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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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to describe MDB I would quote one of the great philosophers of the 21st.Century,,,,,,,,,,,Jeff Foxworthy,,"ya can't fix stupid!!"
I worry when people can't detect obvious sarcasm.
ECB: You won't rob and steal from your citizens? We are very annoyed
Cyprus:
Step 1
Create New Currency
Step 2
Peg it to gold
Step 3
/Sit back and drink vodka while the ECB throws a fit.
#4 prepare to be boarded and searched.
Well done Tyler. 7-2 off-suit is the worse hand to play in Texas Holdem. Bluffing indeed! :-)
Hit me!
http://youtu.be/QDsUKUW5HA0
Probably not the same kind of "hit me" though. Still I like it.
http://www.youtube.com/watch?feature=player_detailpage&v=0WGVgfjnLqc
Some nice bass chops in that
In a surprise move, Germany has announced that it is withdrawing from the EU, and has implemented capital controls to last one week. All Euros held electronically by German citizens will be redeemable in new crisp Reich-Marks
Heil Merkel!
Oops.
Cyprus: ALL IN!
Dealer: But sir, you have no chips.
Cyprus: ....
Cyprus: PUTIN!
Reported last week that Russia will deploy an eight ship naval flotilla, from the Black Sea Fleet to the Eastern Meditrenean. Consisting of missile cruisers, anti-sub, mine sweepers and destroyers.
Me thinks they had a suspision of something coming down the pipeline. Could this be a move to protect their newly acquired sphere of influence? The Greek Cypriot controlled part of the island and that lovely gas/oil field off the southern coast?
Remember the north part of the island is under the Turkish military umbrella. Turkey has been ominously quiet about these latest events on Cyprus. They WILL HAVE something to say. The plot thickens.
Vlad's back and he ain't 'eppy.
Turkey is being flanked.
Turkey's other neighbours are more or less very pissed-off at them for their role in Syria, and for their new "peace-deal" with the PKK, and what it implies for Syria, Iraq and Iran.
If a CB doesn't provide liquidity when you really need it, then why bother? Those "rules" are completely meaningless. You either will or you won't.
Domino chain reaction: www.youtube.com/watch?v=5JCm5FY-dEY
Game-theory blowup for the ECB and Europe.
Draghi should be fired. Just simple incompetence, this entire fiasco is his fault!
@ Reuters:
Draghi promised "whatever it takes". He says "unlimited firepower". If he has unlimited why not float Cyprus banks until the panic can be 'walked backward'?
- They can then use the bought time to negotiate w/ junior creditors as they did with Greek juniors. Depositors can be excluded and life goes on ...
- Draghi didn't exclude Cyprus banks from Greek cramdown, when Greece cratered, so did Cyprus' investments. Somebody had to know the knock-on effects of the banks ... right?
- Draghi didn't mention to Cyprus bankers that putting all their eggs in the Greek basket might be a mistake. If Cypriots had invested their deposits in German banks instead there would not be a crisis right now! Where was ECB? They say, "Oh no, we're not regulators ... " Where was someone from Draghi's office to give an informal advice?
- Draghi put off negotiating Cyprus' English Law bonds for a cram-down until after the Italian elections. He believed that his Goldman familiar Monti would win and the Italian pensioners could be looted ... he miscalculated and now there are no payees!
- If Cyprus' banks collapse Draghi 'believes' that none of the other European banks will be effected! See 'Monti-Italy' above, to get a grip on Draghi's predictive capabilities! If depositors exit the euro the ECB has a big problem, a lack of TIMELY liquidity. Draghi clearly does not understand how loss rates pyramid in a bank run situation, he seems intent on making a bad situation worse.
... add Schauble telling the Cypriots their banks won't reopen ... Good Grief! What morons!
Americans folded like a cheap suit to bail out the den of (Jewish) thieves on Wall Street.
Europeans bailed out the dens of thieves in London, Frankfurt and elsehwere but they are not bailing out the Russian thieves.
The amounts are so small and stupid, it would have been settled literally in a NY minute between Wall Street and the Beltway.
Who has Draghi worked for in the past? ... you sure he's that incompetent?
It's a bit like saying George W Bush was dumb.
Or Reagan's Memory failed at Iran-Contra hearings. "... I don't recall ..."
This article has some interesting detail regarding options on the table:
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_20/03/2013_488823
If you can't strike a reasonable deal with either side.
Then it's time to load the gun and stick it to your head and call their bluff... default it is then.
LaGarde has a poke her face. Take her at face value. Leave it to cleavage to add a new wrinkle. I hear mass ejections are unpleasant for heliotropes.
Russia will bailout Cyprus on condition that Cyprus:
Cut ties with Brussel, leaves the EU, becomes a tax avoidance haven, kicks out the Brits and take over their naval bases, explore their gas fields exclusilvely.
Why would the Russian sovereign have an interest in negotiating a tax free haven for its citizens anywhere including in Cyprus? If they were interested in creating such a place, they could have converted one of their provinces or a city state already. Russian sovereign may be more interested in finding out who has the cash hidden in Cyprus and away from Russian sovereign. Da!
Cyprus finance minister: Russia talks constructive http://www.marketwatch.com/story/cyprus-finance-minister-russia-talks-constructive-2013-03-20
Any guess when the banks will reopen. Mine is may be in two weeks.
Letting Cyrprus go or any other place using the EU, is the best thing that could happen to them.
Declare bankruptcy and tell the EU to stuff itself.
I'll bet the ECB guys have a bet with each other over whether or not they can string this crisis out longer than the Greek crisis.
an ace up his sleeve makes that a 20; not a band hand for blackjack
jb
it was President Anastasiades who set the table stakes game by going 'all in' by insisting that the under 100k pay some billions to save his over 100k cronies bucks.
ecb et al said 'ok, deliver the votes'
President Anastasiades looked at his cards too late, and failed to get the votes.
left afloat, President Anastasiades runs to russia for help.
his error. table stakes. russia not at the table.
won't sit down because central banks v central banks is not poker game. its conspiracy of necessity. all for one for all or none at all.
cyprus had no place to go.
President Anastasiades is dumped by his cronies and runs to ecb et al surrogate.
new deal will reached. my guess it will be old deal ecb et al offered. 0% under 100k, the full monte % on the over 100k.
cb's regain control.
poker lesson for the day: best to actually look at one's cards before going all in.
:)
p.s.
and thanks to President Anastasiades, cb's will show that bank guarantees 'work'. trust them.
paradigm shifted back to old school where money has power.
p.s.s.
cb's nervous, but ok. refocus on real enemy. tbtf. only ones that can take all cbs's down for the count.
that's the game afoot. and it is complex.
tbtf can buy legislators. cb's can not.
good news. unless legislators withdraw rule that gave fed power to have 'no tbtf', long run cb's win. or governments fall. then tbtf fall anyway. someone should point that out to g.s.j.p.m. et al. after all, its in the stockholders best long term interest that their 'live forever' corporate entities actually do that.
Many people (politicians and oligarchs) emptied their accounts last week
http://www.thesun.co.uk/sol/homepage/news/politics/4848766/Troops-betray...
Which banks/countries have big exposure to Cyprus banks? I'm guessing Greece/Greek banks at a minimum, be funny if Eurocrats teach Cyprus a lesson and get a Greek lesson at the same time.
Banco
The Juggernaut: You are funny. MDB is truly an idiot.
Cyprus - the simple solution.
Sigh.
#1: Print enough new fiat "cyp" notes to replace all fiat "euro" notes in cyprus (in all bank accounts).
#2: Have all cyprus banks replace all "euros" with "cyps".
#3: Liquidate all cyprus bank assets.
#4: Abandon the EU and euro.
Simple as can be. Let savers keep their savings, and let investors in fiat, fake, fraud, fiction, fantasy, fractional-reserve banks eat it as they should.