Eurozone finance ministers approve bailout deal for Cyprus

 

French minister of Economy, Finances and Foreign Trade Pierre Moscovici (R) and International Monetary Fund chief Christine Lagarde (L) chat next to EU Commissioner for Economic and Monetary Affairs Olli Rehn (C) prior to an extraordinary Eurozone meeting on March 24, 2013 at the EU Headquarters in Brussels (AFP Photo / John Thys)

Source: Russia Today

http://rt.com/news/cyprus-eu-imf-bailout-764/

The Eurogroup has approved a deal on a 10 billion-euro bailout for Cyprus, struck early Monday in Brussels. Cyprus avoids exiting the eurozone, but will have its second largest bank closed with heavy losses expected for big depositors.

“The size of financial assistance will amount to 10 billion euro,” Eurogroup president Jeroen Dijsselbloem has announced at a press conference in Brussels after the eurozone finance ministers swiftly endorsed the plan.

“With this agreement we’ve put an end to the uncertainty that has affected Cyprus and the euro area over the last few days,”he added.

The new deal agreed between Cyprus and the Troika of international lenders - the EU, the ECB and the IMF - will set up a "good bank" and a "bad bank" and will mean that the country’s second largest bank Laiki will effectively be shut down.

Deposits below 100,000 euros will be shifted from Laiki to the Bank of Cyprus to create a “good bank.” Deposits larger than 100,000 euros will be frozen and used to resolve debts. It remains unclear how large the write-down on those funds will be.

The decision comes hours before the Monday deadline set by the European Central Bank, following heated talks between President Nicos Anastasiades and the Troika.

Earlier on Sunday the central bank in Cyprus has imposed an ATM withdrawal limit of 100 euros per day for the island's two biggest banks, in order to prevent a run on lenders.

Warren Pollock - market analyst and financial adviser says the financial turmoil in Cyprus is part of a broader crisis.

“In reality this is a global problem which has not been addressed since 2007-2008 and previous to that with the issuance of huge amounts of debt and leverage into the system both in Europe and in the United States,” he told RT.


“And when that debt goes bad, the only recourse which exists is to tap remaining collateral in the system which is the savings.”


Pollock believes that sooner or later this “sort of stealing” of savings may result in popular unrest. “We can definitely see smaller countries being the test to see whether savings could be stolen on a wider scale.”

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Cyprus imposes ATM withdrawal limit of €100 per day for island's two largest banks

 

People queue to withdraw their savings at a Cypus Popular Bank (Laiki Bank) ATM in Athens on March 22, 2013. (AFP Photo)

Source: Russia Today

http://rt.com/business/cyprus-bailout-withdrawal-banks-756/

The central bank in Cyprus has imposed an ATM withdrawal limit of 100 euros per day for the island's two biggest banks, in order to prevent a run on lenders.

A spokesman for the country's second largest lender, Cyprus Popular Bank, told Reuters that the new measure began at 1pm local time (11am GMT) and would remain in place until the bank reopens, or until confirmation of continued emergency funding from the European Central Bank. Cyprus Popular Bank had previously limited withdrawals to 260 euros per day.

A government official said the restriction also applied to the Bank of Cyprus.

It was initially reported that the measure was implemented on all banks in Cyprus, although it has now been confirmed that only the island's two biggest banks have been affected.

The news comes after Cypriot President Nicos Anastasiades took part in last-minute crisis talks with international lenders on Sunday, in an attempt to save the country from financial meltdown. The negotiations in Nicosia to seal a bailout from the EU and International Monetary Fund failed to reach a solution.

Anastasiades then headed to Brussels to hold talks with EU, European Central Bank and IMF leaders ahead of a crunch meeting of eurozone finance ministers.

Government spokesman Christos Stylianides said in a statement on Sunday that Anastasiades and his team have a "very difficult task to accomplish to save the Cypriot economy and avert a disorderly default if there is no final agreement on a loan accord."

The news comes just one day after Cyprus and the Troika agreed to a 20 per cent tax on deposits over 100,000 euros at the Bank of Cyprus and 4 per cent on deposits held at other banks.

"Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available. Today, there are only hard choices left," European Union Economic and Monetary Affairs Commissioner Olli Rehn said in a Saturday statement.

Cyprus is scrambling to come up with €5.8 billion by Monday, or face being kicked out of the Eurozone. The cash is a prerequisite for a further €10 billion in bailout funds.

Lawmakers' rejection of a previous proposal to tax all bank deposits prompted the European Central Bank to threaten to cut off emergency funding to Cypriot banks unless a deal was reached by March 25. Banks have been shut all week, and are due to reopen on March 26.

On Saturday, at least 1,000 bank workers in Cyprus hit the streets of the country’s capital of Nicosia. The demonstrators marched against the latest bailout measures taken by the country’s central bank.

Protesters carried banners that read, “Hands off provident funds” and “No to the bankruptcy of Cyprus.”

Turkey sends ‘stern warning’ to Cyprus over gas reserves

Meanwhile, Turkey has warned Greek Cyprus against using hydrocarbon reserves off the island to overcome its debt crisis without the consent of Turkish Cypriots. Ankara says such a move could result in an end to efforts to reunite Cyprus’ Turkish and Greek zones.

Turkey has contacted the US and plans to take the issue to the European Union, Today’s Zaman reported.

Ankara “had to issue a stern warning” regarding attempts to offer natural resources in exchange for foreign loans, a Turkish official said on Sunday.

Turkey has repeatedly warned the Greek Cypriot government against unilateral moves to extract natural gas and oil reserves off Cyprus, saying that Turkish Cypriots also have a say on the reserves.

The dispute recently escalated when reports surfaced that hydrocarbon exploration rights were part of Russia-Greek Cyprus talks last week over a possible deal which includes Russian financial help. However, the talks did not produce an agreement.

Russian Prime Minister Dmitry Medvedev expressed doubt on the inclusion of hydrocarbon reserves as a loan deal, saying there are concerns surrounding commercial viability and questions stemming from Turkish objections.

 

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Cypriot parliament votes against deposit levy

Cypriot woman shouts slogans as she holds a placard during a protest against an EU bailout deal outside the parliament in Nicosia (AFP Photo / Patrick Baz)

Source: Russia Today

http://rt.com/business/cyprus-against-deposit-levy-501/

The Cypriot parliament has voted against a revised bank deposit levy. The tax was meant to shave 9.9% off any deposits over €100,000 and has since caused uproar in the country.

Thirty six deputies voted against the proposal to tax bank deposits in the 56-member chamber, while 19 abstained. One deputy was not present for the vote.

"The bill has been rejected," said house speaker Yiannakis Omirou, as thousands of protesters outside the parliament building in Nicosia erupted in cheers.

According to the proposal, a 6.75% rate was to be set for amounts between €20,000 and €100,000. Deposits of up to €20,000 euros were to remain untouched.

Passage of the bill was considered a prerequisite for a €10 billion European Union bailout for the Mediterranean island. EU finance ministers have warned that Cyprus' two biggest banks could go bust if a bailout deal in some form is not forthcoming. The government and opposition parties have scheduled emergency talks on the bailout for Wednesday.

The European Central Bank (ECB) has threatened to end emergency lending assistance for Cypriot banks if a bailout deal was not ensured. However, following the vote, the ECB said it would continue to provide liquidity to Cyprus as needed “within the existing rules,” Bloomberg reports.

Cyprus has discussed the tax with its European creditors. Ministers from the 17 eurozone countries urged protection for savers with €100,000 or less and for them to be spared from the levy, after the prospect brought panic to the markets and had Cyprus dealing with the prospect of Russia withdrawing its rescue loan.

The Cypriot government’s original proposal was to tax all depositors, setting the rate of 6.75% on all deposits under€100,000 and maintaining a 9.9% tax on all deposits above that level.

In the meantime all Cypriot banks have frozen the accounts liable for the tax and stopped all transactions, including electronic and closed for a long weekend until Thursday to prevent panic.

Cyprus needed to raise €5.8 billion euros for its bailout program and was hoping to get the money in the planned bank deposits levy.

Despite the precarious position Cyprus has found itself in, a default might be preferable than a bailout under the present conditions, United Kingdom Independence Party MEP Nigel Farage told RT.

“The EU has been unhappy about so-called tax havens for a very long time. Ironically, whilst continuing to turn a blind-eye to many activities that go on in Luxemburg. I mean Cyprus finds itself right now in a very difficult, desperate position. But I would say that it is better to officially go bankrupt, to default on international bond obligations. And to do that best to keep a banking industry and to keep some confidence in that country,”he said

 

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Cuts and more cuts Athens passes 2013 budget

 

Demonstrators stand outside the Greek Parliament protesting against austerity measures in Athens on November 11, 2012 (AFP Photo / Panayiotis Tzamaros))

Source: Russia Today

http://rt.com/news/greece-government-austerity-budget-439/

The Greek government has passed a 2013 budget stipulating new rounds of harsh budget cuts. It comes just after Greece announced the passage of more austerity measures, triggering violent clashes in Athens.

The budget was approved with 167 voting in favor and 128 opposed, while 5 abstained.

The recent austerity package, passed in a narrow vote, was apparently insufficient to appease eurozone finance ministers into granting the cash-strapped nation another tranche of much-needed bailout money.

Without the rescue loan, Greece would effectively default on November 16, the date it must repay a three-month treasury bill worth €5 billion.

Greek trade unions called for another demonstration outside Parliament on Sunday ahead of the lawmakers’ vote on the budget.

Earlier in the week, around 70,000 demonstrators rallied as Parliament voted on the new austerity program.

On Saturday, MPs began debating the 2013 budget. It was the second budgetary test the Greek government has faced in less than a week.

Athens is planning further spending cuts totaling 9.4 billion euro, mainly in state wages, pensions and benefits, all of which have already seen drastic reductions over the past two years.

Several hundred Greek civil servants staged a protest on Saturday in front of parliament, where initial discussions over the 2013 draft budget were held ahead of the vote. The protesters railed against the reduction of 125,000 civil servant jobs by 2016, part of the new austerity package that squeezed through parliament on Wednesday.

 

Protesters demonstrate outside the Greek parliament against the new austerity measures in Athens on November 11, 2012 (AFP Photo / Aris Messinis)

Cutting it close

Greece's 2013 budget predicts that the economy will shrink by a worse-than-expected 4.5 percent next year, and that the country's debt will swell to 346 billion euro ($434.3 billion), or 189 percent of the country's gross domestic product.

Athens is hoping to securing a further 31.5 billion euro of desperately needed international aid. Even then, it would still need to borrow over 68 billion euro next year, the draft budget says

This is in addition to the new austerity package, which includes 18.5 billion euro ($23.6 billion) in cuts and labor law reforms.

Greece has so far avoided default by introducing a series of austerity measures needed to secure two huge bailout loans from a 'Troika' of creditors: The EU, the International Monetary Fund and the European Central Bank.

The recent push for further austerity has sparked popular anger in a country facing its sixth year of recession, while unemployment rose above the 25 percent mark in July.

Meanwhile, the government admits that the program is unfair, and will probably drive the country deeper into recession, Dimitris Yannopoulos, an Economist and Editor at the Athens News newspaper told RT.

According to Yannopoulos, the only benefit the new set of austerity measures will bring is the long-awaited rescue package – which Germany is in no hurry to release.

“Berlin implies that we want more conditions attached to the program dealing with the control of these funds as well as the control of the budgetary administration [in Greece],” he explained.

 

Riot police guard the Parliament building during a demonstration against austerity measures as Greek deputies consider a budget vote (AFP Photo / Panayiotis Tzamaros)

 

Demonstrators march to the Greek Parliament protesting against austerity measures in Athens on November 11, 2012 (AFP Photo / Panayiotis Tzamaros)

 

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Greece will have to wait for next round of cash - German minister

 

Finance Minister Wolfgang Schaeuble. (AFP Photo / Johannes Eisele)

Source: Russia Today

http://rt.com/news/greece-bailout-german-minister-294/

Germany, the pillar of European economic stability, is skeptical that Athens will receive the next tranche of aid “in the coming weeks,” despite painful new austerity measures adopted this week in Greek Parliament.

­German Finance Minister Wolfgang Schaeuble, one of the main architects of the Greek response team, warned Thursday that it is unlikely that Greece will reach a quick deal with its international creditors on the next credit line.

“At the moment I do not see the decisions being made” that are required for a definitive agreement between the Troika of international auditors examining Greece's finances and the Greek government, he told a conference in Hamburg.

Despite the poor assessment, the minister welcomed Athens' new measures, which were approved on Wednesday, by saying that Greece has “a pro-European majority and it held last night despite demonstrations and a general strike. All is not lost – all is not won either, but we have no use for cynicism… the Greeks want to remain in the euro.”

This is a conclusion with which many Greeks seem to disagree, as massive demonstrations ahead of Wednesday's vote erupted in the capital. At least 100 people were detained as police used tear gas and water cannons to disperse a crowd that voiced anger against a rise in the retirement age to 67, cuts to minimum wage and benefit reductions.

While the rallies pushed forth with their demands, Greek Parliament agreed by a narrow margin to €18.5 billion in budget cuts demanded by creditors.

Now Greece awaits the €31.5-billion tranche of aid from the Troika – the European Central Bank, European Union and the International Monetary Fund, its fourth emergency loan package in three years.

Economics analyst Antonis Vradis says the massive new loan will simply create more debt for the country.

“These packages are moving in the entirely wrong direction. There is a definition of insanity, and according to it, insanity is doing the same thing over and over again and expecting different results. This is what is happening right now. You have a package after which the country's national debt is going to go up from 175% to 190%. The only way to stop this policy of austerity is if people actually stop them,” Vradis, a member of the Occupy London movement, told RT.

 

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EU IMF give Greece until October 18 to implement reforms

 

President of the Eurogroup Council Jean-Claude Juncker (L) speaks with IMF cheif Christine Lagarde before a Eurogroup Council meeting in Luxembourg on October 8, 2012

Source: Press TV

http://www.presstv.ir/detail/2012/10/09/265651/greece-gets-deadline-for-reforms/

Greece's international creditors have given Athens until October 18, the start of next week's two-day European Union summit, to deliver on scores of broken promises in order to qualify for its next rescue loan payment.

"We stressed that before the next disbursement Greece clearly and credibly should demonstrate its commitment to fully implement the program -- and 89 prior actions from March should be implemented by the 18th of October at the latest," Eurogroup Chairman Jean-Claude Juncker said on Monday at the close of talks with eurozone finance ministers in Luxemburg, AFP reported.

Debt-stricken Greece has depended on bailouts from fellow countries in the 17-nation single currency bloc and the International Monetary Fund since May 2010. To get the loans, it implemented a series of deep income cuts and tax hikes, while increasing retirement ages and facilitating private sector layoffs.

IMF chief Christine Lagarde, who also attended the eurozone finance ministers meeting, said, "On Greece more work needs to be done… Acting means acting, not just speaking."

On Friday, Greek Prime Minister Antonis Samaras said that his country could not take more bitter medicine and if the next disbursement of 31.5 billion euros from a 130-billion second package of loans for the country did not arrive soon, the government will run out of cash next month.

The warning by Greece's bailout creditors came a day before German Chancellor Angela Merkel visits Greece to hold talks with Prime Minister Samaras and President Carolos Papoulias.

Merkel is likely to face angry protests in a country where many blame Germany for the Greek government's draconian austerity measures.

Public Order Minister Nikos Dendias appealed to protesters on Monday to "protect the peace, and above all our country's prospects and our international image."

Some 7,000 police officers will be deployed across Athens on Tuesday to maintain security during Merkel’s stay.

Greece has been at the epicenter of the eurozone debt crisis and is experiencing its fifth year of recession, while harsh austerity measures have left about half a million people without jobs.

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