Cyprus Parliament Narrowly Votes To Accept Bailout

Amid all the stuff going on closer to home, this mess in Cyprus still bears watching:

Cyprus moved a step closer on Tuesday to receiving much-needed aid when its parliament narrowly endorsed a bailout deal drafted amid unprecedented acrimony and calls for the island to exit the eurozone.

In a nail-biting ballot, following hours of heated debate, Nicosia's 56-member House approved the €10bn rescue package with a majority of two votes. Among officials who had warned of a "chaotic default" the result was met with visible relief.

...

Highlighting the furore that the agreement has unleashed, however, the deal was wholeheartedly rejected by the island's anti-austerity opposition parties, Akel and Edek. Several lawmakers predicted that its impact on a country that until recently was better known for its robust offshore financial services, would be "far worse" than the devastating invasion it suffered at the hands of an invading Turkish army in 1974.

With the EU-IMF sponsored rescue programme forcing the government to dismantle the banking sector – and forcing depositors, for the first time, to foot the cost of recapitalising banks exposed to debt-stricken Greece – many MPs have virulently denounced the package as containing the seeds of the country's economic destruction.

Indicative of the concerns that the measure might not be passed, the beleaguered president of Cyprus, Nicos Anastasiades, issued a last-minute appeal calling on politicians to think of the island's "greater good".

With bankruptcy looming, the governing coalition warned of "chaotic scenes", with public sector salaries and pensions going unpaid if the programme was voted down.

"Our country is passing through a critical time that calls for a sense of national responsibility and conduct in a manner which is consistent with the greater good," said Anastasiades, a British-trained barrister who assumed power barely two months ago.

In a replay of the scenes that have haunted Greece, protesters demonstrated outside parliament as the vote took place. Many hurled abuse at politicians now widely blamed for the island's economic decline. The Cypriot economy, once one of the most vibrant in the EU, is set to contract by 13% over the next year.

The prospect of the island being pushed into prolonged recession has given way to mounting speculation that perhaps it would be better if it left the eurozone altogether. In the runup to the vote, Akel ratcheted up the pressure by calling for a referendum on the issue.

"We know leaving the euro is an equally painful option, but reinstating a national currency could offer prospects for growth in the future," the party's general secretary, Andros Kyprianou, said.
Increasingly, the island's business elite has embraced the idea that the country would fare better if it dumped the single currency and returned to the Cyprus pound.

Calls for the island to leave the bloc have mounted as the knowledge has also sunk in that the price of international rescue funds will now be €13bn in budget cuts.

Maybe Randi Weingarten can issue a meaningless and useless call for the end to austerity measures?

Thousands Of High School Students Protest Bailout Deal In Cyprus

From Reuters:

(Reuters) - Cypriots vented anger in the streets on Tuesday and were desperate to learn what would happen to their savings, with the government yet to reveal details of controls it will impose to prevent a run when banks reopen after a painful bailout.

A special administrator was appointed to run the country's biggest bank, which will take over accounts from the second biggest bank as part of the restructuring package designed to bail out and rein in the oversized financial sector.

Cyprus's banks were ordered to remain closed until Thursday, and even then will operate under as-yet-undisclosed capital controls imposed to prevent depositors from emptying the vaults.

The Central Bank governor said the controls would be "loose" and would apply to all banks in the country. The restrictions would be "temporary" but he would not say what form they would take or how long they would last. Earlier, the finance minister said they could be in place for weeks.

Cyprus had faced bankruptcy and potential ejection from the European single currency without a rescue deal with international lending bodies. Now that the deal has been struck, it faces job losses and economic contraction.

Reuters journalists estimated up to 3,000 high school students protested outside parliament, the first major expression of popular anger after Cyprus agreed the 10 billion euro ($13 billion) bailout with the European Union.

"They've just gotten rid of all our dreams, everything we've worked for, everything we've achieved up until now, what our parents have achieved," said a student who gave his name as Thomas.

 Let me repeat two sentences from that excerpt from the Reuters article:

Cyprus had faced bankruptcy and potential ejection from the European single currency without a rescue deal with international lending bodies. Now that the deal has been struck, it faces job losses and economic contraction.

Gee, so glad a deal was reached.

One way or the other, working people, students and old people were going to be screwed by the bailout deal.

Young people the world over are awake to this.

The oligarchs and the media think since they knocked off Occupy, nothing else will spring up to take its place to oppose the New World Feudal Order.

But you can still see signs of unrest the world over.

You cannot keep screwing people time and time again, stealing more and more each time you rob them, sticking them with more and more of the bills and expect them to stay submissive forever.

First It's A Template, Then It Isn't

Been on the road for a few days, but just came home to this news:

Fears that bank accounts could be raided in any future eurozone bailouts spooked markets on Monday, as Cypriots prepared for some of their banks to reopen for the first time in 10 days following a deal to secure a €10bn lifeline.

Markets took fright after the head of the group of eurozone finance ministers indicated that the Cyprus rescue could be a template for similar situations. Cyprus is the first of five bailouts in the eurozone where depositors have been hit.

"What we've done last night is what I call pushing back the risks," Jeroen Dijsselbloem, the Dutch finance minister, told Reuters and the Financial Times after clinching an agreement for Cyprus. "If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders," he said.

Bank of Cyprus and Laiki, the two largest domestic banks, will remain shut until Thursday while the latter is split into a good and bad bank and a levy – of potentially 40% – is imposed on accounts of more than €100,000.

A big percentage of those deposits belong to Russians. On Monday the Russian president, Vladimir Putin, said there would be a deal to rework the terms of a €2.5bn loan to the Mediterranean island, which had become attractive for its low tax regime and lax vetting laws.

Cyprus president Nicos Anastasiades made a televised address in which he admitted that measures would be in place to stop money pouring out of the banks when they reopen. "The central bank will implement capital controls on transactions. I want to assure you that this will be a very temporary measure that will gradually be relaxed," he said.

Markets were initially buoyed by news of the "painful" bailout for Cyprus, clinched late on Sunday night following threats by the European Central Bank to switch off liquidity to Cypriot banks, which, carried by international deposits, had grown to eight times the €17bn economy.

But markets reacted badly later in the day after Dijsselbloem's remarks. As markets tumbled, he issued a clarification insisting that bailout programmes were "tailor-made" and that "no models or templates are used".

 Love it - the markets react well at the news of a "painful" bailout deal for Cyprus, but then when they discover accounts over $130,000 may be subject to a 40% "tax" and that deal serves as a template for future bank bailouts, the markets plunge.

Until the Eurogroup reassures that this is not a template for future bailouts at all, people should ignore what they had said just a few hours before.

In the dictionary under full of shit, I saw a picture of Jeroen Dijsselbloem.

Well, it's great to see that accounts under $130,000 weren't touched, but the remarks made by Jeroen Dijsselbloem really caused chaos today:

The good news for the eurozone was that the markets reacted well to the bailout deal for Cyprus. The bad news was that the rally lasted barely until lunchtime. By then investors were running scared at the prospect that the terms imposed on one of the single currency's smaller members would be the template for rescue packages for bigger countries.

Credit for the change of mood goes to Jeroen Dijsselbloem, who chairs meetings of eurozone finance ministers and who decided it would be a good idea to go public with the idea that Cyprus was not such a special case after all.

For the past week the message has gone out that there are no comparisons between a country that allowed itself to become the tax haven of choice for high-rolling Russians and other, better-managed, members of the eurozone.

Then, in a couple of interviews, Dijsselbloem said Cyprus would be used as the model for future bailouts.

The comments were an open invitation to any investor with more than €100,000 in a eurozone bank to remove it without delay, which some then did.

By the end of the day shares in Europe were tumbling, the euro was dropping against the dollar and the cost of insuring European banks against default was rising, forcing Dijsselbloem to issue a clarification of his earlier remarks. Confirming that European politicians could not organise a booze-up in a brewery, Cyprus was back to being a special case once again.

Very much business as usual, in other words. Confusion reigns as the eurozone stumbles from crisis to crisis, with the markets already bracing themselves for the next bailout.

 What a mess - a disaster waiting to happen in the near future.

Cyprus Is Increasingly Isolated

The screws are tightened:

(Reuters) - Russia rebuffed Cypriot entreaties for aid on Friday, leaving the island's increasingly isolated leaders scrambling to strike a bailout deal with the European Union by next week or face the collapse of its financial system.

In Nicosia, the country's biggest bank urged politicians to make haste and cut a deal with their EU partners as parliament considered proposals to nationalize pension funds, pool state assets and split the country's second-largest bank in a desperate effort to satisfy those exasperated European allies.

 

The governor of the Central Bank, Panicos Demetriades, warned political leaders the country would face a disorderly bankruptcy on Tuesday unless they approved the bills, an official present at the talks said.

"The next few hours will determine the future of the country," government spokesman Christos Stylianides said before the parliamentary debate. "We must all assume our share of the responsibility."

Even if the measures are approved, there was no confirmation they would raise the 5.8 billion euros demanded by the EU in return for a 10 billion euro ($12.9 billion) bailout to avoid a default.

The biggest local bank, the Bank of Cyprus, urged the government to go back and make a deal from the European Union, under which larger deposits over 100,000 euros, would be taxed. It was preferable, it said, to a collapse of the system and a return to the Cypriot pound which would wipe out assets.

"There must be no further delay," the bank said

The oligarchs will have their way no matter what.

"We Have Never Seen This"

Clearly the Masters of the Universe in the Eurozone are in a predicament they do not jnow how to solve:

BRUSSELS (Reuters) - Euro zone finance officials acknowledged being "in a mess" over Cyprus during a conference call on Wednesday and discussed imposing capital controls to insulate the region from a possible collapse of the Cypriot economy. 

In detailed notes of the call seen by Reuters, one official described emotions as running "very high", making it difficult to come up with rational solutions, and referred to "open talk in regards of (Cyprus) leaving the euro zone". 

The call was among members of the Eurogroup Working Group, which consists of deputy finance ministers or senior treasury officials from the 17 euro zone countries as well as representatives from the European Central Bank and the European Commission. The group is chaired by Austria's Thomas Wieser. 

Cyprus decided not to take part in the call, a decision that several participants described as troubling and reflecting the wider confusion surrounding the island's predicament. 

"The (Cypriot) parliament is obviously too emotional and will not decide on anything, if Cyprus does not even feel that they can attend the call it is a big problem for us," the French representative said, according to the notes seen by Reuters. 

"We have never seen this." 

The German representative raised the need to learn more about capital outflows from Cyprus to Russia and Britain, and emphasized that "we stand ready to find a solution immediately" as long as the parameters of the bailout agreed among euro zone finance ministers on Saturday are respected.

The official also referred to the need to resolve Cyprus's two biggest banks, both of which are close to collapse, and mentioned the possibility of Cyprus leaving the euro zone. 

In the event of an exit, the official said steps needed to be taken to "ring-fence" the rest of the euro zone from the impact and to ensure there was no contagion to Greece. 

One issue repeatedly raised on the call was the risk of large outflows of capital once Cypriot banks reopen, probably on Tuesday. The ECB representative said the situation was being closely monitored and "technical preparations" were being made to try to limit the amount of any outflow. 

"Some additional laws need to be passed. Overall we are in a very difficult situation," the official said, according to the notes. "(We're) trying to do everything within the powers to limit any unauthorized outflows." 

 Translation - they're flying by the seat of their pants, they really don't know what they're doing and in the end, if they don't get lucky, this could all go very, very wrong.

Ah, the fun the Best and Brightest around the world bring us.

Cyprus Update

Not good:

Cyprus ordered its banks to remain closed until next week as the cabinet held emergency talks on Wednesday in an effort to strike a deal with the EU or Russia to avert financial meltdown and stave off bankruptcy.

After the country's parliament rejected a plan to provide €5.8bn (£5bn) by seizing a portion of bank deposits from anyone with a bank account, Cyprus is struggling to come up with a plan that will let it access an EU bailout to stop its banks failing.

The country's eurozone partners and the International Monetary Fund (IMF) are ready to provide €10bn in an emergency bailout if Cyprus comes up with an extra €7bn itself. Most of the bailout money is needed to shore up the country's oversized banking sector, with the rest for government finances.

No clear "plan B" had emerged after meetings between politicians and representatives of European partners and the IMF. The Cypriot cabinet was said to be discussing ideas including the nationalisation of pension funds of semi-government corporations, which hold €2bn-€3bn, and another form of levy on deposits.

Another option debated may have been natural gas bonds linked to hydrocarbon reserves discovered off Cyprus, which remain uncertain and will not be exported until at least 2019.

The nationalization of the pension plans will not be accepted:

International creditors were set to reject an alternative bailout plan Cyprus cobbled together a day after the government's divisive tax on bank deposits died a quick death, two officials with knowledge of the situation said on Wednesday.

Experts from the troika—the European Commission, the European Central Bank and the International Monetary Fund—were briefed Wednesday on Nicosia's Plan B to secure a €10 billion ($12.93 billion) bailout after Parliament resoundingly rejected the deposit-levy plan attached to the original agreement.

Cypriot authorities proposed turning pension-fund assets into government bonds in a bid to raise about €4.2 billion of the €5.8 billion the deposit tax would have raised.
But troika officials weren't convinced this would be a viable option, the officials said. While the plan would bring money into state coffers, it would be in the form of debt, making the country's already heavy load unsustainable, they said.

 On it goes...

I Thought Everything Was Turning Around

The message recently was that the economy had turned a corner, that not even the sequestration mess could put a dent into it.

But here's what the Cyprus news is doing:

NEW YORK, March 19 (Reuters) - U.S. Treasuries prices
climbed on Tuesday as a plan in Cyprus to tax bank accounts to
help pay for a bailout unraveled, creating uncertainty about the
island country's financial future and reviving fears about the
stability of the euro zone.

    Benchmark yields hit a two-week low. The Cypriot parliament
overwhelmingly rejected a proposed levy on bank deposits, a
proposal that had sent investors dumping stocks and scurrying
for safe havens this week.
    The rejection by Cyprus's parliament of the levy brings the
country, one of the euro zone's smaller members, to the brink of
financial collapse. 
    Treasuries are being dogged by contagion fears, said Jason
Rogan, managing director in Treasuries trading at Guggenheim
Partners in New York.
    "There are some people saying it could occur in Italy and
Spain, that is really where the fear is building and why
Treasuries are reacting the way they are," he said.  
    Robert Tipp, chief investment strategist for Prudential
Fixed Income, said, "It's pretty much wide open on the rumor
mill for Cyprus right now.
    "People are at a loss. There are a lot of factors in play,"
he said, calling the situation a "jump ball" that could go in
many possible directions.

It really doesn't take much for the so-called recovery to get put on hold.

We heard how things had turned around in the first quarter in both 2011 and 2012.

Until the economy slowed back down to a crawl both years.

Now we have sequestration and this Eurozone flare-up.

Be interesting to see how things go from here.

Wouldn't wanna bet my Spring Break on new highs for the Dow now.

A Demonstration

Reuters describes the scene in Nicosia:

(Reuters) - Cyprus's parliament overwhelmingly rejected a proposed levy on savings in banks as a condition for a European bailout on Tuesday, throwing international efforts to rescue the latest casualty of the euro zone debt crisis into disarray.

The vote in the tiny legislature was a stunning setback for the 17-nation bloc; lawmakers in Greece, Portugal, Ireland, Spain and Italy have all accepted unpopular austerity measures over the last three years to secure European aid.

With hundreds of demonstrators facing riot police outside parliament and chanting "They're drinking our blood", the ruling party abstained and 36 other lawmakers voted unanimously to reject the bill, bringing the Mediterranean island, one of the smallest European states, to the brink of financial meltdown.

EU countries said before the vote that they would withhold 10 billion euros ($12.9 billion) in bailout loans unless depositors in Cyprus, including small savers, shared the cost of the rescue; the European Central Bank had threatened to end emergency lending assistance for teetering Cypriot banks, which were hard hit by the financial crisis in neighboring Greece.

The demonstrators were unbowed: "This is a great decision for Cyprus," said Andreas Miltiadou, a 65-year-old pensioner among the crowd. "The voice of the people was heard."

Make no mistake, the road ahead is difficult.

The Cypriots may be crushed.

But telling the IMF, the ECB, the EC and most especially Germany that they will NOT stand by placidly while the powerful devour them was an important message to send to those in the corridors of power.

And some of them may be getting a little of that message.

Reuters describes the euro zone finance ministers as "stunned" by the backlash against the bailout.

They thought that they could push the 6.75%/9.9% levy through and no one would say or do anything much to stop them.

Instead that move initiated a firestorm.

Felix Salmon lays out two ways this could go:

The best-case scenario here is that the vote by the Cypriot parliament is a “phoney war”, in Dan Davies’s words: “A vote on which the government abstains is like opening with two hearts at bridge. It’s a bidding convention, not a serious plan.” Cyprus and the EU will go back for another round of negotiations, with Cyprus trying to front that it has a great offer from the Russians, and the two sides will come to a compromise which doesn’t involve taxing insured depositors. The banks will then reopen, the Russians will pull a large chunk of their remaining money out of the country, the ECB will provide all the liquidity that the Cypriot banks need, and Cyprus will muddle through in an austere kind of way.

The worst-case scenario — call it #CypriOut — is that talks just break down entirely, with no plan acceptable to both the Eurogroup and the Cypriot parliament, while the Russians ultimately decide that they don’t want to throw good money after bad. In that event, Cyprus ends up with a chaotic default and devaluation — think Argentina 2002, only on an island which is already fractured along intractable ethnic lines.

The cost of CypriOut to the ECB and to Europe as a whole would be substantial, both in euros and in precedent. If you think that taxing deposits is a bad precedent, just wait until you see what happens when the world learns that a country can leave the eurozone after all. So a lot of people are going to spend a lot of effort trying to avoid it. And judging by recent European history, some last-minute deal will manage to get cobbled together somehow. But this whole situation is horribly messy — it reminds me of the Argentine political chaos in March 2001, a few months before the country finally defaulted.

Salmon says they probably will get the last minute deal here that staves off chaos, but unfortunately for the EU, this seems to be the only way they can do things and it isn't going to work forever.

There are only so many last minute, cobbled-together solutions they can pull off before they finally CAN'T pull one off and the shit REALLY hits.

Cyprus Says No To ECB/IMF Screw Job

A resounding no on this vote:

The Cypriot parliament rejected a planned levy on bank deposits on Tuesday, throwing a European bailout plan for the tiny economy into disarray.

The vote was overwhelming, 36 with against and 19 abstentions, and brings Cyprus to the brink of financial collapse.

Shortly after the vote, the euro fell 0.8 of a cent to $1.2874, its lowest level for three months. The euro has been on the slide since it became clear that even the government's own party would not stand behind the deal.

News that MPs had resoundingly rejected the bailout was greeted with applause and cries of "bravo" from the crowds outside the Cyprus parliament, according to those at the scene.

MPs in the main government party abstained, and most of the other members of the tiny legislature else voted against. There were no votes in favour of the deal.

There was not much of a reaction on the American markets this afternoon to this vote:

No market panic in America tonight, where the Dow Jones industrial average just closed up a measly 3.8 points at 14455.

Bloomberg TV is asking whether the financial markets are 'tiring' of the latest developments in Europe. A Wall Street trader, though, flags up that volatility in the markets is rising.

And Jonathan Golub, chief US Market Strategist at UBS, reckons investors have been ignoring 'tail risks', and that markets will be around 8% lower by the end of the year.

But there was a celebration in Cyprus:

I just spoke to Yiannis Mouzakis in Cyprus, who tells me that the mood in Nicosia was "celebratory" after MPs sensationally voted down the bailout in the face of public anger.

Judging by the singing, there was a sense of pride...
But people understand it will not be easy - and that the days ahead will be difficult.

Yiannis confirmed that the mood of the crowds was very different from the protests we've seen in Athens, with "a lot of singing, and a bit of chanting". Slogans included "It will not pass"; "Cyprus belongs to the people" and "The people united will never be defeated".

I heard they're flying Randi Weingarten in to re-negotiate the deal for a second vote...

A Mess

From the NY Times:

NICOSIA — Cyprus’s Parliament was set to reject a divisive tax on bank deposits in a vote scheduled for Tuesday, a government spokesman said, a move that would push the island closer to a default and banking collapse. 

A weekend announcement that Cyprus would break with previous practice and impose a levy on bank accounts as part of a €10 billion, or $13 billion, E.U. bailout prompted turmoil on European financial markets on Monday. 

Cypriot and euro zone officials have sought to soften the initially proposed levy of 6.75 percent on depositors of up to €100,000 and 9.9 percent above €100,000 to ease the burden on small savers.

But passage of the bill in the 56-member chamber, where no party has a majority, was unlikely and it was not clear if the vote would even go ahead later on Tuesday if leaders were sure it would be rejected. 

“It looks like it won’t pass,” a Cypriot government spokesman, Christos Stylianides, told state radio.

The House of Representatives was expected to meet at 6 p.m. local time. Rejection of the measure would effectively block a bailout that Cyprus needs to keep its banks afloat and government paying wages and welfare. 

Tuesday’s vote, originally planned for Sunday, has been postponed twice already. Three parties have said outright they will not support the tax, while a fourth, in the co-governing coalition, said it cannot support it as it stands either.

 And what does this all mean?

BRUSSELS — A plan to rescue the tiny European country of Cyprus, assembled overnight in Brussels, has left financial regulators, German politicians, panicked Cypriot leaders and a disgruntled Kremlin with a bailout package that has outraged virtually all the parties.

In the end, a bailout deal that was supposed to calm a financial crisis in an economically insignificant Mediterranean nation spread it wider. Word of the plan unnerved markets across Europe, raised fears of bank instability in Spain and Italy and sent pensioners into the streets of the island’s capital, Nicosia, in protest. 

As markets tumbled and the Cypriot Parliament fell into turmoil, salvos of blame were hurled back and forth across the Continent. 

Officials scrambled to explain what went wrong and how best to control the damage of what Philip Whyte, a senior research fellow at the Center for European Reform, called a “completely irrational decision” to make bank depositors liable for part of the bailout.

The deal flopped so badly that finance ministers who came up with it shortly before dawn on Saturday were on the phone to each other Monday night talking about ways to revise it. Whatever the outcome, the dispute is a vivid demonstration of why Europe, which until recently was congratulating itself on having weathered the worst of the financial storm, has trouble making decisions with so many different interests represented at the table.

Hard to see how the EC doesn't eventually unravel.

Cyprus may not be the thing that does that, but it surely is a sign that this union is not sustainable.

The Damage Is Done

From The Guardian:

Experts warned that even if the levy on deposits below €100,000 was axed entirely, it would not be enough to restore confidence in the bank guarantee system put in place across the eurozone.

"The craziest thing about the Cyprus announcement is the huge potential cost of undermining the spirit of the bank deposit guarantee for what is a small saving in the overall scheme of European finances. Even if policymakers row back from taxing small depositors in Cyprus, the damage has been done," said Tristan Cooper, analyst at the fund managers Fidelity Worldwide.

They can try and undo the damage all they want.

It's baked in now.

When the shit hits the fan, they burn depositors before they burn bond holders.

A commenter on The Guardian story writes:

Disgusting theft of peoples savings by the EU. The bail out - like all the bailouts - does not go to the cyprus - it goes straight to the creditors i.e. other banks. Ordinary people are being robbed in order to preserve their profits and bonuses. The talk of money laundering is pure smokescreen - a huge proportion of the money flowing the city of london is dodgey.

This is the sort of shit that corrupt dictatorships pull - how much longer are we going to let the bankers and their political puppets ravage our societies?

A very good question.

How much longer are we going to let the bankers and their political puppets ravage our societies? 

Cyprus Banks Closed Until Thursday

Because everything is under control, you see:

BERLIN — European fears of renewed economic crisis flared Monday as officials took the unprecedented step of targeting bank deposits in Cyprus to pay part of the price tag of a bailout for the troubled island nation.

The proposal to tax all bank deposits, which must be approved by Cyprus’s parliament, sparked a bank run on the tiny nation and raised questions about whether a precedent was being set that could expose other European deposits in future bailouts. Amid turmoil in the country and uncertain parliamentary support, Cypriot leaders delayed a vote on the proposal until Tuesday and shuttered banks until Thursday to avoid further deposit losses. Finance officials from the 17-nation euro zone were scheduled to confer by telephone Monday to discuss the situation.

The Guardian reports the Cypriot government will not hold the bailout vote tomorrow, as there are not enough votes right now to pass it:

The Greek TV station Antenna is reporting that Cyprus president Nicos Anastasiades was planing to tell the Eurogroup tonight that he doesn't have enough support to get the bailout deal approved by parliament.

That won't come as a shock to anyone - especially with his own coalition partner, DIKO, demanding changes (see 7.17pm).

Eurozone finance ministers were due to start holding a videoconference call to discuss Cyprus an hour ago. No news flashes yet....

The videoconference call among Eurozone ministers is now over. Here are the headlines:

Eurogroup gives Cyprus 'leeway' over savings tax

Breaking: Eurozone finance ministers have ended their video conference call on the Cyprus crisis.
And the big news is that the Eurogroup have apparently agreed to give Cyprus more flexibility on its bank levy. As long as it hits the €5.8bn target. And it appears that tomorrow's vote in parliament still goes ahead.
That's according to a source in the Greek finance minister, interviewed by Reuters.
Here are the latest snaps off the Reuters terminal:
• EUROGROUP MEETING ON CYPRUS OVER, EUROGROUP GIVES CYPRUS MORE FLEXIBILITY ON BANK LEVY - GREEK FINMIN SOURCE
• EUROGROUP TO SAY THAT CYPRUS SHOULD SAFEGUARD PROTECTION OF DEPOSITORS BELOW 100,000 EUROS - GREEK FINMIN SOURCE
• CYPRUS PARLIAMENTARY VOTE ON BANK LEVY TO TAKE PLACE ON TUESDAY, AS PLANNED - GREEK FIN MIN SOURCE
• CYPRUS SHOULD STILL RAISE 5.8 BILLION EUROS FROM THE BANK LEVY AS PLANNED - GREEK FINANCE MINISTRY SOURCE

And The Guardian posted a note from JP Morgan Chase analysts on the meaning of all of this:

JP Morgan: material risks from Cyprus

Analysts at JP Morgan have just published a new research note, warning that the financial markets have underestimated the risks posed by Cyprus.
They suggest that investors could be wrong to think the current deadlock over the bailout will be resolved, or that the eurozone's long-term "crisis management framework" remains intact.
With Cyprus, the rest of the eurozone, and Moscow all at odds over the plan, the near-term risks are 'material', JP Morgan warned.
Cyprus's fundamental problem, the bank says, is that it is "politically impossible to impose the extent of losses on insured depositors [those with less than €100,000 in the bank] that the weekend agreement envisaged".
This leaves Cyprus with three options, none very pleasant:

Option A could be to recalibrate the pain so that insured depositors do not need to pay anything, while uninsured depositors pay around 15.4% of their deposits.

The difficulty (and the main reason why this approach was not tried initially) is that the burden would fall disproportionately on
Russian institutions and individuals. Russian influence is Cyprus is considerable; and statements from President Putin indicate that he would be extremely hostile to such an approach. There is some possibility that Russia would respond to a larger haircut by refusing to roll its existing €2.5bn loan to Cyprus; meaning that this option would still leave a significant shortfall. In such a scenario, either the haircut on uninsured deposits would need to be around 21.8%, or further Troika funding would need to be found.

Option B could be to go straight to requesting additional support from the Troika.

The Eurogroup is holding a further conference call this evening, which is likely to investigate the near-term implications of the Cypriot agreement. In our view, a significant amendment of the terms of the deals (which calls for €5.8bn to be found from deposit haircuts) is unlikely.
Politically, it could be very difficult for Germany in particular to make any kind of U-turn (especially since part of the purpose of the whole exercise has been to demonstrate the Government's hard-line to domestic voters). The Eurogroup could propose looking at different parts of the capital structure, but this could risk compounding the existing error by creating additional uncertainties. Finance Ministers may look for other
forms of funding, but their task looks difficult (it is possible that Cyprus will revisit the idea of securitising future gas revenues, which we were surprised was not utilised in the initial proposal).

Option C could be to tweak the current pain distribution so that less of the burden falls on the insureds.

The Government has already proposed staggering the burden so that depositors with less than ?100,000 pay 3%,those with less than €500,000 pay 10% and those with more than €500,000 pay 15%. To our mind, this looks like shifting deckchairs.

And in the long term... JP Morgan argues that the "breach of faith between Euro area policymakers and regional depositors" will remain.

They're trying their best to undo the damage the initial agreement did.

Even if they're able to do that (and that's still a big if), having already let the "bail in" cat out of the bag and tried to stick mom and pop depositors with some of the bank bail out bill will not be forgotten for a long, long time.

You can bet the next time some banks in Spain, Italy, Portugal or France need bailing out, people will run to the exits with all the cash they can get out of those banks no matter what the ECB, EC and IMF says to try and reassure them.

That's what JP Morgan Chase means when they say the "breach of faith between Euro area policymakers and regional depositors" will remain long term.

Cypriot Officials Make Like The UFT Leadership

The IMF, the EC and the ECB supposedly don't care how the brackets are done - they just want depositors to pay for the bail out of Cyprus' banks.

So now we get word of this:

NICOSIA, Cyprus--Cyprus and its prospective international lenders are considering altering brackets on a one-off deposit levy agreed to as part of a bailout deal reached Saturday that will see savers suffer losses in exchange for the country's EUR10 billion bailout, an official with knowledge of the situation said Sunday. 

The plan that is currently under consideration will leave the target revenue of the extraordinary levy unchanged at EUR5.8B but will seek to protect smaller depositors. 

According to the official a new plan would see deposits up to EUR100,000 taking a loss of under 5%; of EUR100,000 to EUR500,000 under 10%; and over EUR500,000 of about 13%. 

The original deal that Cyprus struck with its euro-zone peers and the troika of the European Central Bank, the European Commission and the International Monetary Fund is to impose a one-off levy of 6.75% to all deposits up to EUR100,000 and of 9.9% to those above. 

While there was no indication that a new, more nuanced plan to cushion the pain for smaller depositors would be eventually agreed to, one senior European Union official said that it was feasible to change the original plan in cooperation with the Cypriot authorities. 

Cypriot president Nicos Anastasiades in a televised address to the nation Sunday evening hinted that talks on a new plan were underway. 

""I continue to fight so that the eurogroup's decisions are differentiated in coming hours so that the consequences can be limited, particularly for small savers," he said," Mr. Anastasiades said.

So first they announce the 6.75% on $130,000 and below, 9.9% on $130,000 and above, then they say:

"Okay, we hear your pain.

We'll change it to less than 5% for under $130,000, less than 10% for $130,000- $710,000 and 13% above $710,000.

This deal is the best we could do considering the circumstances, and really, compared to the deal Bloomberg and Klein, er, Germany and the IMF really wanted, it scrapes the skies it's so good!"

Yeah, I've seen this kind of thing before.

The reality is, the deal scrapes the dogshit off the street and hands it to everybody for dinner no matter what they change it to.

Shit sandwich anyone?

How The Wealthy Steal Your Wealth

From a comment at Reuters on the Cyprus "bail in":

The criminal wealthy class thinks this may set a dangerous precedent.

Yet when the criminal wealthy class was bailed out by massive government payments to save the wealthy from their giant gambling losses, we heard no complaint from them about any setting of precedents.

Today in America, the Fed continues the massive transfer of cash into the hands of the criminal wealthy class, with its stealthily named QE (quantitative easing).

The Fed’s QE is the biggest boon to the wealthy ever witnessed by modern markets.

The Fed has been buying up, from the wealthy, every worthless note the wealthy had been stuck with.

The Fed has been buying everything, you name it. Worthless junk that nobody else would buy, the Fed has been buying it for top dollar, taking it off the hands of the wealthy.

The wealthy can barely contain themselves at their good fortune. Who would have thought they could get rid of those worthless pieces of paper? Yet, the Fed has now paid them roughly $1.5 trillion in cold, hard cash.

The wealthy, who had expected to lose everything, are now made richer than ever.

The Fed are very happy to accomodate them using the government’s money, and get invited to the country-club parties of the elite. And even President Obama, too, yearns for the invitations to the country-club parties of the elite, so he’s all in with the QE scheme too. No problem.

Once again in life, the wealthy criminal class wins, effortlessly. And the common man is ground into the floor under their heal.

QE is a far greater crime than TARP, and far more subtle for the average citizen to grasp.

The Cyprus bank levy is a tiny refreshing breath of fresh air in the opposite direction.

Now, of course, we hear loud protests from the criminal oligarchs about setting bad precedents.

It's true that at least the Cyprus heist is more transparent that QE.

Gotta say that for it.

Cypriots Are The Guinea Pigs

I think this is exactly right:

One flabbergasted Larnaca bank employee, 28, was grabbing a coffee before returning to the rolling TV news he said the nation was glued to. He found the bank levy an "extraordinary" surprise. "Are we the guinea pigs? There's a feeling they are trying this out on us before they do it elsewhere. Let's see how the markets react."

So now it looks like they may lower the levy on accounts under $130,000 to 3% in some attempt to assuage people that it's not so bad.

But make no mistake - if they get away with this here, they will do this elsewhere in the near future.

The Precedent Is Set - Now Come The Consequences (UPDATED - 5:28 PM)

Doesn't matter if the Cypriot House of Representatives votes for the "bail-in" or not - the precedent that your money will be stolen to prop up the system has been set:

Stelios Platis, the managing director of MAP, a Cyprus-based financial services firm and a former economic adviser to Mr. Anastasiades, said the effect would be the same “whether the Parliament approves the measure or not.” 

“As soon as banks in Cyprus reopen, people will rush to take all their money out, because they don’t believe this is a one-off deal,” he said. “When a bank run happens, the E.C.B. will have to pump in liquidity,” he added, “and what you will have is a shell of a banking system supported by E.C.B.-eligible Cyprus bonds, which will rocket the debt of Cyprus out of control.” 

...

In Nicosia, the lines at cash machines Saturday disappeared temporarily, mainly because A.T.M.’s had been drained. But on Sunday, at a main branch of Laiki Bank, employees were seen inside the darkened building hovering over computers and filling machines with cash. 

As word got out, groups of people arrived in a steady stream to withdraw money. Many expressed anxiety over what they said were dictates from Brussels and Berlin that would have implications far beyond Cyprus’s shores. 

“They are trying to make an experiment with a small country,” said Stefan Kourbelis, a manager at the Centrum Hotel in Nicosia’s main square, echoing a widely held view. “If it works, the next one could be Spain, Italy and others. If things go badly, they can just say, ‘Who cares about Cyprus?”’ he said.

The next few days in the Eurozone ought to be a blast.

They'll be lucky if they don't set off bank runs in Italy, Spain and Portugal with this "deal."

And once the bank runs start there, don't assume the Best and Brightest will be able to contain it to the weakened Eurozone economies:

On Thursday, Société Générale analysts made a prescient call on Europe.

"It is far too early to dismiss euro area crisis as a key [market] driver," wrote SocGen's Vincent Chaigneau. "We fear another shockwave in the spring."

As it turns out, they may not have had to wait very long. News this weekend that the ECB, EU, and IMF bailout of the Cypriot banking system will include an instant 10 percent "tax" on bank deposits before banks re-open following Monday's holiday has already triggered runs on ATMs there.

Now, the banks have a problem on their hands. "The Cypriot cabinet has declared Tuesday a bank holiday, for fear of capital flight, and this may even be stretched to Wednesday, as depositors are certain to withdraw huge sums from the Cypriot banks after the haircut imposed," reports Greek newspaper Kathimerini.

Many market observers are expressing concerns that the decision could have a ripple effect throughout Europe come Monday when markets open. After all, if European leaders have decided to violate the unspoken rule of bank bailouts – that deposits are sacrosanct – what's to say it can't happen in a bigger eurozone country, like Spain?

In a Sunday morning note to clients, Morgan Stanley economist Joachim Fels wrote, "I view this as a worrying precedent with potentially systemic consequences if depositors in other periphery countries fear a similar treatment in the future."

"This will probably go down as an ill-thought-out rescue plan with consequences for peripheral Europe," says Galy. "It breaks a cardinal rule — namely, public trust on which money relies."
The decision, therefore, has everyone scratching their heads. Why would European leaders play with that public trust in bank deposits?

The SocGen report last week predicting a new eurozone "shockwave" this spring summed it up concisely: "Germany, now six months into a general election, will not be keen to share further risks and tolerate policy slippage."

In other words, German politicians are up for re-election in September, and bailouts of other countries with German taxpayer funds don't help their cause much. So, Cyprus had to be made to share in the burden somehow — hence the haircut on deposits.

"Conditionality is here to stay!" wrote SocGen economist Michala Marcussen in a reaction to the deal. "Indeed, there appears to be no change in the economic policy model of austerity and structural reform that has characterised the euro crisis to date."

The Italian elections demonstrated that voters fed up with that austerity could ultimately break the confidence instilled in European markets since ECB President Mario Draghi gave his famous "whatever it takes to save the euro" speech in July.

The Cyprus deal may finally be a good illustration of the risks markets face from the influence German voters as well — the ones ostensibly coming at the austerity debate from the exact opposite perspective.

"It could be the trigger that our colleagues were expecting," says SocGen strategist Sebastien Galy.

Want to bet that a shockwave set off in Europe doesn't land heavily on these shores too?

UPDATE: Reuters reports the following:

(Reuters) - Cyprus was working on a last-minute proposal to soften the impact on smaller savers of a bank deposit levy after a parliamentary vote on the measure central to a bailout was postponed until Monday, a source said.

In a radical departure from previous aid packages, euro zone finance ministers want Cyprus savers to forfeit a portion of their deposits in return for a 10 billion euro ($13 billion) bailout for the island, which has been financially crippled by its exposure to neighboring Greece.

The decision, announced on Saturday morning, stunned Cypriots and caused a run on cashpoints, most of which were depleted within hours. Electronic transfers were stopped.

The originally proposed levies on deposits are 9.9 percent for those exceeding 100,000 euros and 6.7 percent on anything below that.

The Cypriot government was on Sunday discussing with lenders the possibility of changing the levy to 3.0 percent for deposits below 100,000 euros, and to 12.5 percent for above that sum, a source close to the consultations told Reuters on condition of anonymity.

The move to take a percentage of deposits, which could raise almost 6 billion euros, must be ratified by parliament, where no party has a majority. If it fails to do so, President Nicos Anastasiades has warned, Cyprus's two largest banks will collapse.

Regardless of how they change the levy parameters, the precedent is set.

Maybe it's 3% instead of 6.75%.

But maybe next time it's 10%.

Or 25%.

Or 50%.

Or 100%.