Debt Bomb on the Brink of Explosion

Wealth Wire – by Brittany Stepniak
Cyprus has set an unpopular precedent; it has given us a grim look into the future. As our global debt bomb grows beyond any hope of sustainability, confiscation could be the next step.
Sadly, this threat is real, as demonstrated by the bank bailout proposed in Cyprus last week. The financial realm was shocked when the nation’s financial leaders agreed to steal cash from bank depositors in order to fund an emergency bailout.   
Clients with less than 100,000 euros would have faced a one-time tax of 6.75%. Meanwhile, depositors with more than 100,000 would have been forced to pay a tax of 9.9%.
Cyprus can use whatever vernacular they want; that’s still stealing. Calling that measure a “tax” – one that punishes savers, no less – isn’t fooling anyone. It’s theft, no matter how you look at it. The fact that this option was even on the table is mind-blowing.
Fortunately for banks depositors, “lawmakers rejected a 10 billion euro bailout package on Tuesday, sending the president back to the drawing board to devise a new plan that might still enable the country to receive a financial lifeline while avoiding a default that could reignite the euro crisis,” according to The New York Times.
And just because this controversy occurred overseas doesn’t mean we’re any safer in the U.S. The debt crisis is a global dilemma, and everybody’s suffering, like it or not.
I’ve heard repeatedly you can’t live your life in fear, but you will surely perish if you ignore danger. Fears pertaining to global debt woes have now exploded into full-blown danger. The danger of losing your savings is no joke. We are all in danger of bank account confiscation. It’s no longer an irrational fear…
Americans think Europe’s leaders have lost their minds, as the world loses all faith and trust in the banking institution. This will surely have a butterfly effect on banks around the world. How long until our banks start implementing their own new “levies” on us?
Nothing stopped them from using taxpayer dollars to pay for the last bailout… not to mention the$83 billion they already get from us each year.
Global debt is now greater than that of all the bank accounts in the world. This dangerous debt bomb is on the brink of explosion…
We’re keeping a keen eye on the ricochet effect so we can keep you in the loop on how to protect your money, your savings, and your retirement accounts amidst all this chaos.
http://www.wealthwire.com/news/global/4677

67% of Cypriots want to leave the Eurozone

67% of Cypriots want to leave the Eurozone

20% Tax On Cypriot Deposits Over 100,000 Euros, ‘Merkel playing hardball, going to drive Cyprus issue into ground’

RT News
Cyprus and the Troika have agreed to a 20 per cent tax on deposits over 100,000 euros at the Bank of Cyprus and 4 per cent on deposits held at other banks.
A senior Cypriot official told Reuters that a plan to tap nationalized pension funds would not be a part of a plan to raise billions of euros in return for a bailout from the European Union. Cyprus said earlier on Saturday that it was looking at seizing a quarter of the value of big deposits at its largest bank in order to raise such funds.  
“Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available. Today, there are only hard choices left,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said in a statement.
Cyprus is scrambling to come up with €5.8 billion by Monday, or face being kicked out of the Eurozone. The cash is a prerequisite for a further €10 billion in bailout funds.
Lawmakers’ rejection of a previous proposal to tax all bank deposits prompted the European Central Bank to threaten to cut off emergency funding to Cypriot banks unless a deal was reached by March 25. Banks have been shut all week, and are due to reopen on March 26.

The timing of the Cyprus crisis is of utmost importance, as in fact, it means a lot for the government of Angela Merkel, who may virtually keep her post by keeping the island afloat financially, RT news editor Ivor Crotty pointed out.
RT: So what held it all up? Why couldn’t they reach a deal?
Ivor Crotty: This goes back to the EU-Russia summit last year when the Eurocrats basically told Russia that Cyprus would be their problem to solve. Russians had a look at it and said, “No, not really, we think it’s a eurozone problem”, but they had stamped two-and-a-half billion (USD) to keep the island float. So timing is crucial here. A change of government in Cyprus last year delayed any possibility for a resolution, but it crucially brought any chance of a deal into the German election cycle, which is taking place in September this year. And this is why Merkel is playing hardball: she needs votes. And the SPDR opposition have identified Cyprus as a wage issue. Her uncompromising stance which is backed the raid on privately-held deposits in Cyprus forced the Cypriots to go to Moscow looking for help.
RT: But I thought it was some sort of EU limit of money which Cyprus can borrow from now – inside the EU, anyway.
IC: At this stage the Cypriots are pretty much ready to talk to anybody. The Russia-Cyprus connections are well-known, but it’s not that Russia is the only one.
RT: If they’ve been talking for a year, why is it taking so long to reach some kind of deal?
IC: Again, this comes back to the change of government inside Cyprus last year, that it wasn’t possible for them to make a deal while the political transition was going on. Right now, the Russians are looking at the situation, and basically sent the Cypriot ministers packing with their bags empty for two reasons: firstly, specifically, is that this is a eurozone problem. Russians aren’t going to get involved in what is ostensibly an internal eurozone contagion issue. But secondly, they don’t think that Cyprus has hit rock bottom yet. Merkel is playing hardball now, and she’s going to drive that issue into the ground, and nobody – not the Russians, nor the Chinese – aren’t going to touch it until Merkel’s game has reached its zenith.

RT: That carrot was being dangled to Russia yesterday about Cyprus’s gas reserves – Russia wasn’t interested?
IC: There’s a couple of interests here. Cyprus has been confirmed to be nowhere near filling that debt hole, so it looks like it’s going to be a very long weekend at the holds of Brussels in Berlin.
http://rt.com/op-edge/merkel-hardball-cyprus-issue-718/

Reality Check: European Central Bankers Want Personal Accounts To Pay For Bailouts?

FOX19.com-Cincinnati News, Weather

ANA puts off retirement of Boeing 747, three jets amid Dreamliner woes

All Nippon Airways Co. will delay the retirement of a Boeing 747 jumbo jet and three smaller aircraft due to the grounding of its 787 Dreamliner fleet, its officials said Saturday.
ANA initially planned to retire the 747 in April and the three other planes, Airbus A320 and Boeing 737 jets, between March and May, but the move will be now postponed to June or later, the officials said.
The four aircraft are currently being used for domestic services due to the global grounding of all Boeing Dreamliners following battery problems. The number of 787 cancellations will reach 3,601 through the end of May, according to ANA.
The airline is also seeking to introduce three Boeing 777 jets earlier than planned to minimize the impact of its grounded Dreamliners. ANA had originally intended to introduce them in fiscal 2013, which starts April 1, but one of the aircraft is scheduled for delivery by the end of March.

Euro faces big trouble in little Cyprus

Use it or lose it: A woman waits as two people use ATMs in Nicosia on Friday. | AP

 

 

 WASHINGTON/NICOSIA – Confused by all the talk of Cyprus? Don’t be. Here’s the situation in three sentences: The country’s banks were using Russian deposits to buy Greek bonds. The Greek bonds went bad, and the Cypriot banks lost a bundle. It now needs a bailout from its eurozone partners, but it’s tough to convince German taxpayers to pony up if they think the money is going to Russian oligarchs.
But here’s the bigger question: Why are we talking about Cyprus at all?
Cyprus is tiny. It has fewer people than Philadelphia. It has a smaller economy than Vermont. It has no nukes. It is not a country that typically commands global headlines.
But in 2008, exhibiting especially bad timing, Cyprus joined the eurozone. So now its problems are the euro’s problems. And as we’ve discovered in recent years, the euro’s problems are the world’s problems.
In 2011 and 2012, markets seemed in almost constant turmoil over the very survival of the currency union — and their turmoil, in turn, actually threatened the survival of the currency union, as the market became unwilling to lend Italy, Greece, Portugal and Ireland the money needed to fund their governments. Investors have since calmed down. But the relative financial calm masks a dangerous political and human situation.
In Spain, unemployment is at 26 percent, and youth unemployment is above 50 percent. The same is true in Greece. In Italy, an anti-eurozone comedian won more votes than the leaders of either major party, and with no one having enough support to form a government, it looks like the deadlock will require a redo election.
As of Friday, public outrage had scotched Cyprus’ initial idea of paying for its bailout with a broad bank tax, and it was scrambling to come up with a new source of funds before the Monday deadline set by the eurozone.
Lawmakers in the country approved three key bills Friday that aim to raise enough money to qualify the country for a broader bailout package and help it avoid financial ruin in mere days.
A total of nine bills were approved, including a key one on restructuring the country’s ailing banks, which lost billions on bad Greek debt; one on restricting financial transactions in times of crisis; and one that sets up a “solidarity fund” into which investments and contributions will flow.
More bills to meet the total target of ?5.8 billion ($7.5 billion) Cyprus needs to secure an international bailout were to be brought for a vote over the weekend. They include a crucial one that would impose a tax of less than 1 percent on all bank deposits.”My view is that what you’re seeing already is the politics coming unstuck in a lot of places in Europe,” says Desmond Lachman, a resident fellow at the American Enterprise Institute, a Washington think tank. “Greece is the worst example. The extreme left and right has 45 percent of the vote now.”
In 2011, the eurozone’s crises were driven by fearful markets. On any given morning, the people would awaken to find that interest rates on Spanish bonds had soared. Today, the crises are driven by volatile politics, and that makes them all the more dangerous. The European Central Bank can deal with a bond-market crisis. It can’t deal with a popular revolt.
“I don’t understand how you can extend this for many more years,” Lachman says. “The game plan is they apply this fiscal austerity in 2013, 2014 and 2015. And my problem with all this is I don’t see how, if you’ve got significant fiscal austerity at a time when banks are cutting credit and Germany is slowing down and, in Spain, the housing bubble is bursting, I don’t see how this recession ends. And if you don’t have hope? The politicians keep selling the idea that this will hurt a bit but in six months time we’ll see the green shoots. If you don’t see them, you’re just inviting a political mess.”
If you want to fear for the euro, this is the reason to do it. A half dozen countries have unemployment in the 15 to 25 percent range, with youth unemployment in the 30 to 60 percent range. Politics isn’t stable amidst that sort of pain — particularly when there’s a perception that some of the pain is being forced upon the country by richer, wealthier outsiders.
That’s what’s happening now. Christopher Pissarides, a Cypriot economist, won the Nobel Prize in economics in 2010. But in an interview with Bloomberg Businessweek, his fury at the more powerful countries in the eurozone was sparklingly clear. “Small countries, be warned when joining the eurozone,” he said. “You could be bullied any time by your big brothers if it suits their political objectives.”
And that, again, is the view from Cyprus’ Nobel Prize-in-economics contingent. The man on the street, it’s safe to say, is even angrier.
As austerity continues to squeeze these economies over the next couple of years, the political pressure to do something, anything, to recapture national pride and rediscover some measure of hope will build. And once it finds expression — if it finds expression — the chain reaction could be catastrophic for the eurozone.
That’s the other reason a tiny Island like Cyprus matters. It shows the zone’s tendency toward contagion.
Cyprus’ banks fell because they’d invested in Greek debt — so no Greek problem, no Cypriot problem. The initial idea to pay for Cyprus’ bailout would have included levying a 6.6 percent fee on all bank accounts under ?100,000.
That was taken, in many quarters, as a violation of the eurozone’s nascent deposit insurance scheme. It raised the possibility that investors in Italy or Spain would need to move their money, too. After all, if deposit insurance doesn’t protect you from the eurozone simply removing money from your bank account, what good is it?
But what killed the idea wasn’t its underlying economic flaws. It was political outrage in Cyprus. So far, these eruptions against the bailout conditions set by the richer members of the zone have always proved manageable. But there’s been a number of close calls, and of late, the political situation in many of these countries is deteriorating.
If a country like Greece or Spain were to see a political reaction that made remaining in the currency union impossible, it would immediately spark a run on the other teetering countries, making it more likely they’d have to leave, too. That’s how you get to actual dissolution.
Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics, thinks all this is a bit overblown. “The euro is a prison, or a Hotel California,” he says. “Once you’re in, you can’t get out. The costs of leaving are just cataclysmic. They’re so high no one will do it. Greece shows that.”
And thus far, Kirkegaard had been proven right. Elections have produced a lot of anti-eurozone rhetoric, but not a lot of anti-eurozone behavior. “A lot of people have been predicting the 1930s scenario, where the economic hardship we’re seeing will lead to political extremism, and then lead to the undoing of entire area,” he says. “I take some solace in the elections we’ve actually had. Yes, you’ve kicked out incumbent governments in almost every case, but the government that comes in and replaces it is pretty much the same.”
The question is whether they’ll remain so. It is hard to be confident in a currency union that must fret over the decisions of Cyprus.

EU-Japan FTA delayed

AFP-Jiji
BRUSSELS
European Union leaders have announced the indefinite postponement of a key summit with Japan intended to launch crucial free-trade negotiations Monday because of the mounting debt crisis in bankruptcy-threatened Cyprus.
“It is with regret that we have decided to postpone . . . (the) EU-Japan summit,” EU Council and Commission heads Herman Van Rompuy and Jose Manuel Barroso said in a surprise statement late Friday.
EU Trade Commissioner Karel De Gucht will maintain his diary date in Tokyo on Monday, the duo underlined.
In Tokyo, a Foreign Ministry official said: “The postponement was unfortunate but we understand the situation. We hope the two will make an effort to stabilize Europe’s financial system.”
The EU office in Tokyo said that De Gucht was expected to proceed with his events, including a meeting with Foreign Minister Fumio Kishida, but it was uncertain if he would act for the EU leaders to launch the trade talks.

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