Cyprus Parliament Unanimously Rejects Bailout Plan
Posted: March 19, 2013 Filed under: Global Financial Crisis | Tags: Angela Merkel, Cyprus bailout, eurozone crisis 13 CommentsWell, they did it. Matthew Boesler at Business Insider:
The Cypriot parliament has voted against the controversial bank bailout deal hatched with the EU over the weekend, reports Bloomberg.
36 voted no.
19 abstained from voting.
No one voted in favor of it.
The vote was held in a show of hands.
The big part of the bailout plan that has everyone up in arms: a controversial decision to apply haircuts to depositors, which essentially amounts to an expropriation of a certain percentage of money from everyone’s bank account.
That includes insured depositors – those with up to 100,000 euros in the bank – whose funds, up to now, were widely considered sacrosanct.
Now what? Your guess is as good as mine.
I imagine Russia is likely to play a role in this situation going forward, so I found some reactions to the bailout proposal from Vladimir Putin at The Brisbane Times. He wasn’t happy with the deal, which would have removed around 10% of the value of accounts held by many Russians.
Russia’s President Vladimir Putin called the proposed levy ”unfair, unprofessional and dangerous”, and his finance minister suggested Moscow could withdraw a €2.3 billion loan made to Cyprus in 2011. The bank levy was partly intended by Brussels and Berlin to prevent European Union taxpayers spending billions propping up the ill-gotten gains of Russia’s super-rich in Cypriot accounts.
Russian deposits in Cyprus, which offers attractive interest rates and asks few questions, are estimated at €20 billion, meaning Russian corporate and individual investors could lose up to €2 billion in one fell swoop.
Russia’s Finance Minister Anton Siluanov said: ”We had an agreement with colleagues from the eurozone that we’d co-ordinate our actions. So, we will consider the issue of restructuring of the loan taking into account our participation in the co-ordinated actions with the European Union to help Cyprus.”
Other Russian officials tried to allay fears by publicly announcing that whatever happens in Cyprus, the Russian financial system will remain stable.
I guess Angela Merkel is going to have to come up with another plan or else dream up some better threats.
Obviously this is a fast-moving story, but I’ll include links to the very latest headlines below and then post updates in the comments.
Financial Times: Stocks fall as Cyprus uncertainty mounts
Miamai Herald: Give Cyprus more time, Greece tells EU
Bloomberg: S&P 500 Falls for Third Day as Euro Weakens on Cyprus
Bloomberg: German Stocks Decline Before Cyprus Votes on Bank Levy
Guardian UK: Crisis deepens as Cyprus MPs reject savings tax
New Stage in Eurozone Crisis: Cyprus Forced to Cover Bailout from Individual Bank Deposits
Posted: March 17, 2013 Filed under: Foreign Affairs, U.S. Economy | Tags: bail-in, bailout, Cyprus financial crisis, economics, eurozone crisis 18 CommentsThis is a topic on which I know very little, but I thought we should have a thread on it anyway.
On Saturday morning, news broke that the terms of a bailout of banks in Cyprus would require a levy on individual depositors–including those holding small accounts. People immediately rushed to ATMs to withdraw as much cash as possible before the deal was voted on. The most accessible article I found on this is by Edward Harrison of Credit Writedowns blog, posted at Alternet: Hell Breaks Loose in Europe as Banking Crisis Unfolds: Depositors’ Money May Be Seized.
Saturday morning we learned that after hours of tense negotiation, Europe has hammered out a 10bn euro “bailout” of Cyprus. I put the term bailout in quotes because the key feature of this deal is the bail-in of Cypriot depositors to the tune of 5.8bn euros, about a third of Cyprus’ GDP. This means that depositors went to sleep on Friday night and woke up Saturday to find that their money, deposited safely in Cypriot banks, had been seized and used to “bail out” the country. While the bail-in became official EU bank rescue policy during the Spanish crisis last summer, bank depositors were never mentioned at that time. I see this as an extreme measure which, if the European banking crisis continues elsewhere, will have very negative implications for bank depositor confidence in other European periphery countries.
There has since been a revision in the amounts to be deducted–I’ll get to that later on.
Back to Harrison:
Cyprus’ finance minister Michalis Sarris said large deposit withdrawals would be banned. Jörg Asmussen, a German member of the ECB board and a key ally of Angela Merkel, added that the part of the deposit base equivalent to the actual bail-in levies would be frozen immediately so the funds could be used to pay for the “bailout”….
Some of the bailout lenders like the IMF had actually been calling for Cyprus to seize all deposits larger than 100,000 euros. So this falls well short of those demands. Nonetheless, a rubicon has been crossed. Not only are senior bank debt lenders now on the hook before a single penny of European Union loans or guarantees flow to busted eurozone countries, but so are subordinated debt holders and so are even depositors. As an EU citizen, you must now believe that any lending exposure you have to a bank whether as a bond lender or deposit lender can be seized and confiscated by government, no matter how small the exposure. The FT notes that “[e]ven Ireland, whose banking sector was about as large relative to its economy as Cyprus’ when it was forced into a bailout in 2010, never considered such a measure.
Read much more at the Alternet link.
Here’s an FAQ on the crisis published at Fortune earlier tonight. The scary introductory paragraphs after the jump:
Saturday Late Morning Reads
Posted: March 16, 2013 Filed under: morning reads, Republican politics, U.S. Economy, U.S. Politics | Tags: CPAC, eurozone crisis, LGBT rights, Marx Brothers, national security letters, Rob Portman, Ryan budget, same-sex marriage, Ted Cruz 39 CommentsGood Morning!!
Last night I watched an old Marx Brothers movie–Monkey Business. It’s been years since I’ve watched one of their movies, and I’d forgotten how much fun it can be. Laughter really is the best medicine. Wouldn’t it be great if we could see a movie with the Marx Brothers making people like Mitch McConnell, Paul Ryan, and David Gregory look like complete idiots?
Not that Republicans need Groucho, Chico, or Harpo to highlight their idiocy, as you can see from this story at TPM: CPAC Event On Racial Tolerance Turns To Chaos As ‘Disenfranchised’ Whites Arrive
The session, entitled “Trump The Race Card: Are You Sick And Tired Of Being Called A Racist When You Know You’re Not One?” was led by K. Carl Smith, a black conservative who mostly urged attendees to deflect racism charges by calling themselves “Frederick Douglass Republicans.”
Disruptions began when he started accusing Democrats of still being the party of the Confederacy — a common talking point on the right….Disruptions began when he started accusing Democrats of still being the party of the Confederacy — a common talking point on the right.
But “things really went off the rails” in the question and answer session.
Scott Terry of North Carolina, accompanied by a Confederate-flag-clad attendee, Matthew Heimbach, rose to say he took offense to the event’s take on slavery. (Heimbach founded the White Students Union at Towson University and is described as a “white nationalist” by the Southern Poverty Law Center.)
“It seems to be that you’re reaching out to voters at the expense of young white Southern males,” Terry said, adding he “came to love my people and culture” who were “being systematically disenfranchised.”
Smith responded that Douglass forgave his slavemaster.
“For giving him shelter? And food?” Terry said.
At this point the event devolved into a mess of shouting.
It sounds just like a Marx Brothers movie, without the jokes. There’s much more at the link–you have to read it to believe it.
More on CPAC from Gay activist and talk radio host Michaelangelo Signorile: Brian Brown, NOM Leader, At CPAC: Prop 8 Challenge Is ‘Biggest Strategic Mistake’ of Gay Rights Movement
A day before GOP Sen. Rob Portman of Ohio reversed his position and came out for marriage equality, Brian Brown, president of the National Organization for Marriage (NOM), insisted conservatives are rallying against gay marriage and that “if the Republican Party abandons traditional marriage, there is no Republican Party.” He also predicted that California’s Proposition 8 will be upheld by the Supreme Court, which is hearing arguments on the case later this month, calling the decision by gay advocates to challenge Prop 8 “the biggest strategic mistake the supporters of same-sex marriage ever have made.”
“I think people are excited [about traditional marriage],” Brown said in an interview on my SiriusXM OutQ radio program, speaking at the Conservative Political Action Conference in National Harbor, Md., on Thursday. “[Florida Senator] Marco Rubio just stood up there and said, ‘Just because I’m for traditional marriage doesn’t make me a bigot.’ And everyone stood up and cheered. The grass roots of conservatism are absolutely united behind traditional marriage. Folks I’m seeing here are absolutely committed.”
You can listen to the whole interview at the HuffPo link.
I liked TBogg’s rude comment on Portman’s overnight conversion: Honey, I’m Homo.
If you think the rapidity with which a Republican politician, who was previously against equal rights for gays, suddenly switches sides once he discovers that Teh Ghey has invaded his happy All-American home is impressive, you should see how quickly they embrace abortion as a God-given right the moment their daughter announces that she has been knocked up.
By a black guy.
Jonathan Chait has a longer, more carefully reasoned discussion of Portman’s hypocrisy. Here’s the conclusion:
It’s pretty simple. Portman went along with his party’s opposition to gay marriage because it didn’t affect him. He thought about gay rights the way Paul Ryan thinks about health care. And he still obviously thinks about most issues the way Paul Ryan thinks about health care.
That Portman turns out to have a gay son is convenient for the gay-rights cause. But why should any of us come away from his conversion trusting that Portman is thinking on any issue about what’s good for all of us, rather than what’s good for himself and the people he knows?
Exactly.
As for Paul Ryan, he claims that “Democrats’ budget puts US on path ‘straight into debt crisis.'” From The Hill:
Ryan used the weekly GOP address to promote the budget plan bearing his name, saying it will benefit Americans worried about jobs and the cost of living, those trying to keep up with the cost of healthcare and younger workers hoping for a secure retirement. “And for taxpayers fed up with the status quo, we will cut wasteful spending,” he said….
Ryan took aim at President Obama and Senate Democrats, saying the tax increases in a proposal from Sen. Patty Murray (D-Wash.) only “fuel more spending.”
“We know where this path leads—straight into a debt crisis, and along the way, fewer jobs, fewer opportunities, and less security,” Ryan said, painting a desperate image of rising interest rates and inflating debt payments.
“Our finances will collapse,” he warned. “You think this can’t happen here? Just look at Europe.”
WTF?! Europe’s problems are being exacerbated by austerity! Is this guy for real? Here’s what the Tax Policy Center has to say about Mr. Ryan’s “budget.”
House GOP Would Need $5.7 Trillion in Tax Hikes to Offset Ryan Rate Cuts
House Budget Committee Chair Paul Ryan’s (R-WI) fiscal plan promises to balance the federal budget in 10 years, make major cuts in income tax rates for both individuals and corporations, and raise the same amount of revenue as current law. If House Republicans want to do all three, they will have to eliminate trillions of dollars in popular tax preferences.
The Tax Policy Center estimates that cutting individual rates to 10 percent and 25 percent, repealing the Alternative Minimum Tax and the tax increases included in the Affordable Care Act, and cutting the corporate rate from 35 percent to 25 percent would add $5.7 trillion to the deficit over the next decade. Thus, if House Republicans want to cut these taxes and still collect the revenues they promise, they’d have to raise other taxes by $5.7 trillion.
The tax cuts described in Ryan’s budget would generate a huge windfall for high-income taxpayers. On average, households would get a cut of $3,000. But those in the top 0.1 percent of income, who make $3.3 million or more, would get a whopping $1.2 million on average–a 20 percent increase in their after-tax income.
By contrast, middle-income households would get an average tax cut of about $900. Those in the bottom 20 percent (who make $22,000 or less) would get $40 and one-third of them would get no tax cut at all.
Some important caveats here: TPC did not estimate the revenue effects of a Ryan tax proposal since the budget does not include an actual plan. Rather, it modeled generic tax cuts that follow the outline of what his budget describes. And because his plan does not identify any tax increases, TPC modeled only the tax cuts.
Some budget. Here’s Matthew O’Brien at The Atlantic: Paul Ryan’s $5.7 Trillion Magic Trick
I’m not really a fan of magic, but I’m even less of one when it’s politicians doing the tricks.
That’s why I’ve had some less-than-nice things to say about Paul Ryan’s latest budget. Like its previous iterations, it explicitly says how he wants to cut taxes, but says nothing about how he wants to pay for it. Instead, Ryan uses a magic asterisk. He merely waves his hand, and says he’ll cut enough tax expenditures to pay for all of his tax cuts. He just can’t tell us what any of these tax expenditures are. Not a single one.
This is some pretty expensive hand-waving….this magic asterisk is worth about $1 trillion more than before. Ryan keeps the same tax cuts he had last year, but he assumes these same cuts will raise an extra 0.5 percent of GDP in revenue. In other words, it’s the same magical budgeting we’ve come to know from Ryan — but now with even more magic!
It’s particularly magical for the top 1 percent of households. The chart below from the Tax Policy Center shows the percent change in after-tax incomes for each income group from Ryan’s tax cuts. That’s what comforting the comfortable looks like.
There’s much more (with charts) at the link.
Now here’s some good news–if it holds up: Federal Judge Finds National Security Letters Unconstitutional, Bans Them. From Wired:
Ultra-secret national security letters that come with a gag order on the recipient are an unconstitutional impingement on free speech, a federal judge in California ruled in a decision released Friday.
U.S. District Judge Susan Illston ordered the government to stop issuing so-called NSLs across the board, in a stunning defeat for the Obama administration’s surveillance practices. She also ordered the government to cease enforcing the gag provision in any other cases. However, she stayed her order for 90 days to give the government a chance to appeal to the Ninth Circuit Court of Appeals.
“We are very pleased that the Court recognized the fatal constitutional shortcomings of the NSL statute,” said Matt Zimmerman, senior staff attorney for the Electronic Frontier Foundation, which filed a challenge to NSLs on behalf of an unknown telecom that received an NSL in 2011. “The government’s gags have truncated the public debate on these controversial surveillance tools. Our client looks forward to the day when it can publicly discuss its experience.”
The telecommunications company received the ultra-secret demand letter in 2011 from the FBI seeking information about a customer or customers. The company took the extraordinary and rare step of challenging the underlying authority of the National Security Letter, as well as the legitimacy of the gag order that came with it.
The national security letters are one of those holdovers from Bush that the Obama administration has defended in court. Please read the whole article if you have time–there’s a lot of good background info. Here’s the press release from the EFF. Who knows what will happen on appeal or if the case makes it to the Supreme Court, but this is very good news.
Finally, we can look forward to some more insanity from the CPAC crowd today–Ted Cruz will be closing out the conference with his keynote speech–and before that there’ll be a whole assortment of mixed Republican nuts. From NPR:
It’s the last day of the annual Conservative Political Action Conference in Maryland, which will culminate in a keynote address by up-and-coming Sen. Ted Cruz of Texas. As NPR’s David Welna reports,
“Though he’s only been a senator since January, this will be the third year Texas Republican Sen. Ted Cruz is addressing CPAC. This former Texas solicitor general and Tea Party favorite got top billing at the conference after aggressively questioning former GOP senator Chuck Hagel during Hagel’s confirmation hearing to be secretary of defense.”
Also scheduled to speak are Wisconsin Gov. Scott Walker, Newt Gingrich, Rep. Michele Bachmann and Sarah Palin. (CPAC has the full schedule on its website.)
Sorry this post is so late–I hope everyone hasn’t given up on me already. If anyone is out there, please share your recommended links in the comments. I look forward to clicking on them!
Have a great weekend!
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