Yes, IF it breaks apart. Cyprus has large trade and current account and GDP deficit so it would severely affected. Rock and a hard place.
I can imagine very high rates of inflation in certain countries post break up for short termist political reasons. A bit like Israel, Iceland and Greece back in the 80’s. But we are only talking 10%/20% per month. But the most likely outcome is the other method of reducing the standard of living - a drop in disposable income in real terms and huge increase in the price of imported goods.
Back in the 70’s everyone got a haircut of 1%/2% per month on their bank deposits due to inflation. But as the ECB have a 2% inflation rate fetish the only other alternative is a straight tax. There is a twisted logic to the current situation.
Bailout rejected by parliament. What next?
Time to see if the ECB goes through with its threat, as reported by Newsnight, to pull ELA from Cypriot banks.
There will be a solution…but it is getting messy. Spain, Portugal, Italy, Greece, Ireland all may need additional bailouts - Angela is acting with one on on the elections. Interesting times.
Cyprus looks like it may keep the banks closed until Easter - are the printing presses running?
French budget minister resigning over an off-shore account not helping matters tonight.
Cypriot Finance Minister Michael Sarris flew to Moscow on Tuesday to seek Russian financial assistance. He denied by text message reports that he had resigned, which rattled nerves as lawmakers were poised to vote. reuters.com/article/2013/03/ … 3I20130319
ECB say they will provide ELA “within rules”.
But nobody knows exactly what they mean by the “within rules” bit… Helpful.
ECB need 2/3 majority to pull ELA. No way are 2/3 of the ECB board going to send Cyprus back to barter.
Cyrpus have called the ECB’s bluff.
Which Easter? Orthodox Easter, as celebrated in Cyprus, isn’t until May 5th!
Completely anal insistence on all i’s being dotted and t’s being crossed for any collateral being presented to limit liquidity supplied?
That scenario typically happens in the aftermath of a political crisis, a new government is formed and defaults on the previous debts, because no one trusts the new government, capital is driven into hiding and no one will buy their debt so they resort directly to the printing press. The danger with the Cyprus scenario is that it lays another part of the foundation for a shooting war between Russia, it’s allies and the West. It could get very cold next winter in Europe if the Russians and Germans don’t come to an agreement over Cyprus. The other issue over the loss depositors money for Joe Public is likely to lead to an escalation of violence across Europe as people no longer trust their governments to keep their deposits ‘safe’ causing more capital to flee Europe or held in assets like property leading to a fall in investment and rise in unemployment. This is also compounded by the actions of the US government that make it difficult for it’s citizens to bank abroad.
Wer schützt UBS-/CS-Sparer vor Enteignung? -> insideparadeplatz.ch/2013/03/19/ … nteignung/
Unless things get sorted fairly quickly, Cyprus will be a cash only economy.
I love this …to paraphrase
*If we had known what the crooks were doing we would have been doing what the crooks were doing.
I cant believe the crooks were doing this and they didnt tell us…
Did i mention I work for a hedge fund. *
hedge funds just another part of the problem
I wonder if hte Quins are vacationin in Cyprus… this summer
Why quote somebody and then immediately “paraphrase” them? You think people can’t understand the original post or you need to colour it with pejorative rubbish?
My point is that if it had been announced on Friday morning that deposits were going to be burned then anybody with a modicum of sense would have been buying Swiss Francs. I was then communicating the fact that it clearly had been leaked to certain participants - hence the action in the market - because I thought some might find this interesting.
Oh, and how many hedge funds were bailed out by taxpayers?
Cypriot government rejects bailout deal, Russians may be about to provide cash to keep things afloat, “beware of strangers bearing gifts.”
guardian.co.uk/world/2013/ma … avings-tax
The attempt to burn depositholders is dynamite IMO. Wtf are the Germans at. How could they be so bloody stupid.
If there was a rule book about how to recover from a financial crisis, the golden rule would be don’t burn deposit holders once you start to see some tentative signs of recovery. You really could not make this up. I hope this doesn’t fook the hole thing up again.
Maybe I’m wrong and the Germans are being really clever and theyre trying to devalue the euro. I doubt it though.
That’s what I’ve been wondering myself over the past few days. Dangerous ploy if it is.