Schaeuble says euro zone savings deposits are safe

 

'Cyprus will remain a one off case'

 

 

GERMAN Finance Minister Wolfgang Schaeuble has said savings accounts in the euro zone are safe, adding that Cyprus is a "special case" and not a template for future rescues.
In an interview with Bild newspaper published yesterday, Schaeuble distanced himself from comments on Monday by Eurogroup chairman Jeroen Dijsselbloem, who said the rescue programme agreed for Cyprus - the first to impose a levy on bank deposits - would serve as a model for future crises.
"Cyprus is and will remain a special one-off case," Schaeuble said.
"The savings accounts in Europe are safe."
Schaeuble said the problem in Cyprus was that two large banks were in effect no longer solvent and the government did not have enough money to guarantee savings.
"That's why the other euro zone countries had to help," he said. "Together in the Eurogroup we decided to have the owners and creditors take part in the costs of the rescue - in other words those who helped cause the crisis."
Schaeuble said he was confident Cyprus would be able to completely pay back the help. "Cyprus' economy will now go through a long and painful period of adjustment. But then it will pay back the loan when it is on a solid economic foundation."
Schaeuble said the euro was stronger today than at any time since 2010.
"Yes, you could see that during the Cyprus crisis," he said. "The entire turbulence did not have any impact on the other countries in southern Europe."
He said it was different in early 2012, when elections in Greece caused interest rates across southern Europe to rise.
"The financial markets have seen: we are better prepared now. We've accomplished quite a bit," Schaeuble said.
He said he was against thinking about individual countries leaving the euro zone. "What is more important is that we are strong enough to keep everyone in the boat," he said.
"I believe that we will one day read in the history books about this period that the crisis brought Europe even closer together," he said, adding the continent was currently enjoying "a very fortunate era".

Dr Thomas Sowell schooling a liberal

Fear and Loathing in Nicosia

A woman withdraws money from the ATM of a Laiki bank branch on March 30, 2013 in Nicosia.(AFP Photo / Patrick Baz)

 

 
In approximately three weeks’ time, the island of Cyprus will begin receiving its annual cash injection - from holiday tourism. That's what's known as a 'good injection'.
After only a day here, it's become very clear that the people of Cyprus are very concerned, some even scared - about a financial contagion and shock treatment which threatens their future prosperity.
Soon, they will get another 'bad' injection, which we are told will be deadly. So we are treating this like a crime scene.  The next injection will be administered by 'Dr Troika'. Just utter his name in public here and you will see wrinkles in people's faces.
Dr Troika's injection is the equivalent, in economic terms, to an experimental vaccine - designed to treat a financial contagion which originated in Greece and Wall Street. It is certain to provoke an auto-immune reaction.
The people of Cyprus did not ask for this, yet, they are being forced to take it by the mad economic doctors in Brussels, Berlin and the IMF. It's the sort of bad medicine that the banking syndicates and corrupt officials have been administering for a while now, in order to take down governments and economies all over the globe with devastating effect.

People queue up outside a Laiki bank branch in the Cypriot capital, Nicosia, on March 28, 2013.(AFP Photo / Patrick Baz)

I arrived in Cyprus on Wed night, and headed in to the capital city of Nicosia with my colleague Jason Liosatos, in order to further document what many were expecting to be a run on the island's banks at 12pm after 12 days of closed doors to hundreds of thousands of residents whose savings has been locked inside the banks during the extended "bank holiday". This particular 'holiday' will go down in history as one of the worst on record.
The lines began forming around 11am, but to everyone's surprise - except the Cypriots' of course, the lines were not as long as many expected, and not as long as the corporate mainstream media expected either, most of whom were hoping for a fight in front of both the old town's Bank of Cyprus (good bank) and Laiki Banks (bad bank) branches.

The majority of those queuing were older people, but these included many of the top depositors whose life savings have been clipped by the Troika.
We asked around and quickly learned why the Cypriots did not all rush the bank on Thurs at high noon. Many residents told us that there was a community feeling that islanders did not want to stress the Bank of Cyprus by storming its branches. Strict capital controls have been put into place to slow the cash haemorrhaging this week, with most residents restricted to 300 euros per day, for seven days, followed by an official assessment of the situation.
There's a lot of talk of Cyprus's potential riches from untapped gas and oil, and many residents believe the bankers have taken down the economy here in order to exchange the island's future riches for a series of expensive (if not utterly debilitating) ECB and IMF loans. But that's still a ways off, and more pressing matters are salary cuts, pension cuts, a flight of wealth off of the island, and of course - the fact that people's money is being literally stolen from their accounts.

A man with a parrot on his head is seen outside a Bank of Cyprus branch in the Cypriot capital, Nicosia, on March 28, 2013.(AFP Photo / Yiannis Kourtoglou)

When elites go to war, and fight their financial battles, it seems that the only victims are the average mom and pop. After meeting 5 or six local residents and business owners, it became abundantly clear that even the street sweepers knew that a criminal banking syndicate had held a gun to their heads and then stolen their money in broad daylight.
A retired resident, Mr Andreas, explained also, "We Cypriots have dignity. I have had only 3 euros in my pocket for the last week - enough only to buy a cup of coffee, but I will not line up today and beg the Troika for my daily withdrawl of 300 euros."
He adds, "Our friends in Europe have treated us like gangsters and criminals. Our government leaders have made mistakes, yes. But why are we being forced to pay? It's blackmail. This is stealing from the people, that's all."
Not surprisingly, there were no Russian Oligarchs waiting to get inside any of the island's branches on Thursday, many of them apparently withdrew their money from still open Russian branches of Laiki and Cyprus banks - at the same time that the banks in Cyprus were shut.
Mr Kiriakos, a local bar owner lamented over a beer with us before closing shop, explaining the reality of this latest banker-led heist in Cyprus. "I've been working all my life - 30 years, so I can send my daughters to university and give them a better life than I had, and they can just come and take that money? They are running a big casino, when they win they put the money in their pockets, but if they lose they take the money out of our pockets."

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

Euro zone overrates ability to curb contagion: Moody's

The euro zone's awkward handling of Cyprus's bailout puts extra pressure on the bloc's downgrade-threatened sovereign ratings and shows policymakers overestimate their ability to contain the crisis, credit agency Moody's said. Cyprus clinched a 10 billion euro bailout from international lenders this week, but its terms have broken with past taboos by seizing up to 40 percent of the cash held in the island's banks by wealthy individuals and firms.

Market analysts fear that could set a dangerous precedent for future rescue efforts and make the region more prone to bank runs if depositors in other debt-strained countries think their money is no longer safe. "Policymakers appear very confident that market conditions are benign enough and that they have the tools to avoid contagion to other peripheral economies and their banking systems," Bart Oosterveld, managing director of sovereign risk at Moody's, told Reuters.

"We think that that confidence may well be misplaced." While Spain and Italy have so far proven resilient, analysts fear the chaos in Cyprus has increased the risk of contagion if investors think the same will happen if other countries ever seek financial help. The European Central Bank has sought to quash suggestions the tactics used in Cyprus could become a bailout blueprint.

But comments on Monday from Jeroen Dijsselbloem, the head of the Eurogroup of finance ministers, that it could be a model for dealing with future euro zone banking crises has left market concerns difficult to erase. Oosterveld, speaking alongside two of the firm's other sovereign analysts, declined to comment on whether Italy and Spain, which both have negative outlooks on their respective Baa2 and Baa3 ratings, were particularly vulnerable to a downgrade after the events in Cyprus.

But they did say Cyprus remained at risk for a "prolonged period" of default and even of exiting the euro zone. For Italy, the difficult euro zone backdrop and its own political troubles, were a headwind to its growth outlook and could have a future impact on its rating, said Dietmar Hornung, who oversees Italy for Moody's.

"The Cyprus situation and its impact on euro area sovereigns is negative and Italy is no exception," Hornung said. Social cohesion as well as the health of the country's banks would also play an important role. Italy has been in political deadlock since inconclusive elections last month. Pier Luigi Bersani, whose alliance won the largest share of the vote in February but fell short of a parliamentary majority, is meeting officials from rival parties to try to muster support to form a government.

"In the short term we are obviously looking at Bersani's attempt to form a government and the implication for the credit profile," Hornung said. The analysts were not so concerned about Spain, noting it had been easily selling bonds since the ECB said it would buy the debt of struggling countries, and that its fiscal situation was improving.

"While there was a lot of market talk about Spain being the first to apply to the OMT (ECB bond buying) programme, in the end, they didn't need to and continued to enjoy market access," Oosterveld said. Asked whether this meant it would change the outlook on Spain's rating to stable from negative, he said.

Copyright Reuters, 2013

Cyprus effect on deposits is 'negligible' – AIB's Duffy

Foreign investors' confidence in the European banking sector takes a hit

 Large deposits are not leaving the Irish banking system despite the Cypriot savings raid, according to AIB chief executive David Duffy.

"The Cypriot effect on deposits over €100,000 is negligible and our deposit profile across all elements is stable. Also, the level of calls from customers regarding this is de minimis," Mr Duffy told the Sunday Independent.

His views were echoed by Permanent TSB boss Jeremy Masding, who told investors last week that the bank "had not seen any unusual withdrawal patterns" in the last week and there were "no concerns" about suggestions from the EU that customer deposits could be used in a future bank rescue.
However, there is some evidence that the Cypriot raid on savings has prompted foreign investors to back off putting money into Ireland, according to Harry Slowey, director at Finance One and a former director of Bank of Scotland.
"Over the past 12 months there has been a steady return of funds into Ireland, as well as a steady return to the euro by those savers who got out of the currency more than a year ago on the back of fears over the euro's future," he said.
However, Mr Slowey, who advises personal and corporate customers where to put their money on deposit, said that over the last couple of weeks, clients had become concerned again about the stability of the euro – and the safety of Irish banks.
"Goings-on in Cyprus have dealt another blow to depositors' confidence," he said, and added that "a small, but growing number" of savers had expressed an interest in moving money outside Europe "to ensure they cannot be touched", should a similar situation to that evolving in Cyprus occur in Ireland.
Last week, AIB reported full-year losses of €3.6bn. The bank said that its restructuring phase was over and that it was on track to return to profitability next year. "We are seeing signs of stabilisation but we need to see a prolonged period of stabilisation before we can really say we have turned the corner.
There are, however, signs of improvement in the economy. We are seeing growth in sectors such as export and FDI and also in some domestic retail sectors," Mr Duffy told the Sunday Independent.

Slovenia faces contagion from Cyprus as banking crisis deepens

Slovenia’s borrowing costs have rocketed over recent days as it grapples with a festering financial crisis, becoming the first victim of contagion from Cyprus.

 
Honey bee hives in Slovenia. The IMF expects the economy to contract by 2pc this year, following a fall of 2.3pc in 2012

“Banks are under severe distress,” said International Monetary Fund in its annual health check on the country. Non-performing loans of the Slovenia’s three largest banks reached 20.5pc last year, with a third of all corporate loans turning bad.

Yields on two-year debt in the Alpine state have tripled over the past week, jumping from 1.2pc to 4.26pc before falling back slightly on Thursday. Ten-year yields have reached a post-EMU high of 6.25pc.

“The country has lost competitiveness since joining the euro and it’s lead to slow economic collapse. Markets have been very complacent, but it has been clear for a long time that the banks need recapitalisation, and it is not easy to raise money in this climate,” said Lars Christensen from Danske Bank.

The IMF expects the economy to contract by 2pc this year, following a fall of 2.3pc in 2012. “A negative loop between financial distress, fiscal consolidation and weak corporate balance sheets is prolonging the recession. A credible plan to address these issues is essential to restore confidence and access markets,” it said.

The new prime minister Alenka Bratusek told the Slovene parliament on Wednesday that the fears are overblown. “Our banking system is stable and safe. Comparisons with Cyprus aren’t valid. Deposits are safe and the government is guaranteeing them.”

Slovenia’s bank assets equal 130pc of GDP compared with 700pc for Cyprus, though the Cypriot figure is misleading since a large part of its banking system is made of “brass plate” subsidiaries of foreign lenders such as Barclays or Russia’s VTB.
Tim Ash from Standard Bank said the events of the past two weeks had pushed the country over the edge. “Slovenia is now inevitably heading towards a bail-out. The eurozone shot itself completely in the foot in Cyprus,” he said.
The Slav-speaking state - a Baroque jewel with historic ties to Austria - has a population of just 2m and is too small to pose a financial threat.
However, analysts say a crisis in Slovenia would further complicate EMU politics, forcing the northern creditor states to define their rescue strategy yet again. Austerity fatigue in Germany and Holland has already caused policy to harden.
Luxembourg has also come into focus as markets take a closer look at EMU money centres. Its banking assets are 2,500pc of GDP, by far the highest in the eurozone.

Eurogroup chief Jeroen Dijsselbloem fanned the flames in an interview this week, advising Luxembourg to cut leverage in its financial system and slim down its banks. “Deal with it before you get into trouble,” he said.
The comments caused fury in the Grand Duchy. “We do not attract Russian money to Luxembourg with high interest rates. The Luxembourg financial centre is based on several pillars, we are characterised by the breadth of our product range,” said premier Jean-Claude Juncker.
Luxembourg officials have been deeply alarmed by the handling of the Cyprus crisis, intervening in the talks to try to soften the demands. Foreign Jean Asselborn accused Berlin of pursuing “hegemony” in Europe. “Germany does not have the right to decide the economic model for other EU states,” he said.
The knock-on effects in Portugal, Spain and Italy have so far been mild, though bond spreads have spiked to three-month highs.
“It’s remarkable how little contagion there has been, since capital controls and major depositor haircuts violate fundamental principles. The assumption has always been that this would be game over,” said Julian Callow, chief global economist at Barclays.
Moodys warned that the erratic handling of Cyprus had “significantly heightened fears surrounding the safety of bank deposits in other European systems”, and left Portugal vulnerable to renewed stress.
While the agency praised Lisbon for carrying out deep reforms, it said public debt had reached 123pc of GDP in 2012 and is still rising. The economy is likely to contract by 2pc this year.
“The ongoing recession has been the main reason that revenue shortfalls have persisted, and has contributed to the further deterioration in the government’s debt metrics,” it said.
Italy faces its own crisis after last-ditch efforts to form a government collapsed on Thursday night, raising the likelihood of a caretaker leader and fresh elections.
Mr Callow said it is hard to see Italy can now comply with the strict terms of an EMU bail-out, which in turn leaves it is unclear whether the European Central Bank’s back-stop for Italian debt is still valid.
Italy’s national data agency Istat said the economy may contract by more than the official forecast of 1.3pc this year, with no recovery until 2014.
“The eurozone is running out time. If there is no growth for another year, and unemployment ratchets higher, citizens are going to turn against the euro,” said Mr Callow.
Italy’s business lobby Confindustria said the country faces a “full credit emergency”. The authorities are to raise €40bn or 2pc of GDP to pay off arrears to suppliers, a way to form inject immediate fiscal stimulus, while skirting EU deficit rules.
Loan data released by the ECB on Thursday show that credit to eurozone private firms contracted by 2.5pc in February, with signs of a deepening credit crunch for small business across the South.
Europe’s top officials may have jumped the gun earlier this year by proclaiming the EMU debt crisis to be over and the economy to be well on the way to recovery. The mission is not yet accomplished.

Depositor Haircuts: The New Normal

Stephen Lendman
Activist Post

On March 29, Cyprus Mail said banks opened Thursday. They did so amid calm.

Long lines queued. People waited patiently. A feared stampede didn't materialize. Whether it's the calm before the storm remains to be seen.

Looting Cypriot bank accounts reflects the new normal. It set a precedent. It did so for Europe. More on that below.

Wall Street banks operate the same way. So did MF Global.

Grand theft reflects official policy. Money is made the old-fashioned way. It's stolen. Nothing's done to stop it. Corrupt politicians and regulators permit it. They do so for benefits they derive.

Scamming investors is commonplace. Goldman Sachs derisively calls them "muppets."

MF Global's CEO Jon Corzine formerly headed Goldman Sachs. He looted customer accounts. He did so brazenly. He used client money to speculate. More went for internal purposes. Much went to cover debt obligations and losses. Top firm executives made millions. They did so at customers' expense.

Financial reform accomplished nothing. Grand theft is institutionalized. Europe's no different from America. Anything goes is policy.

Banks deposits were considered safe. No longer. Eurocrats changed things. Euro Group head Jeroen Dijsselbloem explained.

Expect more wealth extracted from depositors. Cyprus established a template. Bank accounts in other troubled economies aren't safe.


"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that," he asked? "What can you do to recapitalize yourself?' "

"If the bank can’t do it, then we'll talk to the shareholders and the bondholders. We'll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders."

"The consequences may be that it’s the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take."

In late February, ECB Executive Board member Benoit Coeure suggested raiding depositor accounts for bail-ins, saying:

"There needs to be an appropriate burden-sharing….because we need to achieve debt sustainability."

At the time, he suggested not doing it across the board. Whether he meant it isn't clear.

He added that he doesn't "pre-judge any instruments because the vocabulary matters, and there are many ways to achieve burden-sharing."

It bears repeating. Grand theft is official policy. Even bank accounts aren't safe.

Market analyst Marc Faber believes "governments one day (will) take away 20 - 30% of (his) wealth." There's no place to hide.

German Finance Minister Wolfgang Schaeuble proposed a 40% haircut on all deposits. So does IMF head Christine Lagarde.

Cypriot Finance Minister Michalis Sarris said large uninsured Laiki Bank depositors could lose up to 80% of their money. Other European depositors race similar risks. So do people elsewhere.

Some may lose everything. It's the new normal. Personal savings are up for grabs. Bank bailouts will be borne on the backs of ordinary people.

Think it can't happen here? Think again. There's no place to hide. Ellen Brown explained. Banks legally own depositor funds, she said.

"Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay."

Banks once repaid depositors on demand. A joint December 10, 2012 FDIC-Bank of England (BOE) paper changed things. Plans to loot customer accounts were made earlier.

The Bank for International Settlements originated them. It's the privately owned central bank for central bankers. Major ones have final say.

Looting depositor accounts is policy. Cyprus isn't a one-off. Guaranteed insured deposits don't matter. They're up for grabs like all others. It'll be done clever ways or outright.

Brown said the FCIC-BOE plan involves converting deposits (IOU promises to pay) into bank equity. They get our money. We get bank stock.

Ready cash on demand is gone. Whether it's ever returned, who knows. Take the money and run looks more than ever like policy. Depositors anywhere may be hung out to dry.

Even gold and silver in safety deposit boxes aren't safe. Not in America. Homeland Security told banks in writing. It may inspect their contents on demand.

Under Patriot Act provisions, it may seize them with no warrant. It can do so anywhere. Banco de Mattress isn't safe.

Investor Jim Rogers said "run for the hills now. I'm doing it." Cyprus is no one-off.

"I want to make sure that I don't get trapped," he said. "Think of all the poor souls that just thought they had a simple bank account."

"Now they find out that they are making a 'contribution' to the stability of Cyprus. The gall of these politicians."

"If you're going to listen to government, you're going to go bankrupt very quickly."

"I, for one, am making sure I don't have too much money in any one specific bank account anywhere in the world, because now there is a precedent,"

"The IMF has said 'sure, loot the bank accounts. The EU has said 'loot the bank accounts, so you can be sure that other countries when problems come, are going to say, 'Well, it's condoned by the EU. It's condoned by the IMF. So let's do it too.' "

The Daily Bell asked "What Is The REAL Euro End Game? It is time to apply the free-market to bank depositors."

Strategy involves shifting responsibility from taxpayers to depositors. Things ahead won't be the same. Eurocrats' policy is wrongheaded. They're deepening crisis conditions, not alleviating them.

They believe achieving "full-on political union" depends on it. Their well-documented comments reflect it.

"….Cyprus shock and subsequent statements are not only deliberate, but have contributed to spreading uncertainty throughout Europe."

"Now people no longer trust their banks, contributing to their destabilization."

"If you have a bank crisis, the last thing you want to do is further destabilize trust and confidence in the system. But Brussels Eurocrats have done just that."

"Don't think it was a mistake. If one accepts that line of thinking, the ramifications are serious and deep from a sociopolitical, political and investment standpoint."

The Economic Collapse Blog said global elites plan to loot bank accounts. Don't be surprised when they steal yours.

"They are already very clearly telling you that they are going to do it." Your money is theirs. It's up for grabs on demand.

People put money in banks for safety. Removing it "jeopardize(s) the entire system." Cyprus is a tip of a giant iceberg. Major global banks are highly leveraged. Many are insolvent.

When their bets pay off, they win. When they don't, we pay. Wealth confiscation is now policy. Commerzbank chief economist Joerg Kraemer urges a "tax rate of 15 percent on (Italian) financial assets."

It's "probably enough to push (government) debt below the critical level of 100 percent of gross domestic product," he said.

New Zealand Finance Minister Bill English proposed across the board depositor "haircut(s)" in case of major bank failures.

Britain's Daily Mail headlined "One of the nastiest and most immoral political acts in modern times," saying:

"People who rob old ladies in the street, or hold up security vans, are branded as thieves."

"Yet when Germany presides over a heist of billions of pounds from private savers' Cyprus bank accounts, to 'save the euro' for the hundredth time, this is claimed as high statesmanship."

"It is nothing of the sort….It has struck fear into the hearts of hundreds of millions of European citizens, because it establishes a dire precedent.

If Eurocrats can loot Cyprus, why not anywhere.

"This is the most brutal display since 2008 of how far the euro-committed nations are willing to go to save the tottering single currency."

"It shows that the zone's crisis will run and run to the grievous disadvantage" of most everyone.

"Surely the euro cannot long survive by such anti-democratic means. It certainly does not deserve to."

Graham Summers says "Europe is out of options and out of money." It's "totally and completely bust."

It's banks are highly leveraged. They can't raise capital "because no one in their right mind wants to invest in them…."

"European nations are bankrupt because AGAIN no one in their right mind wants to buy their bonds UNLESS they believe they can dump their investments on the ECB at a later date. Who is the greater fool there?”

Europe isn't fixed because enough capital isn't there to do it. "Europe and its alleged backstops are out of money. This includes Germany, the ECB, and the mega-bailout funds such as the ESM (European Stability Mechanism)."

The ECB is "chock full of garbage debts." It's insolvent. It can print money, "but once the BIG collateral call hits, (it's) useless because (what's needed) would implode the system."

"What could go wrong?" Virtually anything. "It's only a matter of time before (crisis conditions reach) hyperdrive, and we have an event even worse than 2008."

Zero Hedge says Russia's "next in line to restrict cash transactions. (They're) taking a page from the Europeans' book."

Russia Beyond the Headlines said "Russia to ban cash transactions over $10,000." It plans to "slash the amount of cash in domestic trade."

It may do so by 2015. It's "expected to boost" bank reserves "and put a damper on (its) shadow economy. However, the middle class will most likely end up having to pay the price for the scheme."

According to Zero Hedge, leaders realize that "limits of fiscal and monetary policy have been reached."

They're "now changing rules, limiting freedom, and (instituting) outright confiscation (as) the only way to maintain a status quo."

Doing so reflects predatory capitalism's failure. It's a house of cards. It's heading perhaps for eventual collapse. At risk is whether it takes humanity with it when it does.

Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. His new book is titled How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening. http://www.progressiveradionetwork.com/the-progressive-news-hour/