March 18 2013

Protests in Nicosia against the proposed levy. Crucial parliamentary vote delayed until Tuesday. Reports of a rethink on bank savings levy. Vladimir Putin: savings levy is unfair and dangerous. Markets and the euro claw back some of their losses…



Powered by Guardian.co.ukThis article titled “Cyprus: banks shut till Thursday as government scrambles to amend savings levy – live” was written by Graeme Wearden, for guardian.co.uk on Monday 18th March 2013 16.22 UTC

4.22pm GMT

Conservative MP Brook Newmark suggests that the UK government should be doing more to protect UK pensioners, particularly those who have savings of less than €100,000 (and who would thus be protected by deposit protection insurance if Cyprus’s banks had actually gone bust).

Labour’s Chris Leslie is also deeply concerned about the savings levy, saying it was wrong that ordinary savers are pilfered while the people who caused the crisis, Cyprus’s politicans and bankers, are spared.

Several MPs have also argued that the Cyprus crisis shows the perils of joining a single currency union and surrendering control of your own economy. Greg Clark didn’t disagree….

4.14pm GMT

Green MP Caroline Lucas says the UK government is taking too soft a line with Cyprus’s savings levy.

It is immoral and unfair to pilfer the savings of the people of Cyprus.

Greg Clark replies that the decision to tax savings was taken by the Cyprus government – he isn’t keen to defend it personally.

Updated at 4.16pm GMT

4.07pm GMT

Another Conservative MP, Jacob Rees-Mogg, asks Greg Clark whether he would advise UK citizens in Ireland, Portugal, Greece, Spain and Italy to repatriate their funds.

Clark replies that it is clear that the situation in Cyprus is unique.

4.06pm GMT

MPs are asking Greg Clark why the UK government will not cover all losses suffered by military personal, rather than simply “reasonable losses”.

Clark says that the principle is that soldiers should not lose out because they have been sent to Cyprus, and points out that the situation is still fast-moving and fluid.

3.58pm GMT

Tory MP Andrew Tyrie warned parliament that the Cyprus bailout plan risks “triggering a run on the banks”, and criticised it as “badly thought through and dangerously slow”.

3.48pm GMT

Opposition minister Chris Leslie responds to Greg Clark, and is very critical of the Cypriot bailout scheme.

Leslie calls the plan “extremely concerning”, and suggests the initial market reaction “may just be the start”.

Leslie adds that the decision to force a levy on savers risks causing severe damage to confidence in the banking sector.

It is never a good sign to savers that they would be better putting their savings under the mattress than in a bank.

Updated at 3.49pm GMT

3.44pm GMT

Minister Greg Clark adds:

This is a worrying situation not just for the people of Cyprus, but for many of our constituents in the House.

Updated at 3.55pm GMT

3.42pm GMT

UK minister updates House of Commons on Cyprus

Government minister Greg Clark is addressing parliament now about the Cyprus crisis.

Clark, Financial Secretary to the Treasury, confirms that members of the UK armed services will be compensated “reasonable losses” suffered because of the savings levy.

He then says that the Government is suspending payments to UK pensioners in Cyprus with Cypriot bank accounts until “at least tomorrow”.

Clark adds that pensioners could switch payments to another bank account.

3.38pm GMT

We’re looking for stories from people affected by the Cyprus bailout – if you can help, please visit this Open Thread: Cyprus bailout: how will it affect you? Open thread.

3.25pm GMT

Cyprus central bank confirms bank holiday to run till Thursday

It’s official: Cyprus’s central bank has decided to keep its commercial banks closed until Thursday (news which broke a few minutes ago).

Associated Press’s Menelaos Hadjicostis reports:

Cyprus banks will remain closed until Thursday as lawmakers try to amend a measure to raid bank accounts in the country.

Aliki Stylianou, a spokeswoman for Cyprus‘ central bank, says Monday’s bank holiday has been extended by two days.

The extension comes after a proposal to seize a percentage of all bank deposits in Cyprus, a move that was demanded as a condition for a 10 billion ($13.09 billion) international rescue package.

Cypriot lawmakers are now in talks to soften the blow for small savers before they approve the bailout. The parliamentary approval vote has been postponed from Monday until Tuesday evening.

And here’s AFP‘s take:

Cyprus banks will remain closed until Thursday, a Central Bank official told AFP, amid fears of a run on accounts by customers hit by a levy on their deposits imposed under a EU bailout deal.

“The banks will remain closed on Tuesday and Wednesday,” the official told AFP.

With Monday a public holiday, banks have not re-opened since the stringent terms of the EU deal were announced on Saturday.

Updated at 3.25pm GMT

3.08pm GMT

Another photo from the demonstration taking place in Nicosia:

3.04pm GMT

AP: Cyprus banks to remain closed until Thursday

Another big development: According to Associated Press, the Central Bank of Cyprus has decided that the country’s banks will remain closed until Thursday.

They were originally meant to open tomorrow, after today’s scheduled bank holiday.

Nothing official on the Central Bank’s website…. , and I’m afraid i can’t get through on the phone. But Reuters is also quoting a government source saying the banks will be shut on Tuesday and Wednesday.

2.50pm GMT

Eurogroup to speak tonight

Just in: The eurogroup (of eurozone finance ministers) are going to hold a teleconference call tonight to discuss the situation in Cyprus.

That will allow them to discuss potential changes to the savings levy, ahead of tomorrow’s parliamentary vote, delayed from today (which was delayed from yesterday).

Bloomberg’s David Tweet flags up that junior finance ministers will be crunching the numbers first:

Updated at 2.52pm GMT

2.47pm GMT

Here’s a new photo from Nicosia, of a demonstrator holding a sign calling for a referendum:

2.26pm GMT

In Britain, a Treasury minister will make a statement to MPs on the Cyprus bank deposit tax later this afternoon.

The Speaker’s Office said a minister will make a statement to the House of Commons about the proposed levy at 3.30pm GMT.

Yesterday, George Osborne announced that the UK government will compensate members of the armed forces based in Cyprus, whose bank accounts would be subject to the levy.

1.43pm GMT

The Dow Jones index has fallen in early trading in New York. But, as in Europe this lunchtime, it’s nothing to panic about.

The Dow is currently down 71 points at 14443, a fall of around 0.5%.

1.32pm GMT

France’s finance minister, Pierre Moscovici, has now stated that it is happy for Cyprus to change the terms of its savings levy, as long as the deposit tax raises the target of €5.8bn.

1.06pm GMT

Cyprus’s government has hit back against reports that it decided to impose the savings tax on those with less than €100,000 in the bank.

Greece’s Kathimerini has the story:

In a strongly-worded statement issued by spokesman Christos Stylianides about an hour after the postponement of the vote of the measures in Parliament in order to amend the measures, Nicosia rejected claims attributed to German Finance Minister Wolfgang Schaeuble that Cyprus turned down the idea of a 40% levy on accounts in excess of €100,000 and said that the plan was imposed on the Cypriot government.

The statement cites President Nicos Anastasiades as saying that “he categorically denies he was ever given the option of exemption of guaranteed deposits, i.e. deposits up to €100,000 euros.”

Meanwhile, two authoritative reports have outlined how the levy was agreed in the early hours of Saturday.

Peter Spiegel of the Financial Times reported:

Backed into a corner, the only thing the Cypriots could do was mitigate the damage. Several officials suggested putting all of the burden on deposits over €100,000. Berlin was agnostic about where the axe fell. But Cypriot officials, with the backing of the commission, felt anything over 10 per cent would appear so onerous that it would make the situation even worse.

“The Cypriot president did not want to agree to a levy higher than 10 per cent,” said one top negotiator. “People were joking that he has only rich friends.”

The Wall Street Journal has even more detail:

Mr [Olli] Rehn was the first to make a specific proposal. To raise funds, Cyprus should impose a special levy on deposits, taxing accounts of less than €100,000 at 3%, those up to €500,000 at 5% and those above at 7%. Such a “solidarity levy “—the brainchild of Thomas Wieser, an Austrian who chairs technical discussion among euro-zone finance officials, and Mr. Asmussen— could avoid a straight “haircut” on deposits, which they feared could be too destabilizing for Cyprus and the rest of Europe. The tax would be applied to all Cypriot banks, not just the two in deep trouble.

But Ms. Lagarde had something else in mind. The IMF chief presented a much more radical plan, in which deposits above €100,000 in Laiki and Bank of Cyprus would have been cut by between 30% and 40%. The owners of senior bonds in the two banks would also have faced losses—a step that was ultimately rejected. That plan would have limited the international bailout to €10 billion and raise some €7.5 billion from depositors.

Anastasiades fought for a smaller levy, but was bounced into accepting the plan by the threat of the ECB pulling the plug on Cyprus’s banking sector.

12.38pm GMT

The calmer mood in the financial markets reflects optimism that Cyprus will manage to reshape its savings levy in a way that is less painful for small shareholders.

Veteran economist Anatole Kaletsky is certainly hopeful:

The U-turn (should it happen) follows shock and anger across Europe during the weekend. A failure of democracy, or democracy in action?

@Pawelmorski, incidentally, wrote two excellent posts on the Cyprus bailout over the weekend (the first before many people even realised what had happened):

Saturday morning: Cyprus: A Brutal Lesson in RealPolitik

Sunday night: Cyprus: What Were They Thinking? and some other notes

Updated at 2.45pm GMT

12.16pm GMT

While things are calmer, do check out Joris Luyendijk’s banking blog, where a former JP Morgan banker is explaining why he swapped his City career for a new job at Oxfam:

The bankers who traded the City for Oxfam

Here’s a flavour:

My Damascene conversion, if you will, came during the financial crisis when Bear Stearns fell. There were a number of trades outstanding between JP Morgan and Bear Stearns and we went over to price them up. Now, usually when there’s a trade of the kind I was in, if I am 5 million up, you must be 5 million down. It’s zero sum. But when we looked at it up-close, it turned out that while our models said that we were say 3.5 million up, their models stated that they were up, too, by 2.5 million! That drove home the point for me how flimsy risk management structures really were.

Updated at 2.46pm GMT

12.12pm GMT

Financial markets calmer

Europe’s financial markets have calmed down after this morning’s early wobbles, despite the news that the Cyprus bailout vote has been delayed until tomorrow.

Spain and Italy remain the biggest fallers:

FTSE 100: down 44 points at 6447, -0.66%

German DAX: down 83 points at 7959, -1%

French CAC: down 50 points at 3793, -1.3%

Spanish IBEX: down 168 points at 8450, -1.9%

Italian FTSE MIB: down 325 points at 15736, -2%

Here’s market analysts RanSquawk’s midday summary:

The euro is still down one cent against the US dollar (compared with Friday night), at $1.2945.

11.42am GMT

Official: bailout vote delayed

Yiannakis Omirou, the speaker of the Cyprus parliament, has confirmed that the debate and vote on the country’s bailout package has been delayed until Tuesday, with a vote penciled in for 6pm local time or 4pm GMT.

11.33am GMT

Photos: protests in Cyprus

Cyprus’s president, Nicos Anastasiades, saw the public’s anger this morning as he arrived at parliament to discuss the crisis.

A group of demonstrators had gathered outside the building, carrying placards with slogans such as “hands off Cyprus”.

Here are the latest photos:

Updated at 11.38am GMT

11.21am GMT

Demo against savings levy later today

Heads-up, a demonstration against the Cypriot bailout deal is scheduled to start at 3pm local time, or 1pm GMT.

11.18am GMT

On Cypriot-Russian relations:

11.08am GMT

Key event

CyBC, the state TV station in Cyprus, is now reporting that today’s vote has been postponed until 4pm local time, or 2pm GMT.

And an EU official has told Reuters in Brussels that the vote was been put off until Tuesday to allow ‘more time for negotiation’.

It makes sense, given the ongoing chatter that the terms of the deposit levy will be changed. But it’s also hard to see how the country’s banks could reopen until the situation is resolved.

Updated at 11.37am GMT

11.02am GMT

Bailout vote ‘postponed’ – Cyprus state TV

Cypriot state TV news are reporting that this afternoon’s vote on the bailout has been cancelled, and that the country’s banks could remain closed for longer than expected.

Trying to get confirmation from Cyprus…. In the meantime:

10.47am GMT

Schäuble: don’t blame us for savings raid

German finance minister Wolfgang Schäuble has denied that Berlin is to blame for the decision to tax deposit holders in Cyprus.

Schäuble also confirmed that Germany would not have any objections to the terms of the savings levy being rejigged, as appears to be happening today.

Schäuble told reporters in Berlin that:

The levy on deposits below 100,000 euros was not the creation of the German government…If one reached another solution we would not have the slightest problem.

That’s a green light for Nicosia to reduce the impact on poorer savers, and increase the burden on the rich (see 9.09am for the latest)

10.29am GMT

Video: Cyprus’s president tries to calm fears over EU bailout

Here’s a video clip of Cyprus president Nicos Anastasiades addressing the nation last night:

(full transcript online in English here)

10.10am GMT

Parliamentary mathematics in Cyprus

Today’s vote in Cyprus on the bailout terms is a real nail-biter, because president Nicos Anastasiades does not actually hold a parliamentary majority.

His coalition controls 28 of the 56 seats in the Nicosia parliament, suggesting a significant chance that the bailout deal could be voted down this afternoon.

Here’s the breakdown:

Anastasiades party ΔΗΣΥ: 20 seats

ΔΗΚΟ (DIKO) (coalition party): 8

ΑΚΕΛ (AKEL): 19

ΕΔΕΚ (EDEK): 5

Greens: 1

ΕΥΡΩΚΟ (EUROKO): 2

Independent: 1

That’s via the invaluable Yiannis Mouzakis, who blogs as The Prodigal Greek. He reports that one of Anastasiades’s MPs is racing back from Argentina for the vote, but that some opposition MPs could support Anastasiades.

But whatever happens, Cyprus’s banking system will never be the same again, Yiannis argues:

If Germany’s intention was to reduce the size of it – closer to the eurozone average – they managed to achieve that with a masterful stroke in just one weekend.

Deposits flight combined with the sale of the Greek operations will probably leave the Cypriot banking system half the size it was on Friday night, even left with one systemic bank after restructuring.

Cannot see a smooth transition period without some form of capital controls.

By the time the dust settles, the Cypriot economy will sink and PIMCO’s adverse scenario [see here] will materialise. Many people did their best to make this a reality.

Here’s the full article: Cyprus, current state of play

9.41am GMT

Vladimir Putin’s interjection into the Cyprus crisis has caused some eyebrow-raising this morning:

9.09am GMT

Update: Cyprus rethinks raid on savers

Vladimir Putin’s attack on the Cypriot savers’ tax (see 8.56am) comes hours before the Cyprus parliament was due to vote on the bailout measures.

But the news this morning that the levy could still be renegotiated to limit the impact on smaller savers has brought some calm.

To recap: the latest proposal would (apparently) see savers with less than €100,000 in the bank lose 3% of their deposits (down from 6.75% originally).

Those with between €100,000 and €500,000 would lose 10%, as before.

But if you’ve got more than €500,000 in the bank, the Cyprus government would take 15%.

The WSJ, which broke the news this morning, says this would still raise almost €6bn, as originally demanded by eurozone.

One official told them:

As long as the sum remains €5.8 billion, I think it will be backed by everyone, but of course the ministers and the troika will need to hear exact figures and proof that this will work.

The Cyprus parliament is still expected to start debating the bailout at 2pm GMT (4pm local time), with a vote at 4pm GMT.

8.56am GMT

Putin blasts Cyprus savers tax

The Russian government has just blasted Cyprus’s bank levy, piling more pressure on Nicosia ahead of this afternoon’s vote on the bailout.

Vladimir Putin’s official spokesman, Dmitry Peskov, told reporters in Moscow that the president is very concerned about the tax on savers.

Peskov said Putin had held a meeting on the situation in Cyprus this morning, where he was deeply critical of the plan:

Assessing the possible decision of imposing additional tax by Cyprus on deposits Putin said that this decision, if taken, would be unfair, unprofessional and dangerous.

Wealthy Russians own a substantial chunk of total deposits in Cyprus — and eurozone officials were determined to make them share the pain of the bailout (given their concerns over money-laundering within the Cypriot banking system).

As mentioned at 7.53am, Russia has not decided yet whether it will extend its existing loan to Cyprus – giving Moscow plenty of leverage over the situation.

Updated at 9.21am GMT

8.42am GMT

Cyprus’s debt insurance costs jumps

This might cause some jitters in Brussels – the cost of insuring Cyprus’s government debt against default has jumped this morning.

The benchmark credit default swap contract for Cyprus has jumped to 768 basis points, up 113 from Friday.

In practice, that means it would cost €768,000 per year to insure €10m of Cypriot sovereign debt.

8.32am GMT

Key event

Last night, Cyprus’s president Nicos Anastasiades addressed the nation, warning of dire consequences unless the bailout deal was agreed.

Here’s the official translation into English: Cyprus President Nicos Anastasiades’ nationally televised speech

And here’s what Anastasiades claimed would happen without the deal:

1. One bank would instantly cease operation. Following that the other major bank would suspend operations and we would finally be led to the collapse of the banking sector.

2. As a result, depositors would lose direct access to their deposits, while a large number of depositors would be subject to significant losses.

3. Thousands of SMEs and other businesses would risk bankruptcy.

4. Equally important, however, would be the direct loss of thousands of jobs in the banking sector. I cannot also ignore the consequent loss of thousands of other jobs related to banking activities.

5. The culmination of disorderly bankruptcy would be our potential coercion to exit the eurozone. A similar development would doubtless lead to a significant devaluation of our currency and our national wealth, with all that that would entail.

8.28am GMT

Hedge fund manager takes calm view

Lex van Dam, hedge fund manager at Hampstead Capital, reckons investors would be wrong to dump shares in the face of the Cyprus crisis:

He said:

The whole Cyprus situation feels to me like a storm in a tea cup and weakness should be bought. This is a message from Europe to Cyprus to stop misbehaving.

(via Reuters)

Cyprus might be stunned by the suggestion that it is misbehaving; but I think van Dam is referring to the decision to cancel the parliamentary vote on the bailout yesterday (it’s now scheduled for this afternoon).

And shares are recovering slightly, with the FTSE 100 now down 67 points (1.05%)…..

Updated at 11.33am GMT

8.18am GMT

Here’s more details of the sell-off in Europe’s banks this morning:

Barclays: – 3.1%
Lloyds Banking Group: – 2.8%
Standard Chartered: -2.1%

BNP Paribas: -4%
Credit Agricole: -3.2%
Credit Suisse: -4.2%
Julius Baer: -2.04%
UBS -2.75%
Deutsche Bank: -3.3%
Unicredit -4.8%

Updated at 8.18am GMT

8.04am GMT

Heavy losses in Europe

European stock markets are open, and as feared shares are in retreat.

The FTSE 100 is down 99 points at 6390, a fall of 1.5%

The French CAC is down 2.1%, the German DAX opened 1.7% lower, and Spain and Italy have fallen almost 3%.

Banks are leading the fallers, with Barclays and Lloyds down around 3% in London.

Across Europe, Unicredit has tumbled by 5.2% and Societe Generale is down by 5.5%.

8.01am GMT

Reports of a rethink on the savings levy

Breaking news: there are reports that Cyprus’s government is rethinking the terms of the savings levy.

According to the Wall Street Journal’s Matina Stevis, this would lower the impact on smaller savers to just 3% of their deposits:

7.57am GMT

My colleague Angelique Chrisafis is in Cyprus, and wrote last night that people are stunned by the news that their deposits are being tapped as part of the country’s bailout:

Under the palm trees of Larnaca’s waterfront promenade, George Kyprou was staring out to sea and scratching his head. “I don’t know what to do,” he said. Like most Cypriots, he was astonished to wake up one bank holiday weekend morning to discover the government had seized up to 10% of everyone’s savings from their bank accounts without warning.

Kyprou, 62, born in Larnaca, had worked most of his life as a chauffeur and driver in England, proudly buying his London council flat and scrimping to put aside money in Cyprus for when he returned for holidays and eventually to retire. “I’d put aside £50 here, £20 there, all my life,” he said. Over decades, he had built up around €6,000 (£5,200) in a Larnaca account. “It was a state building society; I assumed it was safe.”

But now, as depositors holding less than €100,000 are made to pay 6.75% and those with more than €100,000 9.9% as part of a €10bn (£8.7bn) bailout agreed in Brussels, Kyprou stands to lose €400 overnight. “That’s a lot for someone like me,” he said.

More here: Cyprus bailout: ‘people are panicking, they’re afraid of losing their money’

7.53am GMT

Russian stock market opens lower

Over in Russia, the Moscow stock market fell by 2.7% in early trading.

Russia is a key player in the Cyprus bailout — with eurozone officials hoping that it will extend its existing €2.5bn loan to the country, and lower the interest payments.

However, the Russian government hasn’t yet said whether it will do this.

One government source told Reuters this morning:

There’s been no decision yet.

7.48am GMT

Heavy losses expected in Europe

The FTSE 100 is expected to tumble by 120 points when trading begins
at 8am GMT, as traders balk at the unfolding crisis in Cyprus.

Here’s the latest forecasts from IG Index:

FTSE 100, down 121 points at 6368
German DAX, down 166 points at 7926
French CAC, down 72 points at 3772,
Spanish IBEX, down 218 points at 8401

This follows the 2.7% drop in Japan’s Nikkei, and the euro’s tumble below $1.29:

Chris West, IG’s chief market strategist, commented, said news of the “Cypriot stability levy” had caused alarm in Asia:

It’s been a good old fashioned risk-off day in Asia, with the EUR predictably at the epicentre of the sell-off.

While depositors from other sovereigns with fiscal issue such as Portugal, Spain and Greece will be looking at the levy with great interest, we are confident they are not going to flee local banks, which is ultimately the key concern here.

Updated at 11.32am GMT

7.21am GMT

Cyprus bailout crisis hits markets

Good morning.

The eurozone faces a new crisis, as the botched bailout of Cyprus sparks panic and alarm across the country, and sends stock markets falling sharply.

The hugely controversial decision to force all savers in Cyprus to contribute to the bailout package by removing up to 10% of their deposits has been savaged all weekend.

The latest reports from Cyprus are that the government could adjust the levy, reducing the impact on poorest savers, ahead of a crucial vote on the bailout this afternoon.

Some commentators are predicting that savers in other troubled eurozone countries could start withdrawing their savings, but several City analysts believe this is unlikely.

There’s widespread agreement, though, that savers’ trust in the banking sector has been badly hurt by the decision to impose losses on savers – trampling over the principle that depositors should be protected in such circumstances.

Cypriot banks are still closed for a bank holiday today, and could remain shuttered for several days until the situation is resolved.

What’s certain is that the crisis has jolted the financial markets. In Asia, the Japanese Nikkei has fallen by 2.7%, its biggest drop since last May.

The euro has also fallen sharply, dropping almost two cents against the US dollar to $1.2885 – its lowest level of 2013.

European stock markets are expected to share in the sell-off when trading begins at 8am, with traders predicting losses of around 2%.

We’ll be covering all the latest developments through the day.

Updated at 11.31am GMT

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