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Monday, March 25, 2013

Financial crisis far from over, says outgoing Bank of England chief

Mervyn King and senior German banker warn of 'unexpected twists and turns' before worldwide economy stabilises again

Sir Mervyn King warned last night that the global financial crisis is "far from over" and that fundamental changes are needed to the international system before confidence can be regained.

King, the governor of the Bank of England, said there would be many twists and turns before the worldwide economy stabilises. Speaking at an event at the London School of Economics, he said: "Whichever crisis we are talking about, it is far from over … there will surely be many unexpected twists and turns before we can truly say that the crisis is indeed over."

On the day after the Cypriot government put forward a rescue package to stabilise its economy, King's comments will reinforce concerns that the eurozone has failed to put its house in order. The event was also attended by Ben Bernanke, chair of the US Federal Reserve, who voiced concerns about fundamental imbalances exposed by the financial crisis. He said that while the eurozone works for some countries, it was obvious that others were unable to keep up. "There is a basic question: what is the right size for a single monetary policy?" In a clear reference to Greece, Portugal and Cyprus, he said the crisis had exposed countries with weaker productivity and higher labour costs.

The former head of the German central bank, Axel Weber, also speaking at the event, added to the warnings that the crisis had yet to play out in full. "We are not out of the woods yet," said Weber, now chairman of investment bank UBS. Weber emphasised that the colossal debts run up by western countries in the aftermath of the banking crisis remained a huge drag on economy growth and stability. "While there be more signs of stability, this may in fact be a period when problems that are still with us resurface. The underlying situation remains difficult and is not improving," he said.

He said the soaring stock market had provided a false hope that the eurozone crisis has eased. Weber joined former US treasury secretary Larry Summers and IMF chief economist Olivier Blanchard on stage at the London School of Economics to mark the end of King's 10-year term as Bank of England governor.

King will retire in the summer and will be succeeded by the head of Canada's central bank, Mark Carney, who was in the audience along with many of the world's top economists and central bank staff.

Weber said he was also concerned that governments had responded to the crisis by giving more powers to central banks. He recalled how he refused an offer from the German finance ministry to take on regulatory powers, fearing it would undermine the bank's monetary policy role. "As central banks play a larger role, we need to see the potential downsides," he said. "I'm concerned they are taking roles that distract them from their main task."

Blanchard said the powers acquired by central banks created a "democratic deficit" that could eventually lead to social unrest. The situation in Europe was a cause for concern, especially when central banks were put in a position of making crucial decisions that affected millions of people's lives, he said.

His comments echoed those of many politicians across Europe after the crisis in Cyprus was exacerbated by demands from the European Central Bank for a resolution. The ECB warned last week that it would refuse to lend to banks in Cyprus unless a deal was struck, pushing the government on the island, which is only four weeks old, to accept demands from Brussels for an initial €5.8bn (£5bn) cash payment to secure loans worth €10bn. Bernanke defended the policy shift that has seen central banks assume regulatory powers, arguing that it provided a unique view of the way that international money markets operated. "It is important for central banks to be regulators to understand the financial system and how it is developing," he said.


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Greek politicians wary of Cyprus deal


Kathimerini

Greek politicians wary of Cyprus deal
Kathimerini
ìPainful,î ìsheer blackmail,î ìpunishingî and ìintolerableî are some of the words Greeceís politicians used Monday to describe the deal agreed between Cyprus and the troika for a 10-billion-euro bailout of the country. Speaking several hours after the ...

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Cypriot bank branches in Greece reopen on Tuesday


Kathimerini

Cypriot bank branches in Greece reopen on Tuesday
Kathimerini
Piraeus is set to become Greece's second-biggest lender (behind National) after absorbing the branches, assets and portfolios of BoC and CPB in Greece plus the 29 branches of Cyprus's third-largest bank, Hellenic, according to the agreement reached in ...

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Cyprus bailout deal: at a glance

The essential points of the deal, including the closure of Laiki Bank, and what this means for savers and the eurozone

Cyprus struck a last-minute bailout deal in the early hours of Monday morning, aimed at preventing the island becoming the first country forced out of the single European currency.

• Crucially, the new programme spares deposits below €100,000 (£85,500), unlike last week's proposals, which sparked outrage with a 6.75% tax on all bank depositors.

• Cyprus's second-largest bank, Laiki Bank will be closed. Its €4.2bn in deposits over €100,000 will be placed in a "bad bank", meaning they could be wiped out entirely. Those with smaller deposits at Laiki will see their accounts transferred to the Bank of Cyprus.

All lenders to Laiki will see their investments wiped out, in a first for a eurozone bailout. In other bailouts, holders of higher-rated bonds have not faced such losses.

• Bank of Cyprus survives the axe, but faces huge restructuring. No bailout money will be used to recapitalise the bank. Instead its shareholders and bondholders will be hit. It is thought depositors with over €100,000 at the bank will also be involved in the recapitalisation and face losses of around 30%.

Getting the bank up to healthy EU-mandated capital levels will be made harder by the fact that Bank of Cyprus will inherit a €9bn debt Laiki had with the European Central Bank.

Is my money safe in a UK branch of Laiki Bank?

The bank is saying it is "business as usual" for individuals and companies with money in its four UK branches.

It says its customers will not be transferred to Bank of Cyprus, even though it set up as a branch rather than a subsidiary. It is not restricting withdrawals and says customers should not panic.

But what if the bank had to close?

Customers are covered by the Cyprus deposit protection scheme up to €100,000. Laiki Bank UK is in talks with the Bank of England and Financial Services Authority about the status of savers with more.

What about Bank of Cyprus customers in the UK?

Bank of Cyprus's UK operation is a separate entity, incorporated in the UK, so customers are unaffected by any of the arrangements made in Cyprus. Customers are covered by the UK's Financial Services Compensation Scheme, so if anything did get wrong they would get the first £85,000 of their holdings returned, possibly within days.

How does the deal differ from the one on the table last week?

Two key differences: first, small depositors have been protected – with the EU's €100,000 legal guarantee upheld. Second, the plan does not have to be approved by the Cypriot parliament because losses on large depositors will be achieved by restructuring Cyprus's two largest banks and not by levying a "tax" on its citizens.

Who are the biggest losers?

Russian nationals are estimated to hold more than €20bn of the €68bn deposited in Cypriot banks and many have deposits over €100,000.

Laiki Bank was 84% owned by the Cypriot government, following a €1.8bn bailout in June last year. The rest is owned by private and institutional investors, including bank staff.

Laiki bondholders will be wiped out and lenders to the Bank of Cyprus will face heavy losses in the recapitalisation.

Thousands of staff at both Laiki and the Bank of Cyprus will lose their jobs.

What will happen when the banks open in Cyprus?

There will still be very tough restrictions on bank account access and the movement of cash out of Cyprus, to help prevent a bank run. The European commission said these capital controls will only be enacted "exceptionally and temporarily", as requested by the Cypriot authorities.

The fear is that Cypriot savers will be sufficiently worried by the past week's events that, when they are finally allowed to, they will take their money out regardless of the guarantee that deposits up to €100,000 are safe.

Will this be the end of Cyprus's problems?

No. In fact, analysts say it is only the beginning. Cyprus has benefited for years from attracting the deposits of wealthy individuals from around the eurozone. That business model is now broken and the country has nothing to replace it with. Tellingly, the EU gave no economic projections for Cyprus in its statement.

Gary Jenkins of Swordfish Research said: "The economy is crushed for the next God knows how many years. As soon as people can take their money out the banks, they will take it out. Confidence has disappeared. Who's going to want to do business with Cypriot corporates right now?"

Will Cyprus need another bailout?

Possibly. The €10bn bailout raises Cyprus's debt to around 143% of GDP. With GDP likely to fall dramatically over the next few years, that ratio could start to look even more perilous.

A deal to restructure Cyprus's debt by hitting private bondholders would go against EU promises that the Greek deal of that kind was an exception.

All of which prompts analysts at UBS to suggest Cyprus's eurozone partners might have to get involved again some time in the future. They write: "In other words, we see a risk that this bailout for Cyprus might not have been the last one."

Will this be the model for future bailouts?

It is impossible to say. So far, no two eurozone bailouts have been the same. Policymakers appear to react to events, rather than follow a fixed plan. The danger is that no one is paying attention to the unintended consequences.

What could the unintended consequences of this particular plan be?

With their initial plan to tax all depositors, policymakers made it clear that they would, in certain circumstances, be prepared to take that money. Even though they did not go through with it, this will likely shake confidence in the banks if the financial crisis re-escalates in other countries, such as Spain or Italy.

Meanwhile, larger depositors and foreign companies with money in Spain and Italy are likely to start shifting that elsewhere, fearing that the Cyprus deal will be a model for future bailouts, further damaging already weak financial institutions.


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Greece places its bet on young entrepreneurs


Globe and Mail

Greece places its bet on young entrepreneurs
Globe and Mail
Unemployment in Greece has been surging in recent months, with a rate hovering around 25 per cent, as austerity measures continue to put increased pressure on the fragile economy. Prime Minister Antonis Samaras does not have a lot of fiscal room to ...


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The Secret May Be in the Coffee


The Secret May Be in the Coffee
New York Times
People who live on the Greek island of Ikaria are known to have remarkably high life expectancies, and researchers have been studying them carefully to learn why. Now a new report suggests that one reason may be the coffee they drink. Enlarge This ...


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The Labour party has failed us. We need a new party of the left | Ken Loach, Kate Hudson and Gilbert Achcar

Britain needs a party that rejects neoliberal policies and improves the lives of ordinary people. Help us create one

As the age of austerity bites harder and deeper than many anticipated, it is little wonder that Ken Loach's new film The Spirit of '45, charting the great post-war social advances, strikes a powerful chord. Yet the promise of opportunity, dignity, health and work, fulfilled by Labour's welfare state after 1945, is not to be one that we can look to today's Labour party for. Yet contemporary Britain – and beyond – is precisely where such policies are needed.

Austerity is wreaking economic catastrophe on Europe, most recently on the people of Cyprus, but George Osborne is still following the same disastrous policies. Last week's budget came as no surprise: Osborne announced yet more spending cuts and extended the public sector's pay rise cap, amounting to a real terms pay cut. He's digging us even further into an economic hole, as the Office for Budget Responsibility's revised output forecast shows – from a predicted 1.2% growth down to 0.6%. That sounds like further decline, not the promised growth, and ordinary people are paying the price. The virulence of the government's economic attacks knows no bounds: Atos, workfare, council tax, the bedroom tax – punitive policies against the most vulnerable in society.

Judged by its own stated goals, government policy isn't working – borrowing will be around £61.5bn higher than planned. Of course the reality is that austerity policies are actually designed to dismantle the welfare state, bring down wages and fully marketise the economy, destroying all the social and economic gains of ordinary people since the second world war. So from the government point of view the policies are working.

Across society, there is an increasing understanding of the government's real agenda and as a result, opposition is mounting and economic alternatives are being discussed. Only last week, the Guardian published a letter from over 60 economists, warning that the worst was yet to come with 80% of the cuts still ahead of us.

Yet while economic alternatives are articulated, where can we turn politically to see these expressed as party policy? Who is on our side, to fight for an alternative? In the past many expected the Labour party to stand for us, and with us, but no longer. Workfare? Last week Labour abstained on the vote and now the government can work over quarter of a million jobseekers. Bedroom tax? Would a Labour government repeal it?

We need policies that reject Tory cuts, regenerate the economy and improve the lives of ordinary people. We are not getting this from Labour. There is no doubt that some of Labour's past achievements have been remarkable – the welfare state, the NHS; a redistributive economy making unprecedented levels of health and education possible. But such achievements are in the past. Now Labour embraces cuts and privatisation and is dismantling its own great work. Labour has failed us. Nothing shows the contrast more clearly than The Spirit of '45.

Labour is not alone in its shift rightwards and its embrace of neoliberal economic policies. Its sister parties across Europe have taken the same path over the past two decades. Yet elsewhere in Europe, new parties and coalitions – such as Syriza in Greece or Die Linke in Germany – have begun to fill the left space, offering an alternative political, social and economic vision. The anomaly which leaves Britain without a left political alternative – one defending the welfare state, investing for jobs, homes and education, transforming our economy – has to end. For this reason we are calling on people to join the discussion on forming a new party of the left – you can find out more about our appeal here. The working class cannot remain without political representation, without defence, when all its victories and advances are being destroyed.


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Pittsfield: Greek pastry sale planned Saturday


Pittsfield: Greek pastry sale planned Saturday
Berkshire Eagle
The annual Greek Pastry Sale, sponsored by the Greek Ladies Philoptochos Society of St. George Greek Orthodox Church, will be held on Saturday, March 30. The sale will run from 9 a.m. to 2 p.m. in the church hall at 73 Bradford St., across from Dery ...


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Cyprus saved – but at what cost?

Politicians, trade unionists, analysts and business people are complaining that democracy had been circumvented

Cypriots have reacted to the news of their own salvation from economic meltdown with relief – but also trepidation and despair.

In the streets and cafes of Nicosia, and on television chatshows aired in homes across the nation state, Monday's message was the same: "We have been saved but at what cost?"

An agreement had finally been reached, ending days of uncertainty over Cyprus's membership of the eurozone, but like a wounded animal the country had been left bleeding, its people staring into the future with fear. The interior minister, Socrates Hasikos, encapsulated the mood, describing the European Union and International Monetary Fund-backed bailout as the best of a very bad bag of choices.

"We had got to the point where we were discussing a [depositor] haircut of between 50% and 60%," he said, adding that the Cypriot parliament's rejection of the first accord, with its highly controversial levy on depositors big and small, had been hugely negative for the country's banks. "So this is the best we could get."

After Monday's deal, banks – closed since the outbreak of the crisis 10 days ago – will almost certainly reopen on Tuesday, he said. Within hours of the agreement being brokered, it was quite clear that Hasikos's view of the island's quest to keep bankruptcy at bay was not unanimously shared. In averting a potentially disastrous disorderly default, the deal had kept war-partitioned Cyprus in the family of euro nations – long seen as a geopolitical benefit for a nation divided between Greeks in the south and Turks in the north since 1974.

But overnight everything had changed. In accepting what was on offer from the EU and IMF, the Cypriots had also agreed that nothing would be the same again: the €17bn (£14.4bn) bailout had come with the price of dismantling their economy as an offshore financial centre and reconstructing it from the bottom up. Unemployment, business closures and recession inevitably loom.

Across the board, politicians, trade unionists, analysts and business people decried the manner in which the agreement had been sealed. In the confusion of a deal whose details remained elusive, many complained that, once again, democracy had been circumvented – with Nicosia's 56-member parliament having no say over an agreement that had ultimately been drawn up in Brussels.

"It is illegal and undemocratic," said Christos Tombazos, general secretary of the Pancyprian Federation of Labour. "We're talking about massive changes to the banking system. It should go to referendum for the Cypriot people to decide."

Even worse, said the communist party, Akel – which navigated the crisis until it was ousted from power in elections last month – the bailout had sown the seeds of the island's destruction by enforcing losses not only on wealthy depositors with holdings of over €100,000, but imposing capital controls and closing, Laiki, the country's second largest bank. "A collective punishment has been inflicted on the people of Cyprus and not the bankers whose criminal decisions brought us here," said Giorgos Doulouka, Akel's spokesman. "Transforming the banking system could have been done in an alternative way, on a long-term basis, and not through shock therapy which will be disastrous for the economy and the people of Cyprus."

With the backing of Akel, the island's powerful trade unions promised mass protests in the days ahead. "We've lost a lot of sleep," said Panaghiotis Angastiniotis, who has run a factory in Nicosia that supplies raw materials to the construction sector for nearly 40 years. "We do all our business through Laiki and I have no idea, now, if we'll be able to maintain our credibility and go on paying suppliers."

As in Greece, Cyprus now seems adrift on a wave of angst with many worrying that austerity demands, also being made by the EU and IMF, will push the electorate to political extremes.

Joblessness, already at a record 15%, is expected to soar as the centre-right president, Nicos Anastasiades, moves ahead with internationally mandated reforms. "People are becoming increasingly intolerant and turning to the extreme right and left," said Cleopatra Kitti, the island's pre-eminent business adviser to government bodies. "These policies are clearly creating disillusionment with the European project even if Cypriots realise, after the drama of the last week, that their politicians have not been up to the challenge of looking after their interests. The biggest test, now, is going to be for this country's political class."


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Lawyer demands UCF end Greek Life ban over lack of due process


WKMG Orlando

Lawyer demands UCF end Greek Life ban over lack of due process
WKMG Orlando
A lawyer on behalf of the North-American Interfraternity Conference is demanding the University of Central Florida end its Greek Life ban on Monday because he says it was instituted without due process. According to a letter from Attorney Francis E ...
Greek Sing marks end of chapter competitionBG News
Greek Sing is a musical, philanthropic successCMU The Tartan Online

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Greece continues to support Serbia on EU, Kosovo


B92

Greece continues to support Serbia on EU, Kosovo
B92
Asked whether Greece remains steadfast in its stand that it will not recognize the unilaterally declared independence of Kosovo, "following Romania's announcements that it could review its position", Stoidis said : “Greece's stand remains unchanged.“ ...


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Spectators Kept From Greek Independence Parades


Greek Reporter

Spectators Kept From Greek Independence Parades
Greek Reporter
And we have always emerged stronger as a nation, better as a society, more proud about what we are and more confident about what we can achieve.” He urged Greeks to “stay clear of divisive slogans, the fatalism of submissiveness and national ...


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Cyprus Bailout Prompts Muted Relief in Markets

(LONDON) — The rally in stock markets in the wake of the Cypriot bailout deal proved short-lived Monday as investors remained cautious following a crisis that laid bare the scale of problems surrounding Europe‘s single currency. In the immediate aftermath of the deal between the Mediterranean island nation and international creditors, stocks rallied strongly and the euro edged back up above the $1.30 mark. But as the day wore on, the optimism was running dry. Though Cyprus’ bailout deal will prevent it becoming the first country to ditch the euro, investor worries over Europe’s common currency remain, not least because the deal sanctions raiding bank deposits. (MORE: Cyprus Rescue: The Destruction of a Tax Haven) “The Cypriot bailout has a powerful legacy which may alter the security with which depositors elsewhere in the eurozone view the safety of banks,” said Jane Foley, an analyst at Rabobank International. “It has also reportedly uncovered a lack of harmony.” In Europe, the FTSE 100 index of leading British shares was up 0.2 percent at 6,403 while Germany’s DAX rose 0.1 percent to 7,916. The CAC-40 in France was down 0.2 percent at 3,761. Italy’s FTSE-MIB was the big underperformer, trading 1.5 percent lower, as political parties there still struggled to form a government. On Wall Street, the Dow Jones industrial average was down 0.2 percent at 14,481 while the broader S&P 500 index was flat at 1,557. The focus will likely remain on developments surrounding Cyprus for a while yet. In particular, investors will be interested to see if the level of bank withdrawals from the country’s banks when they reopen. That’s scheduled for Tuesday. A longer-lasting concern is how the Cyprus deal plays out in other countries, notably those at the forefront of Europe’s debt crisis. Will depositors look to reduce their holdings in Spain, Italy and Greece? “It will set an unsettling precedent for future bailouts and investors will once again be concerned over the security of their bank deposits,” said Mike McCudden, head of derivatives at Interactive Investor. In return for

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The London Whale and the real link between the US economy and Cyprus | Dean Baker

Washington policy-makers say the deficit is the greatest threat to the US economy. In reality, it's the failure of banking reform

Many highly-respected Washington types have been running around for the last three years yelling that because of its large budget deficits, the United States is Greece. Then we learned last week that the immediate danger is the United States being Cyprus.

As we now know, Cyprus is a small island country with a financial sector that has run amok, following in the footsteps of Ireland and Iceland. The assets of its banks were eight times the size of the country's economy.

This meant that when the banks' big bets went bad, there was no way Cyprus' government could afford the price of the bailout. As a result, Cyprus was forced to go hat in hand to the European Central Bank and accept whatever offer was put on the table. However the Cyprus crisis is finally resolved, it is not likely to be a pretty picture for the citizens of Cyprus.

As the Cyprus crisis was unfolding last week, we also got to see the report of the Senate Permanent Subcommittee on Investigations (pdf) on JP Morgan's losses at its "London Whale" trading division. The report chronicles a series of bad bets on derivatives that were compounded by traders doubling down their stakes. They concealed the size of their losses both to bank officers and regulators. The end result was a $6bn loss.

JP Morgan is a huge bank and can swallow $6bn in losses, but the incident showed as clearly as possible that the Dodd-Frank reforms are not working. The London Whale's losing trades were all done in the Dodd-Frank era. The bill's provisions did not prevent JP Morgan from making massive bets and misleading regulators about their nature and the risks involved.

If the regulators were not able to catch the London Whale's huge gambles before they went bad, why would we think that they will catch the next crapshoot from the Wall Street gang? It's time that we looked at this seriously: the regulators lack either the will or the competence to rein in the big banks. The big banks are going to get away with everything they want, regardless of the provisions of Dodd-Frank.

If the big banks are too big to regulate and, according to Attorney General Holder, too big to prosecute, then the only sensible course is to break them up. There have been some promising developments in this area.

At the top of the list is Elizabeth Warren's election to the senate. Senator Warren has already made it clear that she will use her seat on the Senate banking committee to try to hold the banks and bank regulators accountable. The other important development is that Warren seems to have an ally in Louisiana Senator David Vitter.

At first glance, this might seem an unlikely alliance. Warren is clearly on the left side of the Democratic party and Vitter is to the right of center of a very conservative Republican party. But Vitter, apparently, takes his belief in the market seriously enough to realize that there is no place for "too big to fail" banks in a free market. The point is straightforward: if a bank's creditors know that the government will cover its losses, the bank is gambling with the taxpayers' money, not its own.

If there is ever going to be enough political force to break up the big banks, it will have to come from this sort of left-right coalition that moves in toward the center. As it stands, the leadership of both parties is too closely tied to the financial sector to take any steps that fundamentally threaten their interests.

This has nothing to do with political philosophy: the leadership of both parties is owned by the financial industry. However, if the outsiders in both parties can build up enough popular outrage over Wall Street's shenanigans, the party leadership will follow.

There is precedent for this sort of left-right coalition. In 2009, Representative Alan Grayson, one of the most progressive members of the House, joined with Ron Paul, one of the most conservative Republicans, to co-sponsor a bill calling for an audit of the Federal Reserve Board by the Government Accountability Office.

Over the next year, the bill gradually got more co-sponsors until eventually an overwhelming majority of members had signed on. It was difficult to see why the operations of such an important government agency should be exempted from normal oversight. As a result of this pressure, an amendment was slipped onto the Dodd-Frank bill that required the Fed to release the details of the $16tn in loans that were made through its special lending facilities.

It will take the same sort of dynamic to create the political space where the big banks can be broken up. Of course, this effort will be much harder. It means pulling the big banks away from the public trough, not just releasing some embarrassing information.

We can also expect the elite media to provide the same sort of condescension and misinformation in the battle to break up the banks as they did in the battle over the Fed audit. Proponents of downsizing the banks will be ridiculed, regardless of their expertise in finance. The big banks will be given every opportunity to push their line, in spite of its absurdity and the lack of supporting evidence.

It will be a tough fight. On its face, it seems that the Wall Street crew is invincible. But the London Whale episode and the silly efforts at cover-up should provide some grounds for confidence. These people can be pretty brazen in their contempt for the law and the general public. This arrogance on the part of the Wall Street gang is exactly what we need to give democracy a chance.


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Recipe of the Day: Greek Salmon Burgers


Recipe of the Day: Greek Salmon Burgers
Health.com
Last month we told you how a Mediterranean diet can help your avoid cardiovascular problems and heart trouble. Today's recipe comes to you with a Mediterranean focus. These Greek salmon burgers are a perfect week-night dinner option. They're easy to ...


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How to cook Gizzi Erskine's Greek yoghurt pannacotta with roasted rhubarb


Metro

How to cook Gizzi Erskine's Greek yoghurt pannacotta with roasted rhubarb
Metro
Pannacotta has to be one of my favourite puddings, it's light and creamy but it's also loaded with fat and can be super rich. I started making it with creamy Greek yoghurt a few years ago and haven't looked back. It's acidity lightens it, but it still ...

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Cyprus bailout deal with EU closes bank and seizes large deposits

Draconian terms aimed at keeping Cyprus in eurozone include closure of second-largest bank and big losses for wealthy savers

European leaders reached an agreement with Cyprus early on Monday morning that closes down the island's second-largest bank and inflicts huge losses on wealthy savers.

Those with deposits of less than €100,000 (£85,000) will be spared, but those with more than €100,000 – many of them Russian – will lose billions of euros under draconian terms aimed at preventing the Mediterranean tax haven becoming the first country forced out of the single currency.

The deal is expected to wreak lasting damage on the Cypriot economy, which has grown reliant on offshore banking and Russian money. Analysts said Cyprus could see its economy contract by 10% or more in the years ahead.

European shares lost early gains, as initial enthusiasm over the bailout deal faded. The FTSE 100 was still positive, up 0.6% and the German DAX was 0.5% higher. But Italy's FTSE MIB moved into negative territory, down 1.1% on the day. In the US, the Dow opened 40 points higher at 14,552. Following an early rally, the euro was down around half a cent against the dollar at $1.293.

A Paris-based trader said: "The loss of confidence in the European banking system stemming from the Cypriot crisis will not only weigh on the banks but also on the economy of the region."

The final deal came close to what the IMF chief, Christine Lagarde, had demanded a week ago but which was rebuffed by the Cypriot president, Nicos Anastasiades.

Laiki, or Cyprus Popular Bank, is to be closed. Its €4.2bn in deposits over €100,000 will be placed in a "bad bank" and could be wiped out entirely. Those with smaller deposits will see their accounts transferred to Bank of Cyprus.

The Cypriot government reportedly fought hard for Bank of Cyprus to be spared, but the island's biggest bank will face huge restructuring. No bailout money will be used to recapitalise it; instead shareholders and bondholders will be hit. It is thought depositors with more than €100,000 at the bank will also be involved in the recapitalisation, and are expected to face losses of around 30%.

Getting the bank up to healthy EU-mandated capital levels will be made harder by the fact that Bank of Cyprus will inherit a €9bn debt Laiki had with the European Central Bank (ECB).

The bailout deal does not need approval from the Cypriot parliament because it has been achieved by restructuring the country's two largest banks, rather than levying a new tax on citizens.

Negotiations got under way on Sunday amid a hardening of stance by the IMF and Germany, which insisted that depositors must take the hit for bailing out the eurozone's latest crisis economy.

Reports suggest that Anastasiades threatened to resign amid demands for a deep restructuring of Cyprus's banking system, but he remained in his post on Monday morning: "I'm happy because we shall have a programme and it's in the best interests of the Cyprus people and the European Union," he said, on leaving the building in Brussels where talks were held.

The ECB had threatened to cut off funds propping up Cypriot banks on Monday, which would have precipitated the island's exit from the euro if the emergency meeting had not reached an agreement.

Wolfgang Schäuble, Germany's finance minister, said the deal agreed in Brussels overnight is "much better" from a German point of view than the original plan.

He said the goal was to shrink the Cypriot banking sector to the European average of three-times national output, rather than its current size of seven times.

Cyprus had hoped to secure a rescue package from Russia, but the government was forced into fresh negotiations with its troika of lenders – the EU, the IMF and the ECB – after the Cypriot finance minister, Michalis Sarris, returned empty-handed from two days of talks in Moscow last week.

The new bailout deal will hit foreign investors, particularly Russians, hard. Russian nationals are estimated to hold more than €20bn of the €68bn deposited in Cypriot banks.

Russia's prime minister, Dmitry Medvedev, said on Monday: "They are continuing to steal what has already been stolen," using a phrase Vladimir Lenin used to answer the allegation that the Bolsheviks were thieves.

Russian officials have repeatedly compared the Cypriot bank levy to Soviet-era expropriation.

There were signs of panic over the weekend as a €100 limit was imposed on ATM withdrawals in Cyprus. Officials said they believed the country would now need strict controls on money transfers in and out of the economy in the coming weeks or possibly months, cutting off its citizens and companies from much of the rest of the eurozone's financial system.

Europe's economics commissioner, Olli Rehn, said: "The near future will be very difficult for the country and its people."

In Cyprus the mood is grim. Cypriots realise that their economy will take a huge hit and there are worries of long-term unemployment as big foreign investors are expected to seek ways to flee from the country. Anger remains directed at the EU, and Germany in particular.

Alexandra Salmani, 32, moved to Cyprus eight months ago to escape the financial crisis in Greece. She said: "We came here to find a better life, and it's exactly the same thing as in Greece. Everywhere I go there's crisis – I'm telling all my friends that I'll go to Germany next. Someone has to learn to say no to Merkel. They saw a rich country, decided to take their money, and destroy them. They are not human."


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UNIVEG opens sourcing and sales office in Greece


FreshPlaza

UNIVEG opens sourcing and sales office in Greece
FreshPlaza
UNIVEG opens sourcing and sales office in Greece UNIVEG announces the opening of a sourcing and sales office in Greece, under the leadership of Petros Milios. Petros has extensive experience in the fresh produce business, having worked at Chiquita, ...


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Greece's Independence Day Parade Takes Place Amid Heavy Police Presence


Montreal Gazette

Greece's Independence Day Parade Takes Place Amid Heavy Police Presence
Huffington Post
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After Cyprus Bailout Deal, Europe's Problems Worse Than Ever

Cyprus may have been saved from disaster, but don't be fooled: Europe is still a hot mess. In the middle of the night on the...

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