Links: 2013-03-25
News links for 25 Mar 2013
Most Dutch voters think Cyprus should leave euro zone | Reuters
“Most Dutch think Cyprus should leave the euro zone even though the cost of a bail-out for the country would be tiny compared to the rescue for Greece, a poll published on Sunday said.”
Anxious, angry Cypriots face uncertain future | Reuters
“Dora Giorgali says she has to go back almost 40 years, when Cyprus was at war, to recall such a feeling of anxiety.”
Moody’s: Cyprus Could Still Default – Business Insider
“In a new piece, Moody’s analyst Sarah Carlson argues that the financial crisis in Cyprus “will have profound long-term negative consequences for the sovereign,” and that “even in the best-case scenario, where the Cypriot parliament passes and implements measures that the euro area governments of the European Union, European Central Bank and International Monetary Fund (collectively known as the Troika) find acceptable, the sovereign will remain at risk of default and exit from the euro area for a prolonged period.””
Will Putin attempt a last-minute Cyprus rescue? | Anatole Kaletsky
“Vladimir Putin could restore Russia’s great power status and maybe go down in history as the country’s most visionary leader since Peter the Great. He could win respect from Beijing and Washington for averting a second global financial crisis and he could prove that Russia understands market economics better than the EU. His miraculous opportunity to do all this started with the Mafia-style “offer you can’t refuse” presented by the EU to Cyprus on Sunday. It will end on Tuesday morning, if Cyprus banks then re-open under the conditions imposed by the European Troika, as currently planned.”
Cyprus crisis is at the heart of fundamental problems in the eurozone – Telegraph
“Underlying all this is the tension between, on the one hand, financial stability and on the other, concern about who pays. When financial stability is at stake, we all have a common interest in saving the system. For if the banking system collapses, it may drag down the whole economy and we could find ourselves in a slump – or even worse. That is what seemed to be a real threat in the financial crisis in 2008/9, which is why governments, including in the UK, took draconian action at huge public expense.
In regard to the management of banking crises, the general principle has been that shareholders, and perhaps even bond holders, can be wiped out but deposit holders should be protected. In most advanced countries, there is deposit insurance which directly protects deposit holders up to a certain maximum sum. In practice, when push came to shove in 2008/9, the UK government implicitly guaranteed all bank deposits in its stricken banks and the Irish government underwrote the deposits of the whole domestic banking system.”
Cyprus and EU/IMF agree draft proposal to rescue banks | Reuters
“The proposal, which will now be put to euro zone finance ministers for approval, will involve setting up a “good bank” and a “bad bank”.
It will mean that Popular Bank of Cyprus, the island’s second largest bank which is also known as Laiki, will effectively be shut down.
Deposits below 100,000 euros in Laiki will be transferred to Bank of Cyprus, the country’s largest bank. Deposits above 100,000 euros, which under EU law are not insured, will be frozen and will be used to resolve debts. It remains unclear how large the writedown on those funds will be.”
Cyprus crisis could spread, Spain’s economy minister warns | In English | EL PAÍS
“Economy Minister Luis de Guindos said on Sunday that unless countries including Spain reached a “conclusive decision” at Sunday’s emergency meeting of finance ministers, the Cyprus crisis could spread to other European countries.
If they failed, he added, there could be an “undesirable situation for the whole of the Union.”
“Cyprus’s problems go well beyond the Cypriot economy,” he added, before entering a Eurogroup meeting that began at 8pm on Sunday evening.”
Eurozone break-up edges even closer – FT.com
“The Cypriot parliament was right to reject this mad deal. But the Cypriot government then committed three subsequent blunders. The first was the decision by President Nicos Anastasiades to seek help from Russia. Instead of working with the eurozone, he worked against it. The Germans, in particular, saw this as an openly hostile move. It was also ill-judged because the Russians rejected the offer. The second was the decision not to communicate with the European finance ministers and the euro working group for three critical days last week. The third was the Cypriot government’s proposal on Thursday to create a sovereign wealth fund backed by a raid on the pension fund and other state assets. On Friday Angela Merkel swiftly dismissed it.
What happened last week is a fitting example of European political leaders, in a most unprofessional pursuit of narrow national interests, failing to defend the common good.”
La rumeur de la mort de Bachar el-Assad agite Internet – Le Point
Rumours are circulationg that Assad was either seriously injured or killed. No confirmation anywhere. Likely another false rumour. Time will tell.
“Les rumeurs de ce type sont courantes sur Internet et se sont souvent révélées fausses.”
“the shutdown wasn’t just a matter of company culture and bigger priorities, sources said. Google is also trying to better orient itself so that it stops getting into trouble with repeated missteps around compliance issues, particularly privacy.
That means every team needs to have people dedicated to dealing with these compliance and privacy issues — lawyers, policy experts, etc. Google didn’t even have a product manager or full-time engineer responsible for Reader when it was killed, so the company didn’t want to add in the additional infrastructure and staff, the sources said.
But at the same time, Google Reader was too deeply integrated into Google Apps to spin it off and sell it, like the company did last year with its SketchUp 3-D modeling software.”
Bailout exposes differences within troika – FT.com
“Relations between Brussels and IMF headquarters in Washington have become so strained that the European Commission, in its weekly meeting on Wednesday, agreed to raise the issue directly with EU prime ministers by suggesting the current structure where the commission and IMF work together in a “troika” of bailout negotiators be overhauled.
“The troika model has become dysfunctional,” said one senior EU official.”
Zypern : Ausnahmezustand unter der “Herrschaft von Angela” – Nachrichten Wirtschaft – DIE WELT
This is a German account about the growing anger at Germany in Cyprus
Mardle Capital: Brevity is the soul of wit – how Twitter changes research
“The press has been quick to respond, largely embracing Twitter and other social media.Financial markets too, are increasingly embracing the new media. What we rather pompously call ‘sell-side research’ is grappling with the issues and lagging behind. But it certainly can’t ignore what is happening.”
The eurozone after Cyprus | Gavyn Davies
“The calmness of the financial markets in the face of the deteriorating Cyprus crisis in the past week has been remarkable. Although Cyprus is tiny enough to be completely overlooked in most circumstances, its economy and banking system have characteristics similar to other, much larger, eurozone countries. Cyprus is certainly at the extreme end, but an over-leveraged banking system, with insufficient capital and reliance on foreign funding, is familiar territory in the eurozone.”
Ex-President Musharraf returns to Pakistan for elections | Reuters
“Pakistan’s former President, Pervez Musharraf, returned home on Sunday after nearly four years of self-imposed exile to contest elections despite the possibility of arrest and death threats from the Taliban.”
Apple’s first quarter of negative income growth since 2003 – Apple 2.0 -Fortune Tech
“it’s what analysts call a “tough compare” in terms of gross margins — a measure of the efficiency with which a company turns revenue into profits. Last year at this time Apple’s gross margin peaked at an extraordinary 47.37%. This year, following the introduction of a slew of new products — including new Macs, iPhones and iPads — it is projecting gross margins somewhere between 37.5% and 38.5%. That’s what’s driving the income down. Wall Street seems to be betting that in the next six to 12 months, those numbers have nowhere to go but up.”
Emerging nations risk Cyprus contagion: World Bank | Reuters
“Developing nations must be ready for a financial market selloff if the Cypriot banking sector collapses, World Bank Managing Director Sri Mulyani Indrawati said on Sunday, urging a swift resolution to the crisis in Cyprus.”
Bruegel – The Brussels-based think tank | blog > Detail
“Taxing depositors should not be seen as the main mistake of this crisis provided those below the 100K are protected. In fact, it must be possible to get a financial contribution of depositors of oversized and insolvent banks – even though this contribution should ideally be received in an orderly bank restructuring process. But by introducing capital controls, the eurozone has embarked on a process severely endangering the currency area and the single market. A euro in Cyprus now has a different value than a euro in Frankfurt. De facto, the ECB has showed that it is ready to contemplate implicit limits to the Target2 balances. It is not too late to correct this mistake.”
ekathimerini.com | Cyprus central bank limits cash withdrawals to 100 euros per day
“The central bank in Cyprus imposed a 100-euros per day withdrawal limit at cash machines for all local banks on Sunday to avert a run on lenders.
A spokesman for second largest lender Cyprus Popular Bank, which had previously limited withdrawals to 260
euros, said the new measure began at 1 p.m. (1100 GMT)” Deposit Insurance, and the Historical Reasons for It – NYTimes.com
“Cyprus, alas, does not have the option of a national government bailout because it does not print its own money. Even if it rejects the euro zone’s terms and bails out banks in some new local currency, that currency would not be worth much in international markets. So one way or another, its depositors are going to lose. Insurance plans are just as safe — but cannot be any safer — than the assets behind them.”
Analysis: Sitting on too much money, Norway risks going off course | Reuters
“Middle East-style oil wealth combined with a generous Nordic welfare model is slowly throttling big chunks of Norway’s economy, threatening western Europe’s biggest success story.”
ekathimerini.com | Turkey warns Cyprus of ‘new crisis’ if gas revenues included in solidarity fund
“Turkey has warned of a “new crisis” in the eastern Mediterranean if Cyprus proceeds with plans to collateralize future gas revenues as part of a national investment fund aimed at staving off a disorderly default.
Ankara warned that the island’s natural resources also belong to Turkish Cypriots and as such could not be included in the package being put together by Nicosia.”
EUobserver.com / Economic Affairs / EU commission prepares ground for far-reaching economic powers
“The European Commission has started preparing the ground for legislation that would prevent member states from undertaking major tax, labour or financial reforms without running it by the commission and other governments first.
In an ideas paper published Wednesday (20 March), the commission said this ex-ante co-ordination should concern “major national economic reform plans and should take place at an early stage before the measures are adopted.”” PIMCO cuts euro exposure as investors decry Cyprus bailout plan | Reuters
“A demand that Cyprus seize money from depositors to help rescue the island’s banks is a wake-up call for those who believed the euro zone crisis was solved, institutional investors and hedge funds said.
One of the world’s biggest money managers, PIMCO, has already reduced its euro currency allocations in response to the planned levy unveiled at the weekend, a senior executive told Reuters on Tuesday.”
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