After that resounding no vote, what’s in the stars for Cyprus today?
Martina Stevis and Michalis Persianis write in the WSJ that there are short term ideas — basically, Cypriot and European officials are discussing capital controls for when banks are due to open next Tuesday.
Meanwhile the IMF is coming up with a plan to merge Cyprus’ two biggest banks into a ‘bad bank’, a source told the pair. The IMF wouldn’t be drawn on that.
Where does the ECB stand in all this? Read more
The ECB’s role in this eurozone crisis/saga has been complex.
Yes, yay for Draghi with the OMT/whatever it takes and before that, the LTROs.
But there’s a couple of other niggles that have been highlighted, yet again, by the Cyprus ‘bail-out’. Read more
Wow. So it looks like the EU maybe won’t be breaking the sovereign/bank doom-loop after all!
The FT’s Peter Spiegel has seen a proposal from the European Commission that throws yet more doubt, if such a thing is even possible, on the seriousness of the June 29 eurozone statement that recognised “the imperative to break the vicious circle between banks and sovereigns”. Read more
Thousands of Greeks protested outside parliament on Sunday against a fresh austerity package agreed in return for the country’s second bail-out in 13 months by the EU and IMF, reports the FT. Protesters shouted “Thieves, thieves….” as riot police ringed the parliament building in central Athens. Activists from the “Indignant Citizens” movement – modelled on its Spanish namesake – have camped out for more than a week amid Europe-wide protests against unemployment and austerity. George Papaconstantinou, finance minister, is set to unveil on Monday a €6.4bn emergency package of tax increases and cuts in allowances. Separately the FT reported that international lenders were nearing a deal to wind down Greece’s existing €110bn ($161bn) bail-out programme and launch a new rescue but were still trying to settle differences on how much private bondholders will contribute.
Markets across Europe were moving higher on Tuesday morning…. Read more
Portugal has reached agreement with the European Union and the IMF on a €78bn ($116bn) financial rescue package, becoming the third eurozone country to be bailed out of a sovereign debt crisis, reports the FT. In a television address on Tuesday night, José Sócrates, the country’s caretaker prime minister, said the deal was challenging but indicated the terms were not as tough as those agreed with Greece and Ireland. The bail-out funds would total €78bn over three years, including financial support for Portugal’s banking system, the government said. The interest rate to be charged was not specified. The NYT notes the plan still requires EU approval, which might raise some obstacles.
Portugal’s cost of borrowing has jumped to nearly 10% amid growing fears that the country needs an international rescue to fend off a sovereign bond default, reports the FT. The yield on Portugal’s five-year benchmark bonds rose to 9.91% on Monday, higher than Ireland’s levels when Dublin was bailed out in November. The market estimate of the probability of a default is now 40%, up from 30% a month ago, as measured by credit default swaps. One analyst warned that on top of a bail-out, Lisbon may also have to restructure its bonds, which could then spark contagion elsewhere. A key test comes on Wednesday, with Portugal’s auction of up to €2bn in short-term bills. Although debt managers are expected to raise the money, they are likely to be forced to pay high yields.
Stress tests on Ireland’s four main lenders will reveal a capital hole of around €20bn (£17.6bn) in results to be published on Thursday of tests on Bank of Ireland, Allied Irish Banks, Irish Life & Permanent and EBS Building Society, reports Reuters, citing the Sunday Business Post. Earlier, the FT reported that Ireland is trying to secure a deal with the European Central Bank to contain the country’s banking crisis after the test results are published. Dublin wants about €60bn ($85bn) in medium-term funding from the ECB to replace emergency help from Ireland’s central bank. But the ECB is demanding that Dublin first honour its pledges to recapitalise its banks – and could threaten to cut off support. The standoff presages a fraught week for the new government of Enda Kenny, the Irish prime minister, with missteps likely to weaken investor confidence in Irish banks and the eurozone’s stability.
Portugal’s seemingly inexorable slide into an orderly bail-out threatened to become a drawn-out and potentially chaotic process as European leaders warned that Lisbon must pass the recently rejected austerity package before they would consider providing rescue loans, reports the FT. Meeting at a summit in Brussels, heads of governments and EU officials warned that Portugal was entering weeks of uncertainty that might leave the country without the ability to act on the new EU-backed budget measures or to request an international aid package. Separately, the FT reports that investors are asking whether Portugal’s banks could unravel as dramatically as those in Ireland, the last eurozone country to be bailed out. Reuters meanwhile reports that ratings agency Fitch on Thursday cut Porturgal’s credit rating by two notches to A-minus from A-plus.
Citigroup has moved to revive its share price, which has languished below $5, revealing a reverse stock split and its first quarterly dividend in more than two years, reports the FT. At one cent per share, Citi’s second-quarter pay-out may offer stockholders more symbolic value than actual income. But for a bank that nearly collapsed in the financial crisis and until recently counted the US government as its largest shareholder, reinstating the dividend is a key milestone for Citi executives, its investors and regulators. Despite the moves, Citi shares fell 1.5% to $4.43 in New York after the news, adds the WSJ, noting that the stock has “become the favoured play thing of high frequency traders”.
Concerns over Portugal increased on Monday as the country’s economy went into reverse and its cost of borrowing jumped to fresh euro-era highs, reports the FT. Deepening investor concerns were fears that some eurozone countries have cooled on the idea of giving the eurozone’s €440bn ($593bn) rescue fund more flexibility, strategists said. Portugal’s 10-year bond yields increased to 7.45% amid growing concern that Lisbon was heading for a bail-out similar to that of Greece and Ireland. Portuguese officials insist the country’s finances are strong enough to avoid a bail-out, highlighting plans to buy back bonds, due to be repaid in April and June, ahead of schedule on Wednesday. However figures showed on Monday that Portugal’s economy contracted in the last quarter of 2010 for the first time in a year as austerity measures curbed consumer spending.
The European Central Bank has intervened in eurozone bond markets for the first time in weeks, buying Portuguese debt amid fears the country could yet seek an international rescue, reports the FT. The ECB returned to the market on Thursday as Portugal’s cost of borrowing on 10-year debt jumped to a euro-era high of 7.63% traders said. The ECB temporarily suspended its bond-buying programme in mid-January. Lisbon blamed “speculation against the euro” for the increase in Portugal’s yields and called for a joint European response to “return markets to normality”. Pedro Silva Pereira, a minister and cabinet spokesman, insisted that Lisbon would not need to turn to the EU or IMF for financial assistance.
Portugal’s cost of borrowing hit a euro-era high on Wednesday amid concerns that Lisbon will ultimately have to turn to bail-out funds to revive its stagnating economy, reports the FT. Hedge funds were selling Portuguese debt after purchasing bonds at a syndication of five-year bonds just 24 hours earlier, brokers said. Investors are also concerned that EU policymakers will also fail to introduce the reforms necessary to beef up the eurozone bail-out fund. Portuguese 10-year bond yields jumped to 7.35% – the highest since the euro’s launch in January 1999 and a level regarded as unsustainable for Lisbon’s struggling economy.
European leaders on Thursday night approved an amendment to EU treaties to create a new bail-out system for troubled member countries, but hardened their disagreements over other measures to halt the eurozone crisis, reports the FT. The amendment, which must be ratified by all 27 member states, allows for eurozone countries to create a permanent rescue fund in 2013, the biggest change in EU institutions since the debt crisis unfolded early this year. But despite calls by top officials, including the heads of the European Central Bank and IMF, for a more immediate regional response to the crisis, a core group of leading EU members rejected suggestions of short-term changes to the EU response system.
The Wall Street Journal has a great, interactive, illustration of the Federal Reserve’s Primary Dealer Credit Facility — based on Wednesday’s central bank data dump.
Britain’s government has pledged billions of pounds in loans for any Irish bail-out operation, declaring that stabilising the Irish economy was in the UK’s national interest, reports the FT. UK Chancellor George Osborne said Britain was willing to help Ireland and its stricken banks because it was “a good neighbour”, not because some British banks – including state-owned RBS – were explosed to the crisis. Although Britain is not part of the 16-member eurozone, Osborne is under pressure from other EU countries to offer Dublin support. Wolfgang Schäuble, German finance minister, said Britain “knows it has special connections and obligations towards Ireland”. But Eurosceptic MPs, many in Osborne’s own Conservative party, see Ireland’s woes as a eurozone crisis to be handled primarily by eurozone countries. The Telegraph says Britain will contribute about £7bn towards an Irish bail-out.
Investors demanded high premiums from Spain and Greece at debt auctions on Tuesday as pressure mounted on eurozone bond markets amid concerns about EU deliberations over a possible Irish bail-out, the FT reports. Spain borrowed almost €4.97bn ($6.74bn) and Greece €390m from the markets as both countries paid a high price due to investor alarm over Ireland’s banking problems. Bloomberg quotes one analyst saying peripheral markets of the eurozone “remain at considerable risk of contagion”, while the Telegraph says the great concern is that the crisis could spread to Spain, which has a bigger economy than Greece, Portugal and Ireland combined.
Oh dear, it’s the battle of the government agencies. Over AIG.
And specifically, the US Treasury vs SigTarp. Read more
Greece took an important step towards a bail-out from its eurozone partners and the International Monetary Fund as it formally sought “consultations” over a €30bn-plus loan package to stave off default, the FT reports. In a letter to the European Commission, Greece’s finance minister, George Papaconstantinou, said Athens wanted to discuss “a multi-year economic policy programme with the Commission, the European Central Bank and the International Monetary Fund”.
At long last, an official release on the Greek bailout and … it’s something of anti-climax.
Statement by the Heads of State or Government of the European Union: Read more
It’s Friday the 13th — that seems as apt a date as any for Lloyds to unleash a £7bn writedown in HBOS’s corporate division.
A key question is why this bit of news was released during lunchtime on Friday (when FT Alphaville was conveniently ensconced at the Boot and Flogger). Read more
Yesterday was a pretty good day to bury news, amid the hoo-ha surrounding Treasury Secretary Tim Geithner’s much-anticipated ‘financial stability‘ plan.
So it’s only now we’re coming to this little snippet (HT Deus ex Machiatto). Read more