ECB Re-Bluffs To Cyprus Bluff, Is "Prepared To Let Cyprus Go"
When the market briefly surged yesterday, following the cryptic note from the ECB that it would "provide liquidity within existing rules" we urged to ignore the kneejerk algorithmic exuberance (although with only algos left trading that was obviously self-defeating) which interpreted this as an indication the ECB would provide unconditional liquidity now and forever, and that this was hardly a bullish sign because "the last thing the ECB wants is to appear weak, and fold letting every other broke deadbeat country to demand the same equitable treatment and diluting Germany's political might." Today, Reuters has picked up on this coming out with its own analysis that the "The European Central Bank is prepared to cut off funding to Cyprus and let the Mediterranean island succumb to financial meltdown if it has to, confident it has unlimited firepower to protect the rest of the euro zone."
It is unclear how much of the article is actual analysis, and how much interest-driven propaganda to put the ball back in Cyprus court with the imputed knowledge that the ECB will not fold and thus cave to Troika deposit haircut demands, but fundamentally the logic is there as, once more, the ECB will hardly want to appear weak and cave in to a "recalcitrant" and unyielding Cyprus. Of course, what happens if indeed Cyprus decides to pull the € plug, should Russia provide an unlimited backstop and in the process subjugate a part of European territory without firing a shot, and the precedent that Europe can and will let members go, nobody knows but one thing is certain: stocks will go, as always, up.
From Reuters:
Cyprus propelled the 17-nation bloc into uncharted waters on Tuesday by rejecting a proposed levy on bank deposits as a condition of a 10 billion euro ($12.9 billion) EU bailout.
Without the aid, much of it to recapitalize Cypriot banks, the ECB says they will be insolvent, and it requires banks to be solvent for them to receive central bank support.
Denied these funds, Cyprus would be left staring into a financial abyss.
For the rest of the euro zone, the ECB has a suite of policy tools at its disposal to prevent contagion - with bond purchases and unlimited liquidity offers to the fore.
"Tools" such as the unlimited, open-ended and very much non-existent OMT, which only "works" as long as it never has to work, because the Deus Ex qualities attributed to it by Draghi would actually have to be formalized, with the legal conditionality precedents put in writing should it truly start buying up bonds, something which would immediately destroy its image as the "end all, be all" bazooka that can fix any ailment. Which is why the second the OMT must be used, is when the entire European house of cards implodes. The catch is that a country must first agree to an aid plan of reforms and austerity measures. The Cyprus case has highlighted just how difficult agreeing such a program can be. "Even if the principle of OMT is still there and valid, all the drama about Cyprus may remind people that the bar to get OMT is actually higher than they probably think," Deutsche's Gilles Moec summarized.
As for the ECB's hard line:
By stressing that it stands ready to provide liquidity "within the existing rules", the ECB is standing firm.
The central bank is not ready to bend for Cyprus.
As its governing council gathered for a mid-month meeting on Wednesday, Asmussen pressed Cyprus to agree to an aid plan:
"We can provide emergency liquidity only to solvent banks and ... the solvency of Cypriot banks cannot be assumed if an aid program is not agreed on soon, which would allow for a quick recapitalization of the banking sector.
With Cyprus sovereign bonds ineligible for use as collateral for ECB refinancing operations due to their low credit ratings, the Cypriot central bank is providing banks with Emergency Liquidity Assistance (ELA).
These emergency loans are more easily available, but the ECB's Governing Council must approve provision of ELA. It reviews banks' eligibility every two weeks and needs a two thirds majority to stop these funds.
"If really need be, the euro zone would likely choose to let small Cyprus go and focus on containing the damage instead of softening the conditions to such an extent that much bigger countries than Cyprus could be encouraged to reject their own current bailout terms," said Berenberg Bank's Holger Schmieding.
And to think: so much pain and confusion over what CNBC can't stop repeating is nothing but a tiny, little country.
Tiny... maybe. But the precedent it will set may well be of Archduke Ferdinandian size.
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What is CNBC?
My Autobiography - Part 3
A Virtuous Life - A story of courage, integrity and bravery
My college years were when things stated to go wrong.
After a rigorous education in politics and the classics, I was accepted into Dartmouth to perfect and build on what I had learned. The excitement in the air at Dartmouth was overwhelming. Beautiful liberal women paraded the campus, and the students carried themselves with an air of importance and status. One night, immersed in the euphoria of a college party, I found myself sharing a range of drugs with a ragged group of hippy students. This became a frequent pastime, and by my third year of college I was on a combination of marujuana, cocaine and heroin. I'm not proud if those days. Today however, I am fully reformed. I now fully support the ban on dangerous drugs and I would introduce even harsher penalties on those who choose to make these destructive choices.
Do you get AIDS, cancer and MS in Part 4? That would be awesome...
So starting Tuesday the Cypriots will use Rubels!
How this a bluff?! Cyprus would be better off a sovergn creditor country. Who dey fool'n? Ain't nobady got tame fo dat!
@ MillionDollarBonus_: You are an idiot.
Lagarde cuts off her huge nose to spite her face. Lovely. Now she's bleeding from two nostril orifices in her skull. Blood dribbling down.
I'm sure they would like to let Cypress, Italy, Greece, and Spain go.
That's not the problem.
It's the avalanche of hundreds of trillions of dollars in derivatives that will follow.
Well they can bundle up all those derivatives trades and sell them to the US FRB. I hear those guys will buy anything at face value.
In my experience, when two people are bluffing, one of them still doesn't lose. ECB holding Jack high while Cyprus holds a pair of deuces. Let's go all in!
I'll take the low hand, you take the high.
It's not the cards that Cyprus is holding that is important, it's the well armed, and well connected (read Russian Mafia) that is way more important. Why do you think there was not a single vote for the conditions? None of the politicians in Cyprus are dumb enough to piss off the Russians.
As far as the rest of Europe, I have a feeling they will freeze next winter. They all deserve it too, morons!
I see the ECB has failed to learn from Lehman.
I think I'll make some popcorn.
One wee refinement Tyler; it's not a European territory its Cypriot, and Russia gets a client-state and strategic alliance partner, not territory, though maybe some basing rights. The real significance of it is the strategic relationship with Greece that it will surely open, and which NATO will be frantic to avoid. (and which Greece will be glad to use as a lever :D ... or a battering-ram)
I disagree. "there was no insurance for Lehman." and they do have a legitimate point if the "Lehman contingent" were to ask "why did Goldman and Morgan get the Good Government treatment?" I take one look ay Cyprus and see "Lehman.gov." in other words "we the Eurogroup deem" and blah-blee-blah. So I put it to all you Animal Spirits types "is the Fed chairman right when he says he sees no risk of contagion?" my personal view is that "he has no way knowing this"...indeed does anyone? Hence..."stay tuned." I see no problem with logic of this story...and look forward "only on Zero Hedge do you have any hope of rising above your own bullshit." needless to say "the bulldozer thing was REALLY cool!" still...you got nothing on New York Cyprus...
After the bubble from the tulip mania in Holland in the 1630s popped, there were, of course, massive lawsuits flying all over the place. The courts decreed that these were gambling debts and thus legally unenforceable and uncollectable.
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Can I defer the payment of the machine until it is up and running?
Do you have gas or oil fields for collateral?
I worked on a Heidelberg press as a young man. Even back then I realized the incredible German quality and craftsmanship that seems to be missing in America today. I wonder if we’ll ever get that back.
Part 4 is how you got into Herbalife. Makes sense now.
"So starting Tuesday the Cypriots will use Rubels!"
They either go to gold/petro-Rubels or to Petro-Pounds (reverting to their old currency), backed by their huge gas reserves.
The ECB, meanwhile, is back by other kind of 'gas': Bankster Biogas. That also "goes Bang!"
Rebels + Rubles = European Rubble.
you just made me spit my drink lol!
Me too...
Dartmouth? I think MDB is Tim Geithner!
A-K beats 7-deuce
Russian AKs also beat 7-deuce
Next card has to be a deuce, doesn't it?
It's a pretty good start for a low-ball hand, though.
eh
http://www.youtube.com/watch?v=6S9ecXWCBCc
I do love the voice of Engelbert Humperdinck in Please Release Me, as well as the other hit: Born Free
"Our race is the Master Race. We are divine gods on this planet. We are as different from the inferior races as they are from insects. In fact, compared to our race, other races are beasts and animals, cattle at best. Other races are considered as human excrement. Our destiny is to rule over the inferior races. Our earthly kingdom will be ruled by our leader with a rod of iron. The masses will lick our feet and serve us as our slaves."
— Israeli Prime Minister Menechem Begin
That was the funniest part. The few I still know from my college days still have the hairy armpits (grey now) and their boobs are like pencils pointing groundward. I'm thankful I didn't burn my bra.
Miffed;-)
cool story bro, you should tell it again
MDB is just trying to be (Mr) Nice.
Or Howard Marks - if you haven't seen the film.
Thnx for the clarification, I had no idea what he was on about I was hung up on the Dartmouth bit, in the film its Oxford. Good film liked David Thewlis acting abilities in that one. good reference from MDB I'll have to give that guy a thumbs up :)
cool story bro, you should tell live it again
Small penis! That's probably what's this all about. It's always the same. Self-grandeur resulting from a tiny pee-pee syndrome.
I just pissed my pants laughing out so loud!
My Conclusion - Part 1
You're a still a moron.
Part 2
You used to be funny, but that's gone now.
Part 3
You're really trying too hard...
It’s the psychotropic drugs is what did him in
Thanks for the Cliff Notes (i.e., the correct answers), angel.
+1
A Virtuous Life - A story of courage, integrity and bravery?
"A Depraved Life - A story of arrogance, delusion, and hypocrisy"
There, fixed it for ya.
So, in order to retain some credible level of intellectual consistency, you will be submitting yourself for retroactive prison time, when?
Because what you did deserves prison time, by your professed standard. So you'd need to do time to be consistent.
But you're a fucking hypocritical tool, like all the other drug warriors.
Glad you took care of your drug issues.
When do you plan to address your failed economic beliefs?
Treating his syphilis-induced dementia is a higher priority for now.
When you can't think straight, nothing else matters!
Who are the humor/irony impaired people junking MDB?
@ MillionDollarBonus_,
do you come out of the closet in part 4 or 5?
It's that station that once had the late, great, surly missed Mark Haines
I miss Mr. Haines. Unfortunately eating Cheetos with ketchup for breakfast every morning will catch up with you.
The fact they replaced Mark with Cramer speaks volumes about the current state of "journalism" at CNBC.
And his bottom!
toilet paper ?
Just dust in eye of US market.