National planning Cyprus-style solution for New Zealand - Confusion and panic spreads in Cyprus: Bank holiday extends to Thursday to prevent bank run

March 18, 2013 – CYPRUS – For those who read the previous article on the topic of last minute chaos and confusion in Cyprus, and Europe, it will come as no surprise that the previously scheduled Monday bank holiday (aka Green Monday) has been extended into Tuesday (now Friday). So prepare to not be surprised: 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. Nicosia postponed from Sunday to Monday the tabling in Parliament of the bill including the measures for the Cypriot bailout – including a bank account haircut and a tax hike on interest and corporate earnings – but the European Central Bank insists on a rapid voting because there are already signs a domino effect will follow across European lenders and markets from Monday. There is genuine fear of market unrest on Monday morning when stocks may crumble in the eurozone and bank accounts in other southern European bank may suffer. Skai radio reported on Sunday that the Bank of Greece has sent between 4 and 5 billion euros to Cyprus in order to help Cypriot banks respond to cash requirements by their clients. So, if the official name of the March 18 holiday was “Green Monday,” will the March 19th ad hoc holiday be called “Red Tuesday”? Inquiring minds want to know. –Zero Hedge

Banks closed most of the week: Via Bloomberg, AP is reporting that Cypriot banks will now remain closed through Thursday. The bank bailout deal was completed over the weekend to take advantage of a bank holiday in the EU today, owing to the St. Patrick’s Day holiday. However, the holiday was extended through Tuesday to allow the Cypriot government more time to pass a vote on the bailout deal, which includes a controversial haircut on depositors. Now, depositors in Cyprus won’t be able to access their funds until Friday at the earliest. -BI

March 18 (Bloomberg) -- Bloomberg's Ryan Chilcote reports that the Parliament in Cyprus has delayed a vote on a proposed bank deposit tax until Tuesday as banks will remain closed to prevent a run on the institutions. He speaks on Bloomberg Television's "In The Loop."
-- Related Story: http://bloom.bg/WugzVl
-- For more "In the Loop" videos: http://bloom.bg/LbOTQk
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March 18, 2013 – CYPRUS - Even though the haircut of bank deposits had been on the agenda of the EU for more than a month now, featuring in Commission memos and being openly discussed by European politicians, most of whom, refused to rule it out, few people thought the Eurogroup would go ahead with it. It was an idle threat, to force Cyprus privatize SGOs and increase the corporate tax, was the prevailing view. And after all, President Anastasiades had emphatically declared in his inauguration speech that “absolutely no reference to a haircut on public debt or deposits will be tolerated,” adding that “such an issue isn’t even up for discussion.” Finance Minister Michalis Sarris made similarly reassuring statements, arguing that it would be lunacy for the EU to impose such a measure because it would threaten the euro system. The decision to impose an unprecedented all-out haircut on Cypriot deposits was a painful one, but it was the only option to avoid bankruptcy of the state, said President Nicos Anastasiades yesterday. Germany and the leaders of the Eurogroup opted for this lunacy, calculating that Cyprus is too small and inconsequential for the haircut on its bank deposits to cause contagion in the eurozone. Of course, the markets could view the decision differently, perhaps not when they open on Monday, but a few weeks later as it becomes apparent that not even deposits in European banks are safe from raids by the Eurogroup. It is obvious from the statements made that Anastasiades was blackmailed into accepting this euphemistically called ‘solidarity levy’. If he did not accept it, the European Central Bank would not provide Emergency Liquidity Assistance to the Cypriot banks, after the March 21 deadline (it had been extended by two months in January) and the banks would have collapsed on the same day, with people losing much bigger parts of their deposits than the seven to 10 per cent that would be taken now. The eurozone struck a deal on Saturday to hand Cyprus a bailout worth €10 billion, but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risks of a wider bank run. The one-off levy on bank deposits agreed between Nicosia and international creditors will impact all Cypriot account holders. Monday was declared a bank holiday, and electronic money transfers with the troubled banks were unilaterally frozen. Cyprus residents awoke to the news, that they had been outwitted. Thousands lined up at banks to withdraw their funds out of ATMs before banks reopen on Tuesday. In addition to Cypriot commercial and co-operative banks, Barclays, Russian Commercial Bank and Societe Generale, among others, would be affected. One deputy yesterday wondered whether it would be better to allow the two banks that required liquidity assistance from the ECB to go under instead of accepting the haircut. But the problem would not be confined to these two banks as there is inter-dependence among the banks and a bank run on two would spread to all. This will be Anastasiades’ main argument in explaining why he agreed to the bail in of deposits. The alternative would have been the collapse of the banks, state bankruptcy and exit from the euro. Under the circumstances the president opted for the lesser of two evils, even though we doubt there would be many people who would give him credit for that. In effect, the EU offered a ‘rescue package’ that is designed to destroy, rather than rescue what is left of the Cyprus economy. –Cyprus Mail TEP

Cyprus bailout shock unsettles markets across Eurozone: Bailing-in depositors with banks in Cyprus is a serious policy error that will destabilize the European banking system and threatens to accelerate bank runs in future. There is a good reason deposits have been the most protected form of bank liabilities. It has nothing to do with fairness. Deposit protection is the most successful banking policy enacted in the last 60 years. It has banished the runs that plagued banks and savings institutions in the early 20th century, leading to the suspension of thousands of banks a year in the early 1930s, and which erupted again briefly in the mid-1980s, felling hundreds of savings and loans in the United States. If European policymakers need reminding about the terrible dynamics of a bank run they need only consult Robert Bruner and Sean Carr’s monograph about “The Panic of 1907,” or “Integrity, Fairness and Resolve,” the history of the savings and loan crisis published by the Federal Reserve Bank of Kansas City. “Depositors knew all too well what to do,” in the savings and loan crisis, the Kansas Fed wrote. “They gathered up their lawn chairs, thermos bottles ad portable radios and lined up outside the banks as if they were embarking on a familiar American outing. In a sense they were. Only two months ago, depositors across the U.S. witnessed scenes right out of the Great Depression during a panic that temporarily shutdown Ohio’s privately insured thrifts,” according to the Fed, quoting from contemporary news reports. Bank runs are rational when depositors fear they may not be able to get all their money back, or face lengthy delays. But what is individually rational, is collective madness. –Reuters

Banks in Cyprus remain closed as the country's ministers scramble to revise the terms an international bailout package which has sparked uproar on the island.
As part of a €10 billion bailout by the European Union the government announced at the weekend it had agreed to impose a one-off levy on bank savings.
President Nicos Anastasiades has been meeting MPs before Parliament votes on Tuesday on the deal. Reuters reports the government was working to soften the blow to smaller savers by tilting more of the tax towards those with deposits greater than €100,000. There are almost 70 billion euros in deposits held in Cyprus. A little less than half that is held by non-residents, most believed to be Russian. Read more at: http://www.radionz.co.nz/news/world/130755/cyprus-works-to-amend-controversial-bank-tax

Headlines on Reuters: http://www.reuters.com

Cyprus reworks divisive bank tax, delays vote: http://www.reuters.com/article/2013/03/18/us-cyprus-parliament-idUSBRE92G03I20130318
By Michele Kambas and Karolina Tagaris
NICOSIA - Cypriot ministers scrambled to revise a plan to seize money from bank deposits before a parliamentary vote that will secure the island's financial rescue or could lead to its default, with reverberations across the euro zone. Full Article | Live Coverage

How Europe stumbled into scheme to punish Cyprus savers: http://www.reuters.com/article/2013/03/18/us-eurozone-cyprus-stumbled-insight-idUSBRE92H0RH20130318
Cyprus starts to lose its appeal for wealthy Russians: http://www.reuters.com/article/2013/03/18/us-eurozone-cyprus-stumbled-insight-idUSBRE92H0RH20130318
World Wrap: European markets stumble on Cyprus bailout deal: http://blogs.reuters.com/world-wrap/2013/03/18/cyprus-bailout/
Summers: Europe's hair trigger economy; http://blogs.reuters.com/lawrencesummers/2013/03/18/europes-hair-trigger-economy/
Video: Cyprus contagion: http://www.reuters.com/video/2013/03/18/factbox-cyprus-contagion-whos-looking-po?videoId=241692551

Drudge Report March 18, 2013 Headlines: http://www.drudgereport.com

Cyprus set to seize personal savings... http://www.guardian.co.uk/business/2013/mar/18/cyprus-bailout-markets

Plan moves ahead as vote delayed... http://www.cnbc.com/id/100562007

BANKS SHUT DOWN UNTIL THURSDAY... http://www.reuters.com/article/2013/03/18/us-eurozone-cyprus-banks-idUSBRE92H0M120130318

Putin: 'Unfair, Dangerous'... http://news.yahoo.com/putin-hits-dangerous-cyprus-bank-deposit-levy-091554439.html

FT: Here come bank runs... http://www.ft.com/intl/cms/s/0/b501c302-8cea-11e2-aed2-00144feabdc0.html

Germany: Not our idea... http://www.courant.com/business/sns-rt-us-eurozone-cyprus-germany-schaeublebre92h0br-20130318,0,2823433.story?track=rss

Will Italy follow? Banking Chief Calls For 15% Looting of Italians’ Savings: http://www.infowars.com/banking-chief-calls-for-15-looting-of-italians-savings/

Europe's leaders run out of credit... http://www.ft.com/intl/cms/s/0/cd6ad842-8fc0-11e2-ae9e-00144feabdc0.html

Russian Company Offers to Bailout in Exchange for Gas Exploration Rights... http://www.weeklystandard.com/blogs/report-russian-company-offers-bailout-cyprus-exchange-gas-exploration-rights_707768.html

19 March 2013 - The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today. Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out. “Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman. “The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank. “Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat. “While the details are still to be finalised, nearly all depositors will see their savings reduced by the same proportions. “Bill English is wrong to assume everyday people are able to judge the soundness of their bank. Not even sophisticated investors like Merrill Lynch saw the global financial crisis coming. “If he insists on pushing through this unfair scheme, small depositors can be protected ahead of time with a notified savings threshold below which their savings will be safe from any interference.” read more at link above

Theft At Cyprus And A Run On The Banks

https://www.youtube.com/watch?v=paDYpZF4pnc


The people of Cyprus are lining up at the ATM's in an effort to save their assets from being seized by the government in an unprecedented move to bailout the failing Cyprus economy!


Love Always
mudra

James Beeland Rogers, Jr. (born October 19, 1942) is an American investor and author. He is currently based in Singapore. Rogers is the Chairman of Rogers Holdings and Beeland Interests, Inc. He was the co-founder of the Quantum Fund with George Soros and creator of the Rogers International Commodities Index (RICI).

http://en.wikipedia.org/wiki/Jim_Rogers

"I don't trust the data from any government, including the U.S., Rogers said. "We know that governments lie to us. Everybody's printing money, but it cannot go on. This is all artificial."

Rogers, who for years has been an outspoken critic of the Feds policies of "Quantitative Easing" says all the money printing is creating false hope that we are in the middle of some kind of super bull market.

But in reality, he says, "we're living in a fool's paradise."

In a newly released documentary that went viral last month, a team of influential economic experts say they have discovered a "frightening pattern" they believe points to a massive economic catastrophe unlike anything ever seen before.

"What this pattern represents is a dangerous countdown clock that's quickly approaching zero," said Keith Fitz-Gerald, the Chief Investment Strategist for the Money Map Press, who predicted the 2008 oil shock, the credit default swap crisis that helped bring about the recession, and the Greek and European fiscal catastrophe that is still wreaking havoc until this day.

"The resulting chaos is going to crush Americans."

"We found an identical pattern in our debt, total credit market, and money supply that guarantees they're going to fail," Martenson said. "This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible."

"And what's really disturbing about these findings is that the pattern isn't limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well."

http://moneymorning.com/ob-article/jim-rogers-major-crash-ahead.php?p=PPYRP206&utm_campaign=content&utm_medium=cpc&utm_source=taboola

March 19, 2013 – CYPRUS - In the early hours of Saturday, Cyprus agreed to a “bailout” with the EU and IMF that is very controversial because it imposes an immediate one-time tax on everyone with money in a Cypriot bank before banks reopen on Tuesday (Monday is a holiday). The deal still needs to be passed by Parliament and that’s not a sure thing. Ekathimerini has this report: The Cypriot government is now sweating over a possible rejection by the island’s parliament of the shocking set of measures imposed on Nicosia for the eurozone to bail its economy out of a likely default, announced in the early hours of Saturday. The Cypriot government is preparing the bill to be tabled in Parliament probably on Sunday in an emergency session, as everything will have to be voted by Monday night for Cypriot banks to open on Tuesday. The stakes are incredibly high. Here’s a statement from Cypriot President Nicos Anastasiades warning of total financial collapse and euro exit if there’s no deal.“It is well known that the deep economic crisis and the state of emergency in which the country has found itself did not come about in the last fortnight since we have undertaken the administration of the country. The state of emergency and critical nature of the times does not allow me, as they do not allow anyone, to embark on a blame game. On Tuesday, March 19 we would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy…(without a deal) Such an uncontrolled situation would push the whole banking system into collapse with all the attendant consequences. As a result of the above, the service sector would be led to a complete collapse with a possible exit from the euro. That, in addition to the national weakening of Cyprus, would lead to devaluation of the currency by at least 40%.” –BI

You can be forgiven for thinking that you don't need to give a hoot about what's going on in Cyprus this weekend. After all, it's just a little island somewhere in the Mediterranean. But what's going on in Cyprus could actually matter — not just to the rest of Europe, but to the rest of the world.

Here's the short version of what's happening:

Cyprus's banks, like many banks in Europe, are bankrupt.

Cyprus went to the Eurozone to get a bailout, the same way Ireland, Greece, and other European countries have.

The Eurozone powers-that-be gave Cyprus a bailout — but with a startling condition that has never before been imposed on any major banking system since the start of the global financial crisis in 2008.

The Eurozone powers-that-be (mainly, Germany) insisted that the depositors in Cyprus's banks pay part of the tab.

Not the bondholders.

The depositors. The folks who had their money in the banks for safe-keeping.

When Cyprus's banks reopen on Tuesday morning, every depositor will have some of his or her money seized. Accounts under 100,000 euros will have 6.75% of the funds seized. Accounts over 100,000 euros will have 9.9% seized. And then the Eurozone's emergency lending facility and the International Monetary Fund will inject 10 billion euros into the banks to allow them to keep operating.

Cyprus's government tried to explain this deal by observing that it was better than the alternative: Immediate bankruptcy and closure of the major banks. In that scenario, depositors would lose a lot more of their money. Businesses would go bankrupt. And tens of thousands of people would be instantly thrown out of work.
But, still, not surprisingly, news that deposits in Cyprus's banks would be seized triggered an immediate run on the banks. Depositors rushed to ATMs and tried to withdraw their money before it could be seized.

But the ATMs weren't working. And the government has now made it impossible to transfer money out of the country.

The moment depositors think that there is risk to their savings, they rush to banks to yank their money out. That's called a run on the bank. And since no bank anywhere has enough cash on hand to pay off all its depositors at once, runs on the bank cause banks to go bust. That's what happened to hundreds of banks in the Great Depression.

And it's what happened to Bear Stearns, Lehman Brothers, and other huge banks during the financial crisis (though, with Bear and Lehman, the folks who yanked their money out weren't mom and pop depositors but other big financial institutions). It's what threatened to bring the entire U.S. financial system to its knees. And it's why the U.S. and European governments have been frantically bailing out banks ever since.

But now, thanks to Eurozone's bizarre decision in Cyprus, the illusion that depositors don't need to yank their money out of threatened banks because they'll be protected has been shattered.

Read more: http://www.businessinsider.com/cyprus-bailout-risks-europe-bank-runs-2013-3#ixzz2O0LlYqG8


Personal note: I wonder if this isn't a global reset to force investors into a one-world cashless society. Surely we are witnesses how paper money assets can easily be stolen when in a financial institution like banks along with the stock and bond markets. It seems the most viable option for tangible wealth is to have land one owns along with gold and/or silver coins. But where to put them? The banks can also have access to safe deposit boxes. It wouldn't surprise me if people start buying more safes that they can put in cement to keep their assets protected. Either that or just become a monk and live a life of proverty.

The thumbs down given by the financial markets to the bailout plan for Cyprus was swift, decisive and predictable. It was hard to find anyone with a good word to say for those at the European Union, the European Central Bank and the International Monetary Fund who decided it would be a good idea to levy a tax of at least 6.75% on all Cypriot bank depositors. Shares and the euro fell, money flooded into the safe havens of gold and the US dollar, and interest rates in Spain and Italy rose.
All this just when there was growing confidence that the eurozone was over the worst.

Most of the attention was on the contagion risk posed by the levy. The concern expressed by investors was simple: if the taxpayers of the rich northern members of the eurozone are going to force a country that represents only 0.2% of the club's GDP to part-finance their own bailout, will they be any more generous when it comes to some of the big-country members such as Italy and Spain that might be next in line? And in the event that the Italians and the Spanish get an inkling that a bailout is looming, won't they immediately withdraw all their euros immediately, triggering a bank run?

These were points the financial masterminds who pieced together the Cypriot deal appeared to have overlooked. Suggestions that Cyprus was a one-off, a special case that certainly did not set a precedent for future bailouts was laughed off by the markets. They have heard that refrain rather too often during a crisis now into its fourth year to take such attempts at reassurance seriously.

Three other points are worthy of mention. The first is the dubious morality of what some were calling "state-sponsored theft". Europe is supposed to guarantee all deposits up to €100,000 in the event of a bank collapse, and the tax announced at the weekend violates the spirit if not the letter of that commitment.

The argument from the ECB/EU/IMF troika is that the Cypriot banks have not actually collapsed (although they will do so without the bailout) so the guarantee does not apply. Tell that to the nervous depositor in Madrid or Milan.

What's more, there is something morally offensive about a plan that makes ordinary Cypriots lose a chunk of what will in many cases be meagre savings while bond holders get away unscathed. As Marc Ostwald of Monument Securities noted, the deal "highlights how post 2007 efforts to resuscitate and rescue western economies have continued to favour the vested interests of the financial sector, while treating the "population at large" with disdain and contempt – this sort of attitude is still a seedbed for social revolution, as has been witnessed above all in the Arab Spring."

A second point, overlooked in the furore about the raid on depositors, is that Cyprus will be subjected to a brutal austerity programme in return for the financial help. The country is already in a double-dip recession and contracting by 3% a year. The proposal is that it should suck a further 4.5% out of the economy at a time when its key financial services sector is struggling and tourists – the other mainstay of the economy – are likely to stay away for (legitimate) fear of social unrest. Making every bank depositor at least 6.75% worse off at a stroke is the work of a European policy elite that has learned nothing whatsoever from the crisis. The suggestion that Cyprus will reduce its debt to GDP ratio from 145% as a result of the bailout is for the birds.

All of which leads on to the final point. Clearly Cyprus is in dire need of money and the assumption the weekend was that Cyprus had no choice but to sign on the dotted line, because the alternative would be the collapse of its banks by the weekend followed by the collapse of the real economy thereafter.

But who has more to lose here? Cyprus, for whom life is going to be grim whatever happens? Or the rest of the eurozone which would be quickly engulfed in the contagion from a Cypriot collapse? The Cypriot parliament is unlikely to accept the bailout in its present form and if it hangs tough may get the terms substantially softened.

http://www.guardian.co.uk/world/2013/mar/18/cyprus-bailout-eurozone-crisis-larry-elliot?INTCMP=SRCH