositor confidence is removed or the deposits are rescheduled, the run will resume when the freeze ends. The only way to end a freeze without default is to restore confidence with a guarantee from a creditworthy guarantor backed by unlimited resources. Unlimited resources means a printing press.* There is only one such entity in the eurozone, the ECB, or the ESM backstopped by the ECB. There is no evidence that anyone is even discussing such a resolution. Germany wants a default.

fonte: http://www.project-syndicate.org/blog/will-germany-turn-europe-into-latin-america--by-christopher-t--mahoney#t7QWYKGbV3rdmDZH.99 

Cypriot crisis: Will Germany's tough stance backfire?

 di Paul Mason

da BBC

The question people in financial markets are shouting about is: what on earth does Germany think it is doing? It triggered the Cyprus crisis and is playing hardball, rejecting the Cyprus government's latest attempt to solve it. Here is my take on what is happening.

First the facts.
Last Friday in Brussels the Germans led Eurogroup ambush of the new president of Cyprus, demanding an immediate resolution to the country's debt crisis.
They were the ones to demand depositors take losses, although at first Mrs Merkel assured them the ordinary savers would lose just 3% of their money. Then, according to a report in the Financial Times, Wolfgang Schauble, the German finance minister, upped this to 6% and 10% for those with savings above 100,000 euros - though this version of events is disputed by German CDU MP Dr Michael Fuchs, who told Newsnight on Monday it is "not our problem" how Cyprus raised the money - as long as it is raised.
This immediately nullified the explicit 100,000 deposit guarantee in the eurozone and the president of Cyprus said it would never pass through parliament.
So to focus Cypriot minds, Jorg Assmussen, the German socialist who heads the council of the European Central Bank also told them the ECB was pulling emergency funding to Laiki Bank, thus rendering it insolvent.
Moral hazard Now, after a week of Cypriot attempts to get Russia to soften the size of the bailout, which Germany also nixed, the Germans have rejected the latest plan out of Nicosia, which would involve nationalising the country's pension schemes and also mortgaging future revenues from an oil and gas field that comes on stream in 2020.
Germany's intent in all this is, at a textual level, clear: they want to avoid creating a moral hazard, rewarding a country that has sold itself as a rule-free playground for Russians who want to keep their money offshore.
They want to insist any money lent from the European Stability Mechanism (ESM) bailout fund can be paid back on a sustainable basis, and so they need a debt write off.
In Greece this came from banks who had bought government debt; but in Cyprus few global banks were stupid enough to buy this debt, and so the money has to come from Cypriots themselves.
But there is a wider, strategic and philosophical basis to Germany's stance. First, they are engaged in a tough negotiation over the shape of a future banking union in Europe.

Decisions taken in Germany are directly affecting ordinary Cypriots

Once that union is in place, say Germany, Finland and the Netherlands, direct centralised bailouts of banks will be allowed: there will be effective pooling of taxpayer money within the eurozone. But…
This north European trio are insisting the new banking union cannot cover "legacy debts": that is, from the pre-2007 crisis.
So it is logical to pursue at the same time a banking union with fiscal transfers in future, and a cleanup of the old debts with the countries responsible taking the pain.
On top of that the German public is increasingly outraged over the scale of its taxpayer exposure to what it sees as profligate peripheral countries.
So that is the principle, the strategy and the tactics of Germany.
But here is the problem: the outcome of their actions is repeatedly creating situations they do not want.
Cyprus, like Greece and Spain beforehand, creates an existential crisis for the euro. Once one country leaves, however small, the fiction that it is a permanent currency union is exposed.
In the process of imposing perfectly rational economic pain, something else is revealed.
The eurozone does not involve shared sovereignty - which is hard enough for some countries to accept under austerity pressures. In fact it has come to involve the sovereignty of the solvent nations over the insolvent nations.
Contagion What shocked everyone, not just Cypriots, was the sudden, tactical and coercive manner in which both the IMF and the ECB attacked the incoming Cyprus government.
It was the equivalent of the cops breaking down your door at 6am: perfectly legitimate if you have the legal right to do so, but it can seem excessive.
So Germany is left with a mismatch between intent and outcome. And the outcome could get really nasty. It is not just the contagion effect on southern Europe of seeing queues at cash machines and people going bust. Or the potential "me too" effect on Greece if Cyprus leaves.
What is being presented is a choice: stay in Europe or become part of the Brics, beholden to Russia for finance, Israel for various as yet untransparent deals, remain continually at odds with Turkey and Northern Cyprus, and once your finances have recovered, sell yourself as a kind of posh nightclub to the world.
Actually, the polls are telling us, and my colleagues on the ground report, more and more Greek Cypriots are seeing this as a viable option. Given the choice between a busted euro and a vibrant, if rule-free, future in the Russian penumbra, they may choose the latter.
Israel and Iran This FT article gives a flavour of the diplomatic and military unknowns out of a closer Russian-Cypriot relationship.
The Russian Navy could gain a Mediterranean base, but Russian intelligence would then lose the ability to mingle freely with Nato personnel, suggests the author, so it is swings and roundabouts.
I would suggest the island is currently also something of a diplomatic and intelligence battleground for Israel and Iran, so it gets even murkier.
In the end the crisis has exposed two weaknesses of modern German politics: first on economics, they don't seem able to move away from principle-driven action to outcome-driven action.
On the bigger geo-diplomacy - driving an EU member state into the arms of the Russians and sending a big sub-textual signal to other states close to Russia - it just begins to look like the Germans cannot do geo-politics.

fonte: http://www.bbc.co.uk/news/world-21899515

Cipro, tra Russia ed Europa

Riportiamo qualche altro commento dalla stampa internazionale sulla crisi di Cipro. Il Parlamento di Nicosia ha rifiutato il bail out europeo e Bruxelles e Berlino ora chiedono un altro piano. Il convitato di pietra, in questo caso, è la Russia che ha interessi importati nell'isola mediterranea, dove gli oligarchi ammassano le loro fortune per poi farle rientrare in patria a tassazione agevolata.
Il problema, però, non è solo di Cipro. L'Islanda, tanto per dire, era in una situazione molto simile, con un sistema bancario gonfiato dalla valuta estera - nel caso di Cipro le passività del sistema finanziario sono 8 volte il PIL, ed in Islanda erano 10 volte il valore dell'economia. Ma anche stati più grandi, come l'Irlanda (4 volte superiore) e la Gran Bretagna (4.5) si trovano in situazioni simili. Tutti e quattro i paesi sono incorsi in gravi crisi bancarie, con gli ultimi due per il momento salvati dai propri cittadini a costi elevati, mentre l'Islanda ha fatto pagare il costo della crisi ai creditori. Il piano UE era di dividere le perdite su entrambi i fronti (prelievo sui depositi di tutte le dimensioni e senza discriminazione esteri-domestici, cosa per altro proibita dall'Europa) ma il Parlamento cipriota, appunto, ha detto no. Trovare i soldi nella sola economia cipriota, troppo piccola, pare improbabile, a meno che non si trovi un accordo con i russi sul gas del Mediterraneo. La soluzione più equa e convincente pare in ogni caso far pagare il conto ai creditori più ricchi, cioè una tassa solo sui depositi maggiori. E chiedere nel caso alla Russia di compensare per le perdite dei propri cittadini - come in effetti avrebbe dovuto fare la Grecia, tanto per dire, invece di accettare il piano d'austerity.
Non è una soluzione facile, ne và dello status di Cipro e del suo intero sistema bancario - come spiega bene nell'articolo qui sotto Jeremy Warner - ma di mezzo ci sono anche gli interessi strategici della Germania e i suoi rapporti con la Russia (non è una sorpresa che sian stati proprio Merkel e Schauble ad insistere per un bail out salva russi, pur senza spese addizionali per i tedeschi). In generale, però, come fa notare Paul Krugman nell'articolo successivo, quello di Cipro è un problema del capitalismo finanziario tutto, dove i movimenti di capitale destabilizzano il sistema e creano paradisi off-shore per chiunque ne abbia la possibilità. Anche rimettere in ordine Cipro non servirebbe. In fondo, i capitali russi fuoriusciti da Nicosia potrebbero pur sempre trovare ottimo alloggio a Londra. Ed il discorso non finisce qui. Come avevamo spiegato tempo fa, e come spiegato anche nell'ultimo articolo presentato, di Martin Wolf, in discussione è il rapporto tra banche e governo. E' giusto che i governi garantiscano i depositi, sballando dunque il sistema di incentivi della banche stesse, che possono dunque continuare a comportarsi irresponsabilmente? Il problema è globale e necessita una risposta globale.

Cyprus should do what Iceland did, and just confiscate the Russian money   

Jeremy Warner
da Telegraph

It's a funny thing about small islands on the fringes of Europe – or in the case of the UK, not so small – but they do seem particularly prone to banking crises, as the latest shenanigans in Cyprus has once again proved. "Maybe it is something in the surrounding waters, but banks in such places evidently should come with a “caveat insula investor” (Let the island investor beware) sign in the window!" muses Jacob Funk Kirkegaard in this penetrating piece for Washington's Peterson Institute.
Whatever. One thing they do have in common is that they all allowed their banking sectors to grow to sizes where they were essentially too big to save – or almost too big to save in the case of the UK. Pre-crisis, Iceland's banking liabilities amounted to around 10 times its annual GDP, with Ireland it was four times, and with Cyprus it is eight times. Britain was at least 4.5 times.
Britain has gone its own route in dealing with the fall-out from a banking sector which massively outgrew the economy. But for smaller islands where the same phenomenon has occurred, two very different approaches have emerged. The choice, as Mr Kirkegaard puts it, is between an "Icelandic bail-in" and an "Irish bailout".
In Iceland, the government allowed the banks to go bust but protected domestic retail and wholesale depositors. The losses were instead born by other creditors, including bondholders and foreign depositors in the UK and the Netherlands. Iceland subsequently agreed partially to pay the British and Dutch deposits back over time.
In Ireland, by contrast, they saved the banks with a blanket guarantee of all creditors. This proved unmanageable and eventually forced the Irish government into insolvency alongside the banks. Irish taxpayers are still paying for the consequences of that guarantee. Banking losses have fallen on them rather than creditors – hence extreme levels of austerity in the form of tax rises and government spending cuts.
The size of Cyprus's banking sector at an astonishing 800 per cent of GDP makes it much closer to Iceland than to Ireland. Cyprus could not have gone the Irish route even if it had wanted to. Its banking sector is too big to save. At "just" 400 per cent of GDP at the time the balloon went up, the Irish nation was in a better position to bankroll the losses. With Cyprus, as with Iceland, it's just not possible.
As proposed, bondholders are to be protected in the Cypriot bailout, consistent with the approach applied elsewhere in the eurozone. But even if they weren't, they are not big enough as a capital class to cover the losses. This has made applying a hair cut to depositors inevitable.
European rules, moreover, prevent the Cypriot government attempting to replicate Iceland (which is not in the EU) by protecting domestic retail depositors from a wider creditor haircut. Expropriation that discriminates between Cypriot depositors and other EU deposits is not allowed.
The obvious solution would therefore be to default on the Russian deposits, accounting for about a third of the total, or at least all deposits above the insured rate of €100,000. Unfortunately, this would be the end of Cyprus's banking industry, and the supposed economic benefits it brings to the island. A defaulting bank is a dead bank.
This none the less is essentially the choice facing the Cypriot authorities. To haircut insured deposits is political suicide, and as we have seen, profoundly destabilising for the eurozone as a whole. If it can happen in Cyprus, then it can happen elsewhere.
So why not just make the Russians bleed. If, as widely suspected, it's largely mobster money, would anyone care apart from the Russians themselves? And if the Russian government really does care, should it not be bailing out its own citizens, rather in the way the British and Dutch governments were forced to in the case of Icesave.
Admittedly, it would make Cypriot banks, and by extension the European Union, pariahs in Russian eyes. Germany in particular has made good diplomatic and trade relations with Russia a priority in recent years. These would be jeopardised. Cypriot's banking model would also be over, not to mention the backhanders liberally heaped on the higher echelons of Cypriot society. That particular gravy train would not be calling again.
But shocking to the traditional rules of banking though this solution might be, it is surely better than expropriating insured deposits, and/or, loading up taxpayers with decades of austerity. As Iceland demonstrates, small countries can and do get away with this sort of thing.
As for where the Russians then turn as a home for their dodgy money, well, there's always London…

The Яussians Are Coming! The Яussians Are Coming!

di Paul Krugman
da NYT

How big a deal is the Russian factor in Cyprus’s crisis? Pretty big, it seems. Over at FT Alphaville, Izabella Kaminska reports on estimates of 19 billion euros in Russian nationals’ deposits in Cyprus banks, which is more than the country’s GDP. Without being an expert here, I wonder whether this is an understatement; given what we think we know about the nature of much of this Russian money, is all of it really being declared as Russian?
Let me make a broader point: we’ve now seen three island nations around Europe become huge international banking hubs relative to their GDPs, then get into crisis because their domestic economies don’t have the resources to bail out those metastasized banking systems if something goes wrong. This strongly suggests, to me at least, that we have a fundamental problem with the whole architecture (to use the preferred fancy word) of international finance.
As long as you haven’t bought into the Barney-Frank-did-it school of thought, you realize that the global crisis of 2008 was in a fundamental sense made possible by the erosion of effective bank regulation. As Gary Gorton (pdf) has documented, we had a 70-year “quiet period” after the Great Depression in which advanced countries had very few major financial flare-ups; Gorton argues, and most of us agree, that the key to this quietness was a constrained, regulated financial system that also limited the opportunities for excessive non-bank leverage.
But this regulation in turn depended, to an important extent, on limited international capital flows; otherwise regulations made in Washington or elsewhere would have been bypassed via havens like, well, Cyprus. And once capital controls began to be lifted in the 1970s we entered an era of ever-bigger financial crises, starting in Latin America, then moving to Asia, and finally striking the whole world.
So what are we going to do about this? Cyprus, as a euro-zone country, should really be part of a euro-wide safety net buttressed by appropriate regulation; it’s insane to imagine that the euro can be run indefinitely with merely national deposit insurance. But euro-area deposit insurance doesn’t seem to be in the cards — and anyway, there are plenty of other potential Cypruses out there.
All of which raises the question, is the era of free capital movement just a bubble, fated to end one of these years, maybe soon?

Big trouble from little Cyprus

di Martin Wolf

da FT

A camel, it is said, is a horse designed by a committee. This is unfair to camels, which are well-adapted to their harsh environment. The same, alas, cannot be said of eurozone rescue programmes. The proposed Cyprus intervention, rejected on Tuesday by the Nicosia parliament, will not help the eurozone make a smooth exit from its wave of crises. Indeed, the imbroglio should serve as a lesson in how not to deal with financial and sovereign debt problems.

Let us start with why some bank restructuring was inevitable. The government of Cyprus is both highly indebted and responsible for a banking sector that is surely too big to save. According to the IMF, gross government debt reached 87 per cent of gross domestic product last year and would reach 106 per cent of GDP by 2017, without the bailout. The sovereign credit rating is also far below investment grade: Standard & Poor’s rates Cyprus CCC+. That is not surprising: the banking sector still has assets over seven times GDP. (See charts.)

The banks stand on the edge of collapse. But it is theEuropean Central Bank that has pulled the plug by threatening not to accept Cypriot government debt as collateral against liquidity support. Banks have to be recapitalised. Taxpayers cannot do this, on their own. Without taxing depositors, the proposed rescue package would have had to be €17.2bn, instead of €10bn, or close to 70 per cent of GDP. This would have brought sovereign debt to some 160 per cent of GDP: an unsustainable burden. Indeed even the actual bailout package looks unsustainable, since it would appear to bring gross debt to 130 per cent of GDP. Under the programme, public debt is to fall to 100 per cent of GDP by 2020. Achieving that will demand substantial fiscal tightening and lending to Cyprus on easy terms. A restructuring of public debt is still likely. As Hamlet advises: If it be not now, yet it will come.

Is there no alternative to the bail-ins? Yes: direct bank recapitalisation by the eurozone, for which the sum required is a small matter. If the banking union had been up and running, that would have happened. It is not, presumably because core countries do not want to bail out mismanaged banking systems, such as theoffshore hideaway for Russian capital that is Cypriot banking. The banking union will not arrive before the cleaning up of past mistakes and establishment of new arrangements.

Turn then to whether what was done was right. The answer is: yes, though only up to a point.

Many insist that any tax on deposits is theft. This is nonsense. Banks are not vaults. They are thinly capitalised asset managers that make a promise – to return depositors’ money on demand and at par – that cannot always be kept without the assistance of a solvent state. Anybody who lends to banks has to understand that. It is inconceivable that banking – a risk-taking financial business – can operate without exposure to loss of at least some classes of lenders. Otherwise, bank debt is government debt. No private business can be allowed to gamble with taxpayers’ money in this way. That is evident.

The question, then, is not over the principle that lenders can face losses. It is about which of them should do so and to what extent. Apparently on the insistence of Nicos Anastasiades, the president of Cyprus, losses are to be imposed on deposits of less than €100,000, the upper limit for deposit insurance in the eurozone. The idea is to tax these smaller deposits at 6.75 per cent and the bigger ones at 9.9 per cent. That may now change – and for good reason. But forgoing the former would mean raising the rate for deposits above €100,000 to 15 per cent, to raise the required sum of €5.8bn. A good thing, I would argue. But the Russian government does not agree . Nor does that of Cyprus.

A big question is why ordinary Cypriot taxpayers should rescue banks at all? With no bailout and full protection of deposits under €100,000, the tax on the remainder (after allowing for €1.4bn from wiping out the junior creditors) would rise much further. Unjust? No. The only argument against this is that the government, as agent for taxpayers, created a dangerous financial system. So taxpayers must bear part of the cost.

Yet bail-ins create dangers. The actual package under discussion is a balancing act between those frightened of creating further panic and others determined to address “moral hazard”. The result may be the worst of both worlds. The fact that depositors are on the hook may trigger flight elsewhere. At the same time, taxpayers still bear a big part of the costs of failures.

This leads me to some big worries.

The first concern is the deal itself. The decision to impose losses on insured deposits is indeed a big error. (Yes, it is a default, not a tax.) But the decision to bail in some deposits was not an error. However unpopular it may be, a resolution regime that makes this a reality is necessary, in Cyprus and elsewhere. Another concern is the blanket coverage of the tax, which does not vary from bank to bank. This robs even big depositors of the incentive to monitor bank solvency.

The widest concern comes from the Banker’s New Clothes, the book by Anat Admati of Stanford and Martin Hellwig of the Max Planck Institute, which I reviewed earlier this week. Banks have so little loss-absorbing capacity that they stand permanently on the edge of disaster.

The case of Cyprus is an extreme example: beyond a small amount of equity stood only some €2.7bn in unsecured bonds (€2.5bn junior and €200m senior) protecting €68bn in deposits. Rightly or not, the other, including interbank loans were deemed untouchable. (See chart.) This structure gives the authorities not just in Cyprus, but virtually everywhere, a terrible dilemma: either rescue all institutions, thereby validating the riskiest business models and, at worst, putting the solvency of governments in danger; or refuse to rescue them and so risk causing a depression at home and panic abroad, particularly within the tightly integrated eurozone.

The eurozone must either make the industry far more robust, by hugely increasing equity capital, or consolidate fiscal capacity and tighten regulation, to ensure adequate eurozone-wide oversight and fiscal support. What is frightening is not that tiny Cyprus got into trouble, but that it is a source of wider danger. Banking is dangerous everywhere. But it still threatens the eurozone’s survival. This has to change – and very soon.

Trojka scacciata, a Cipro vince la democrazia

Belle notizie da Nicosia. Il Parlamento cipriota ha rimandato al mittente l'assurdo piano di salvataggio europeo, che per salvare banche e oligarchi russi voleva rubare i soldi dei risparmiatori. Anche la proposta rivista, che salvava i risparmiatori sotto i 20 mila euro, non ha preso un singolo voto favorevole nel Parlamento.
I ciprioti hanno detto no ai ricatti, hanno rivendicato la sovranità della loro democrazia. Certo, l'Europa, in quanto tale, è una scelta che comporta una rinuncia ad una qual certa dose di sovranità, ma non può permettere ricatti e minacce. I tedeschi, guidati dal solito terribile Schauble avevano posto il solito ultimatum, o così o fuori dall'Euro. La SPD come al solito, si era accodata: "i lavoratori tedeschi non pagheranno per gli oligarchi russi". Ma i lavoratori ciprioti, evidentemente si. Dei veri socialisti.  La BCE ci aveva messo il carico da 90, minacciando di tagliare la liquidità alle banche cipriote in difficoltà, un vero e proprio ricatto. Una situazione a dir poco inquietante. La BCE è indipendente per statuto, ma si permette di puntare la pistola alla tempia dei governi, non si sa con quale autorità. Ed il FMI si era accodato - nelle parole di Lagarde si era raggiunto il miglior compromesso possibile. E tutto questo nonostante il governo cipriota allertava tedeschi&C. che un tale "accordo" non avrebbe mai avuto una maggioranza in Parlamento. Irrilevante, fino a domenica, per la UE, i ciprioti si dovevano piegare. Un rifiuto non era neanche preso in considerazione, d'altronde l'unica volta che si era provato, in Grecia, ad indurre un referendum sulle condizioni capestro dell'Europa era successo un putiferio, con Sarkozy e Merkel che avevano proibito al governo greco di tenere tale consultazione. Gli ultimatum non si discutono.
Ed invece i ciprioti hanno detto no. Gli ultimatum si discutono e si rifiutano anche. La UE ha capito la mala parata e, guarda un pò, ha subito proposto un altro deal, un pò meno draconiano. Ma orami era troppo tardi. I risparmi dei cittadini garanti per altro dalle regole europee, non si toccano. Basta con i poveri che salvano i ricchi. Piuttosto si esce dall'Euro, e d'altronde a cosa serve l'Europa se porta povertà, ineguaglianza e ricatti?
Meglio soli che male accompagnati.

A Cipro la Germania sta con gli oligarchi russi

Continuiamo ad occuparci di Cipro riportando altri articoli che sono apparsi sulla stampa estera, ed in particolare su The Nation e London Review of Books. La situazione non è ancora chiara e si sta cercando di raggiungere un nuovo compromesso meno punitivo per i piccoli risparmiatori ciprioti - assolutamente incolpevoli dei problemi delle loro banche. La situazione è precipitata oggi sui mercati, dopo che le modalità del bail out erano state criticate da tutti, da destra a sinistra, FT e WSJ compresi e dopo che la tassa sui depositi sia diventata una bomba ad orologeria per tutto il sistema bancario della periferia europea, col rischio di una fuga di capitali da Grecia, Spagna, Portogallo e pure Italia e Francia se i risparmiatori si sentissero in pericolo.

Sembra dunque evidente come la trojka sia ormai fuori dalla realtà. Non solo è incapace di risolvere la crisi, ma è attivamente impegnata a peggiorare la situazione. Il metodo ormai è noto, prendere o lasciare, ricattando i paesi in difficoltà e poi magari dando loro la colpa degli insuccessi. Con la Germania in prima fila, come riportato un po' ovunque stamattina - (Cyprus' President) Anastasiades is reported to have said to Olli Rehn and Elmar Brok: I warned you that there would be no majority for this, "give my regards to Mrs Merkel"
Germania sempre pronta a punire i paesi in difficoltà, imponendo controproducenti misure di austerity. Sempre preoccupata di pagare il conto, quando poi in realtà tutti i paesei della EU contribuiscono, tra cui l'Italia senza per altro dimostrare la meschineria tedesca. Ed ora impegnata pure a salvare i soldi degli oligarchi russi, imponendo il prelievo forzoso sui conti correnti ciprioti. Una situazione davvero tragica: la Merkel e Schauble sono impegnati solamente a lisciare il pelo agli elettori tedeschi e continuano a castigare il resto d'Europa. Per tre anni hanno imposto politiche economiche assurde e disastrose in nome di un supposto senso del dovere e della moralità - non era giusto far pagare gli errori altrui ai virtuosi nordici. Ora la moralità ha lasciato spazio al salvataggio di rubli sporchi - la costante è solo picchiare duro sui più poveri. Incompetenti, incapaci, meschini e pure un po' corrotti. Difficile immaginare qualcuno di peggio a governare l'Europa.

Why Cyprus Matters: The Eurozone Strikes Again

di Maria Maragonis
da The Nation

The kaleidoscope spins again; the shards are rearranged; this time, the fragment at the centre is Cyprus. Faced with yet another country needing an urgent bailout (and with the German election looming in September), Eurozone leaders and the IMF have come up with a new wheeze: make savers pay to rescue the banks that were meant to look after their money, in exchange for a bailout of 10 billion euros.
Not unreasonable, you might say: Why should the proverbial German taxpayer cough up for Russian oligarchs and shady foreign businessmen who’ve stashed billions on the island? But the plan will take a cut from everybody’s savings—farmers, pensioners, orphans, oligarchs and oil magnates—on a roughly graded scale. (The proposed levy on accounts under 100,000 euros—which were in theory guaranteed by the Cyprus government—will probably now be reduced from 6.7 percent to 3.5 percent, which reminds me of the sage Nasrudin Hoja’s advice to the man whose house was too small.) Over the weekend Cypriots queued at cash machines; one man drove his bulldozer up to the door of the bank.
As the newly elected government of President Nicos Anastasiades postponed a vote on the plan and closed the banks until Thursday, the blame-shifting began: Was it Anastasiades who sold out the small savers to keep the Russians sweet, or the Troika heavies who showed him the brass knuckles? (Answer: it’s complicated, but there were brass knuckles.) Vladimir Putin weighed in, calling the plan unfair, unprofessional and dangerous. Russia has loaned Cyprus 2.5 billion euros; the EU is hoping it will extend the terms.
Why does all this matter? One, because this is the first time the EU and IMF have decided to take money directly from people’s pockets rather than through the messy process of cutting wages and pensions and putting taxes up. You could perhaps read this as a tacit acknowledgment that austerity has failed, economically as well as politically: it’s messy, it’s unreliable, and it makes people vote for leaders who won’t play the game, like Italy’s Beppe Grillo. You could certainly read it as a sign of how profoundly Europe’s leaders have lost the plot. Though the market meltdown predicted over the weekend hasn’t materialized, howls of derision have issued from bankers and business leaders as well as Cypriot indignados: if guarantees on bank deposits aren’t worth the paper they’re printed on, if people’s savings can be siphoned off by fiat, then the world as we know it, or at least the banking system, will come to an end. (It’s worth remembering here that before the last Greek election a Syriza economist proposed tapping private deposits to fund public investment; he was pilloried as a dangerous radical who would destroy the principle of private property.)
Two, it matters because with both ends of the economic spectrum lining up against it, the latest Band-Aid offered for the ailing Eurozone looks more and more like a crowbar to help tear it apart. The European Union, a liberal project with the twin goals of preserving peace and solidarity and facilitating commerce, always had opponents on both left and right. As the crisis deepens and peace and solidarity drop out of the equation, those voices are getting louder, not only in Greece and Italy but in Scandinavia, where far-right parties are rising, and in Britain, too. The anti-immigration UK Independence Party beat the Tories to second place in a recent by-election. Cyprus, a former colony, is home to several thousand British retirees; the front page of the Daily Mail today denounces the great eu bank robbery. The financial “contagion” from the Cyprus bailout might be containable; the political fallout will be more problematic.

Three, it matters because the plundering of ordinary people’s savings to bail out the banks lays bare more starkly than before where the real power lies. What price is democracy, when the European Central Bank’s Jorge Asmussen can present an elected European leader with the choice to accept the deposit tax or we will let your banks go under, and your economy too? (And yes, I know that Cyprus has a bloated banking sector; I know its people elected the governments that chose to let this happen; I know it’s a center for money laundering. But so are Switzerland and Luxemburg and the City of London, not to mention—according to the Basel Institute of Governance—Germany.)
Last but not least, it matters because Cyprus matters. Always in the cross-hairs of Great Power rivalries, betrayed by its former colonial masters, pushed and pulled by the politics of its neighbors Greece and Turkey, the island has struggled for decades to shape its own destiny. When the crisis hit Greece a couple of years ago, a Cypriot friend wrote to me, “Don’t bring us down with you, the way you did last time.” She meant 1974, when the junta in power in Athens launched the coup in Cyprus that sparked the Turkish invasion that split the island in two. Cyprus’s fall this time is due in part to its exposure to Greek bonds, which were given a short back and sides last year by the same financial wizards who have hatched this latest plan.
You might be forgiven for thinking that those wizards want the Eurozone to fall apart. But that’s conspiratorial, and gives them too much credit. Like the British in Cyprus the 1950s, they’re trying and failing to juggle their own contradictory interests. And as in the 1950s, it’s the locals who’ll get hurt first.

The Cyprus Debacle

di James Meek
da London Review of Books

Years ago, in the early days of the financial crisis, Cyprus was one of the first European countries to reassure bank savers of relatively modest means by guaranteeing their deposits up to a limit of €100,000. What this meant was that the government made a promise. Anything could happen to a bank. It could go bankrupt. Branches could crumble into lumps of concrete and shards of glass, servers explode in showers of sparks, cashiers and mortgage consultants plunge flaming from fourth-floor windows, and small savers would still get their money back.
Suppose, for instance, a Cyprus bank adopted lax practices. Suppose it took in deposits from trusting small savers, pooled it with money of uncertain provenance from Eastern Europe – suitcases of cash were acceptable – and used it to gamble, lending it on to risky businesses. Suppose these lax practices weakened the bank to the point where it went bust. Under the deposit guarantee plan, this would not be a disaster. A lousy business would have succumbed to the pressure of the market. The big losers would be the bankers and the fat cats with millions deposited in the banks: they would lose heavily, but what were they doing with so much money if they didn’t know how to look after it? The modest savers, those with €100,000 or less, would walk out of the rubble unscathed, not having lost a cent.
How is it, then, that when real banks in Cyprus face actual financial collapse as a result of their conduct, it is not the banks themselves that suffer, nor the foolish rich who stashed their money there, but those savers of modest means who were promised their money was sacrosant? Those who thought they were safe with the guarantee are now being hit with a tax of €6.75 for every hundred euros they have in savings, in order to save the banks that screwed them over. It is true that those with over €100,000 are being made to pay more – €9.90 for every hundred euros – but the percentage game is in itself a game for the rich, whereas the less well-off live in a world of absolutes. A euro savings millionaire still has €901,000 left after the levy. If you’re saving up for a €200 plane ticket, on the other hand, and your savings go from €200 to €186.50, you don’t fly.
As I write, Cypriot and German politicians are blaming each other for the terms of the deal. This seems to me to be missing the point. Whether it was Germany who was to blame by insisting bank customers help pay for a loan to restructure the Cyprus banks, or Cyprus who was to blame by not wanting to over-tax the rich Russians who have pumped so much money into the island, the fact is that neither side was prepared to insist on honouring the deal to protect the less well-off. Nor did either side, it seems, dare consider asking the big foreign financial institutions foolish enough to lend Cyprus banks €1.7 billion over the years if they would mind taking a loss on that investment.
The most predictable moment in the Cyprus debacle came when George Osborne piped up to cite it as a dreadful warning to Britain to continue on the path of austerity or face disaster. Whatever bad happens in Europe, as far as George Osborne is concerned, is a dreadful warning to Britain to continue on the path of austerity or face disaster.
Recent events in Cyprus have nothing to do with routine government spending, with austerity or stimulus, and everything to do with what happened in Britain, Ireland and Iceland a little over five years ago. What’s happening in Cyprus is not, at its heart, about a government failing to pay its way, but about banks failing to pay their way, and having to be rescued by government. If there is a government failing it is not that it spent beyond its means but that it allowed the banking sector to swell to grotesque, unsustainable proportions, like some obscure organ of the body that has bloated up until it can’t be removed without destroying the host, and all the resources of the body are consumed by the need to carry it. In Cyprus, the less well-off face a deposit tax to pay for the rescue of their banks by Europe and the IMF; in Britain, we continue to endure spending cuts, higher VAT and the hidden tax of a weakened currency as a consequence of a bank rescue carried out from our own resources. We rescue our banks; who will rescue us?

A Cipro patrimoniale contro i poveri per salvare gli investitori

 Imbarazzante quello che sta succedendo a Cipro. Dopo la vittoria dei conservatori alle ultime elezioni, come al solito sotto ricatto della bancarotta, il nuovo governo ha firmato un accordo umiliante per il salvataggio da parte della UE. Il bail out, che doveva essere di 17 miliardi di Euro è stato ridotto a 10 miliardi. E da dove sono venuti questi soldi? Una parte da una tassa di quasi il 10% messa sui depositi sopra i 100 mila euro. E fin qui.... soprattutto tenuto conto che molti dei conti correnti di Cipro sono intestati a milionari russi che usano l'isola per evadere le già bassissime tasse russe, si può anche capire.

Ma una tassa del 6.75% su tutti gli altri depositi (anche se ora sembra possa essere ridotta ad un più modesto 2.5), quelli cioè sotto la franchigia dei 100 mila euro, è una vera e propria rapina dei piccoli risparmiatori ciprioti. Ora non bastano più solo i programmi di austerity che riducono occupazione e salario, ora bisogna pure pagare per essere "salvati". L'idea sarebbe quella di far pagare i responsabili invece di chiedere ai cittadini del resto d'Europa di contribuire. Eh già, peccato che sto discorso, quando si è trattato di salvare le banche non si sia mai fatto. E non solo. Come si domanda giustamente l'Economist nel primo articolo qui sotto (il secondo viene, invece, da El Pais), come mai coloro che hanno investito a Cipro, non incorrono in perdite? Le banche, le istituzioni finanziarie, ne escono senza un graffio, salvate, appunto, dai tax payers europei, mentre i ciprioti sono derubati dei loro risparmi. Se questa era l'attesa reazione della UE al nuovo vento politico che spira in Europa, c'è poco da stare tranquilli! 

Unfair, short-sighted and self-defeating

da Economist

IT IS not a fudge, but it is still a failure. The euro zone’s bail-out of Cyprus, which was sealed in the early hours of Saturday, did get the bill for creditor countries down from €17 billion to €10 billion, as had been rumoured. But the way it did so was somewhat unexpected.
Almost €6 billion of the savings for taxpayers in euro-zone countries came from losses imposed on depositors in Cyprus’s outsize banks. A one-off 9.9% levy will be imposed on all deposits over the insurance threshold of €100,000 before banks reopen after a bank holiday on Monday. That idea had been in the air for a while, not least because a lot of those uninsured deposits came from outside Cyprus, and from Russia in particular. The politics of saving wealthy Russians with money loaned by thrifty Germans were always going to be tricky.
What had not been anticipated was a 6.75% loss for savers with deposits in Cypriot banks below the insurance ceiling. Cypriots woke up this morning to find bank branches closed to them. By the time they will be able to get at their money, it will be too late. The offer of equity in banks to replace the value of their savings is meant to be a balm but it’s not a choice they would have made. Why this decision was taken is not yet clear. The most plausible explanation is that the Cypriot government itself preferred to spread the pain rather than wipe out non-resident depositors and jeopardise its long-term prospects as an offshore financial centre for Russian and other money.
Whatever the rationale, it is a mistake for three reasons. The first error is to reawaken contagion risk elsewhere in the euro zone. Depositors have come through the financial crisis largely unscathed. Now they have been bailed in, some of them in breach of an explicit promise that they can be sure of getting their money back even if a bank goes belly-up.
Euro-zone leaders will spin the deal as reflecting the unique circumstances surrounding Cyprus, just as they did the Greek debt restructuring last year. But if you were a depositor in a peripheral country that looked like it needed more money from the euro zone, what would your calculation be? That you would never be treated like the people in Cyprus, or that a precedent had been set which reflected the consistent demands of creditor countries for burden-sharing? The chances of big, destabilising movements of money (into cash, if not into other banks) have just shot up.
The second error is one of equity. There is an argument to be made over the principles of bailing in uninsured depositors. And there is a case for hitting everyone in Cypriot banks before any taxpayer in another country. But there is no moral imperative for whacking Cypriot widows and leaving senior bank bondholders untouched, as appears to be the case here; or not imposing any losses on sovereign-debt investors in Cyprus; or protecting depositors in the Greek operations of Cypriot banks, as has also happened. The euro zone may cloak this bail-out in the language of fairness but it is a highly selective treatment. Indeed, the euro zone’s insistence that this is a one-off makes that perfectly plain: with enough foreigners at risk and a small enough country to push around, you get an outcome like Cyprus. (That is one reason why people are now wondering about the implications of this deal for little Latvia, also home to lots of Russian money and itself due to join the euro zone in 2014.)
The final error is strategic. The Cypriot deal has no coherence in the larger context. The euro crisis has been in abeyance for a few months, thanks largely to the readiness of the European Central Bank to intervene to help struggling countries. The ECB’s price for helping countries is to insist they go into a bail-out programme. The political price of going into a programme has just gone up, so the ECB’s safety net looks a little thinner.
The bail-out appears to move Europe further away from the institutional reforms that are needed to resolve the crisis once and for all. Rather than using the European Stability Mechanism to recapitalise banks, and thereby weaken the link between banks and their governments, the euro zone continues to equate bank bail-outs with sovereign bail-outs. As for debt mutualisation, after imposing losses on local depositors, the price of support from the rest of Europe is arguably costlier now than it ever has been.
It is also hard to square this outcome with the ongoing overhaul of finance. The direction of efforts to improve banks’ liquidity position is to encourage them to hold more deposits; the aim of bail-in legislation planned to come into force by 2018 is to make senior debt absorb losses in the event of a bank failure. The logic behind both of these reform initiatives is that bank deposits have two, contradictory properties. They are both sticky, because they are insured; and they are flighty, because they can be pulled instantly. So deposits are a good source of funding provided they never run. The Cyprus bail-out makes this confidence trick harder to pull off.
Other than that, it is a really good deal.

fonte: http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bail-out

El rescate de Chipre provoca el primer corralito en la Eurozona

da El Pais 

Europa cerró anoche el acuerdo para rescatar a Chipre, pero a costa de imponer una tasa a los ahorradores que empuja a las autoridades a decretar un corralito parcial. El acuerdo alcanzado en la madrugada del sábado incluye un impuesto que se parece como una gota de agua a una quita en los depósitos chipriotas. Todas las cuentas de la pequeña isla del Mediterráneo —tanto de residentes como de no residentes— quedarán sujetas a una tasa, que se pagará solo una vez, del 9,99% para los que superen los 100.000 euros, y del 6,75% para los que no lleguen a esa cantidad.

Con esta medida, la Eurozona da un paso más allá al permitir por primera vez que los depositantes tengan que pagar parte del rescate, incluso los que tienen menos de 100.000 euros, la cantidad asegurada por las normas europeas. Jörg Asmussen, miembro del consejo de gobierno del Banco Central Europeo, aseguró que las autoridades ya han tomado las medidas necesarias para que la parte correspondiente a la tasa se quede “congelada” en las cuentas bancarias para garantizar que pueda ser recaudada. El Gobierno del conservador Nikos Anastasiadis aprobará este fin de semana una ley para permitir esta operación. Se sabrán entonces los detalles de un bloqueo que, en principio, no tendría por qué durar más que el tiempo necesario para recaudar el impuesto. Pero mientras tanto, los ahorradores chipriotas verán bloqueados parte de su dinero en los bancos. Las sucursales estarán cerradas el lunes por ser festivo, pero el mismo sábado, muchos chipriotas se han lanzado a los cajeros a poner a salvo lo que puedan de sus ahorros.

El presidente de Chipre, Nicos Anastasiades, ha declarado que el rescate aprobado esta madrugada "era la única solución para evitar la bancarrota en el país". De haber fracasado, ha añadido, uno de los principales bancos del país habría quebrado.

Decisión difícil

El ministro de Finanzas de Chipre, Michael Sarris, admitió que esta decisión “ha sido muy difícil”, pero que las consecuencias de una bancarrota habrían sido peores. Sarris explicó que los ahorradores recibirán acciones de los bancos por un valor equivalente a lo que pierdan en sus depósitos. “El tamaño del sector bancario es tan grande [en Chipre] que hemos tenido que diseñar un programa específico en el que estaba justificado involucrar a los ahorradores”, aseguró el presidente del Eurogrupo, Jeroen Dijsselbloem, que estima que el nuevo impuesto sobre los depósitos recaudará 5.800 millones de euros. Con esta decisión, se supera el último escollo para aprobar un programa de ayudas de 10.000 millones de euros acordado tras diez horas de discusiones entre los ministros de la zona euro y los líderes del FMI y del BCE.

El Fondo Monetario Internacional ha logrado su objetivo de reducir el monto de un rescate que hace meses se calculaba en torno a 17.000 millones de euros, una cifra reducida en comparación con las ayudas concedidas a otros países, pero que equivale a todo el PIB chipriota. El organismo que encabeza Christine Lagarde, apoyado por Alemania, se ha empeñado en evitar a toda costa que la deuda pública del país se disparara hasta niveles insostenibles.

El ministro de Finanzas reconoce que es una "decisión difícil", pero mejor que la bancarrota

Pero si querían reducir el programa de asistencia financiera, el dinero había que buscarlo en otros sitios. Y sobre esas fuentes adicionales de ingresos es sobre lo que los ministros europeos han estado discutiendo hasta bien entrada la madrugada. Además de la tasa sobre los depósitos bancarios y otra sobre los intereses, se aprobará una quita para sus bonistas júnior, una subida del impuesto de sociedades al 12,5%, un ambicioso plan de privatizaciones y un ajuste presupuestario del 4,25% del PIB. Además, se redactará una evaluación independiente sobre el lavado de dinero en la banca y las autoridades de Nicosia se comprometen a reducir el tamaño de su sector financiero hasta alcanzar la media europea. “El Eurogrupo confía en que estas iniciativas permitan que la deuda pública de Chipre, que se prevé que llegue al 100% del PIB en 2020, permanezca en una senda sostenible e impulse el potencial de crecimiento de la economía”, asegura el comunicado.

Una de las obsesiones de países como Alemania era que el FMI participara en el programa de ayudas a la economía chipriota. Lagarde confirmó que propondrá al consejo de la institución que contribuya a financiar el rescate financiero, aunque no especificó con qué cantidad.

La mayor parte de la ayuda se destinará a recapitalizar a un sector financiero hipertrofiado que había quedado herido de muerte tras la quita de la deuda aprobada por sus vecinos griegos. El dinero que Europa va a prestar Chipre, cuya economía supone tan solo el 0,2% del PIB de la Eurozona, es muy inferior al inyectado en Grecia, Irlanda o Portugal —los otros tres países que han necesitado un rescate total—; o incluso en España, que recibió ayudas para su sector financiero. Pero muchos dirigentes temían que una quita entre los ahorradores chipriotas generara un pánico bancario que se extendiera al resto de la Eurozona

fonte: http://economia.elpais.com/economia/2013/03/16/actualidad/1363411787_894846.html