- Saving Cyprus Means Nobody Safe as Europe Breaks More Taboos. The devil lies in the detail of Cyprus’s salvation. The island nation’s rescue sets precedents for the euro zone that may stick in the memory of depositors and bondholders alike as investors debate who will next fall victim to the debt crisis. Under the terms of the agreement struck early this morning in Brussels, senior Cypriot bank bond holders will take losses and uninsured depositors will be largely wiped out. The message that stakeholders of all stripes can be coerced into helping a cash-strapped nation may make investors more skittish they’ll be targeted should Slovenia, Italy, Spain or even Greece again be next in line to need help. The risk is that bank runs and bond market selloffs become more likely the moment a country applies for a new rescue, said economists and academics from Nicosia to New York. “We now have a new type of rule and everyone within the euro zone has to sit down and see what that implies for their own finances,” Nobel laureate Christopher Pissarides, an adviser to the Cypriot government, told “The Pulse” on Bloomberg Television. The Stoxx Europe 600 Index (SXXP) erased an earlier gain of as much as 1 percent after Jeroen Dijsselbloem, who chaired last night’s meeting of euro region finance ministers, indicated the model used for recapitalizing Cypriot banks could be replicated elsewhere.
- Cyprus Bailout Fueling Bank Funding Concern on Bond Losses. The European Union’s decision to recapitalize Cypriot banks by inflicting losses on depositors and senior bondholders is triggering investor concern that bank funding across the region will be hurt. Cyprus qualified for its 10 billion-euro ($13 billion) bailout by agreeing to close Cyprus Popular Bank Pcl, also known as Laiki Bank, the island’s second largest lender, the EU said in a statement. Uninsured depositors and senior bondholders will be “bailed in,” staying in a so-called bad bank. “This has implications for any weaker banks that get into trouble,” said Chris Bowie, the London-based head of credit portfolio management at Ignis Asset Management Ltd., which oversees about $110 billion. “We’d expect to see some deposit flight and a shift in funding towards a combination of covered bonds, real equity and quasi-equity.”
- Cyprus Shows Trust in ECB Is Misplaced. Ever since European Central Bank President Mario Draghi said last July that the bank will do whatever it takes to preserve the euro, complacency has pervaded Europe’s single-currency area. Markets have weathered potential crises in Italy and Spain with surprising calm, secure in the knowledge that the ECB will save the day if needed. This was always a false assumption, as events in Cyprus have made clear. There are significant limitations to the support the ECB is willing or able to offer, even to such a tiny island economy whose needs are easily affordable.
- Mundell Says ECB Tolerating Euro Gains Worsened Debt Crisis. The European Central Bank worsened the crisis in the region’s most indebted nations by tolerating the euro’s appreciation against the dollar, according to Nobel- prize winning economist Robert Mundell. Europe’s policy makers “missed a big opportunity” to do a deal with the Federal Reserve that would have enabled them to stop the currency from strengthening as the U.S. central bank bought debt to boost the economy, Mundell said in a Bloomberg Television interview with Sara Eisen. The euro’s advance was a “devastating thing to happen” for the region’s weaker economies and Europe should consider its own form of asset purchases, which tend to weaken the exchange rate, he said.
- Euro Weakens to 4-Month Low on Cypriot Fallout; Yen Rises. The euro fell to a four-month low versus the dollar after a European leader said the Cyprus bailout may be a precedent, spurring doubts about the safety of other bond holdings and deposits. The 17-nation currency fell against all 16 of its most- traded peers as Dutch Finance Minister Jeroen Dijsselbloem said Europe is “going down the bail-in track.”
- Debt Flagged by Fed Bought by Funds Copying 2007: Credit Markets. Money managers from Ares Management LLC to Onex Corp. (OCX) are borrowing at the fastest pace in six years to buy the type of speculative-grade loans that federal bank regulators warned last week is becoming riskier. Ares, which oversees $59 billion, and Onex’s credit unit are among firms that have raised $22.9 billion of collateralized-loan obligations this quarter, approaching the all-time high of $26.4 billion in the three months ended June 30, 2007, according to Royal Bank of Scotland Group Plc. Leveraged-loan mutual funds have received their two biggest weekly inflows since January. At the same time the Federal Reserve’s zero interest-rate policy is encouraging investors to seek ever-riskier debt assets to generate returns, some members of the central bank are also saying the market may be overheating.
- Rival Bidders Join Battle to Control Dell(DELL). Icahn's Firm Discloses 4.6% Stake in PC Maker; Dell Founder Likely to Talk With Blackstone.
Fox News:
- Eurogroup's Dijsselbloem: forcing losses on bank owners, large depositors new rescue template. A top European official says the move in Cyprus to inflict losses on banks' shareholders, bondholders and even owners of large deposits should become the bloc's default approach for dealing with ailing lenders. Jeroen Dijsselbloem, who chairs the Eurogroup gatherings of the 17 eurozone finance ministers, said in an interview Monday banks' owners and investors must be held responsible "before looking at public money or any other instrument coming from the public side."
- Key Events And Issues In The Week Ahead.
- Think Tank: Cyprus 'Saved'; But At What Cost?
- European Markets Sliding (Fast). (graphs)
- Eurogroup’s Dijsselbloem Says "Banks Should Save Themselves".
- European Financials Biggest 1-Week Plunge In 8 Months; Russian Ruble Nears 2013 Highs. (graphs)
- The Complete (And Very Disturbing) European Bank Loan-To-Deposit Ratios: A Redux. (graph)
- US And South Korea Sign New Pact To Retaliate Against North Korean Aggression.
- Europe Keeps Missing The Point. So now in addition to austerity and reform, Europe will focus more on taking pain and clipping creditors, rather than just papering over crises with more money. But they're still dancing around the real point, which is the flawed monetary structure. The reason Europe is in this mess -- and the reason it's assumed that there will be more messes for which Cyprus can serve as a template -- is because these countries lack their own currency and monetary flexibility.
- Uh Oh, It Looks Like Apple(AAPL) Is Under Attack From The Chinese Media.
- IT'S OFFICIAL: Banks In Europe May Now Seize Deposits To Cover Their Gambling Losses.
- ZERVOS: I'm Staying In My Bunker, And Not Buying Any Stock After This Cyprus News.
- SOCGEN: 'Depression For Cyprus'.
- UBS: Contagion Risks Are Alive And Well.
- Why the new Cyprus deal sows the seeds of the next European crisis. If you are a depositor in a European bank, you now have every incentive in the world to move your money somewhere safer, or even to keep it in cash, the minute you detect any hint that your nation could end up in the same place Cyprus did. The next time there is a banking panic in Europe, it will move much faster, and be much harder to control, than those of the recent past, as depositors try to get ahead of future losses and capital controls. And that’s a scary proposition indeed.
- METALS-Copper dips as post-Cyprus bailout cheer fades.
- EURO GOVT-Cyprus bailout template rattles Spanish bonds.
- German government advisers cut 2013 growth f'cast. Economic advisers to the German government more than halved their forecast for 2013 growth on Monday, blaming a sharp fourth-quarter contraction and weak prospects for foreign trade and investment. The advisers, known in Germany as the "wise men", predicted the economy would almost grind to a halt this year, growing just 0.3 percent compared to 0.7 percent in 2012. In October they had forecast Europe's largest economy to expand 0.8 percent in 2013, but data has since shown that it shrank by 0.6 percent in the last three months of 2012.
- Dudley gives first hints of slowing QE3. One of the Federal Reserve’s biggest backers of easy monetary policy said he supported the slow down of the central bank’s asset purchases once the US economy had enough momentum.
- Cyprus: they make a desert and call it peace. By punishing those who put their faith in the solidity of the euro as a single currency, the eurozone has crossed a line and in the process poisoned Europe beyond redemption. Not since the second world war has anti-Germany feeling been so acute. Where’s the solidarity in a bailout which imposes such “solutions” on its member states?
- Cyprus bail-out leaves 'bitter taste' for residents. Cypriots are outraged by the consequences of the last ditch bail-out deal hammered out between their government and its EU-IMF troika of lenders early Monday morning.
- OECD's Padoan Says Underrating Cyprus Biggest Risk. OECD Chief Economist Pier Carlo Padoan comments in interview. Padoan says European solution to Cyprus crisis must be adequate, unlike first Greek rescue. Padoan says bank-sovereign debt ties too tight in many euro-area countries.
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