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Tuesday 26 March 2013

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Cyprus bail-out: live

Markets have taken another knock as a European Commission spokesman said large depositors could have their savings raided as part of future bank rescues in the eurozone.

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By Denise Roland
2:43PM GMT 26 Mar 2013
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Bank of Cyprus chairman Andreas Artemis resigns:reports Thousands of Cypriot students protest against bail-out 'We are facing an emergency': Cyprus finance minister Banks in Cyprus to stay closed until Thursday Cyprus president announces criminal probe into crisis Eurogroup head hails Cyprus bail-out as a template Russia's Putin orders restructuring of 2.5bn Cyprus loan Latest 14.43 Chancellor George Osborne is fielding questions from MPs on the Treasury Select Committee. He criticised the handling of the situation and said the Treasury is working with Cypriot authorities to a British solution for UK branches of Laiki, which has one outlet in Birmingham and three in London. Laiki is to be wound down, with insured deposits (those under 100,000) being transferred to Bank of Cyprus and everything else to be folded into a bad bank. Unfortunately for the Cypriot people, this is just the Top 10 coolest EU budget talks collapse

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beginning. They are facing a sharp contraction on GDP, which I wouldn't wish on anyone. He also said he did not think there were templates for eurozone bailouts, saying: They [the eurozone] have had different solutions for different problems but its clearly the case if the eurozone hadn't moved more swiftly to deal with its problems. Unfortunately British people and many other countries have suffered a lot. Mr Osborne also said he didn't question the legality of the capital controls, since Article 63 of Europe's internal market rules can be bent in an emergency. Permanent Secretary to the Treasury Sir Nicholas Macpherson added that contingency plans have been made around potential economic outcomes in the eurozone. Follow Szu Ping Chan's liveblog of Osborne's grilling here.

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14.10 Cypriot finance minister Michalis Sarris has described the "very, very tense" negoatiations in Brussels as his government were faced with "a real prospect of full catastrophe for Cyprus". Speaking to Bloomberg, he said: Almost reaching any agreement would have been preferable to coming back empty-handed and risking the full collapse of the economy including the very real possibility of an exit from the eurozone. He said he considered it a victory that one of the two largest banks was saved and repeated his assertion that he was against a bank levy on small deposit holders from the start, saying the IMF and Germany were the main drivers for such a measure. Accusations have flown back and forth over who pushed for the bank levies in the original proposals. A number of parties, including EU President Herman van Rompuy's adviser, have accused the Cypriot government for pushing the bank levy on small depositors. A clip of the interview is below.

13.55 Greek finance minister Yannis Stournaras has weighed into the debate over whether the Cyprus bail-out deal represents a template for future crises. He has aligned himself with the European Central Bank by insisting the bailout deal was tailor-made for the Mediterranean island. He said: This solution concerns Cyprus only and no other country, because Cyprus has a particular banking system. The eurozone is not insecure.

Greek Finance Minister Yannis Stournaras, right, arrives for an emergency eurogroup meeting in Brussels on Sunday, March 24, 2013. Credit: AP/Geert Vanden Wijngaert

13.23 Earlier we mentioned reports Andreas Artemis, chairman of the Bank of Cyprus, had tendered his resignation. One of the reasons he reportedly gave was that he had appointed an administrator without notifying the bank's management. Now special administrator Dinos Christofides has confirmed he was appointed on Monday night, though he said the Cypriot central bank was responsible for his appointment. Speaking to Reuters, he said: [I will oversee] the restructuring of the bank and the absorption of part of Cyprus Popular Bank. It means that from now until further notice I will be running the bank. It could be short term...or it could be longer.

13.00 Sky's Ed Conway reports that the Bank of Cyprus haircut on large depositors will happen on Friday. Cypriot finance minister Michalis Sarris earlier (08.50) told Radio Four large depositors could see as much as 40pc wiped off their savings.

EdConwaySky Ed Conway Govt source: current expectation is Bank of Cyprus haircut to be implemented on Fri. So BoC may not reopen til then
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12.56 The European Central Bank's decision to keep funding flowing to Cyprus' ailing banks represents a stamp of approval for the bailout deal, according a senior official at the bank. Speaking to reporters, Jozef Makuch, governing council member and head of Slovakia's central bank, said: The condition to relaunch ELA (Emergency Liquidity Assistance) for Cyprus was a programme which is trustworthy, and the fact that we decided to launch ELA means that this programme is trustworthy. When it comes to ELA...no special conditions were established. 12.45 The orthodox Church of Cyprus, which offered up its entire wealth to help prop up the ailing economy, told the Cyprus Mail could lose more than 100m as a result of the bail-out, through losses from its extensive portfolio of investments across the island, including in the two banks at the centre of the deal. The Cyprus Mail has the full story here. 12.36 More pictures from the student protests in Nicosia, were an estimated 3,000 young people have taken to the streets to express their fury at the bail-out deal.

Cypriot protesters hold a banner as hundreds of Cypriot students march on the presidential palace in Nicosia during a rally against a bailout for the financially crippled island on Tuesday. Credit: AFP/Getty Images

Cypriot students protest against the bailout package outside the Presidential Palace, in capital Nicosia, on Tuesday. Credit: AP/ /Petros Giannakouris

Cypriot college students light a flare outside the presidential palace during a protest in Nicosia against a bailout for the financially crippled island on Tuesday. Credit: AFP/Getty Images

12.18 On the back of the European Commission's Dijsselbloem-esque comments (12.10), The FTSE 100 is now trading flat on today's open and the DAX is down 0.12pc. Markets in the eurozone periphery have fallen more sharply, with the Spanish IBEX trading down 1.67pc and the Italian MIB down 1.18pc. The French CAC is proving more resistant, with shares having climbed 0.15pc.

12.10 Maybe the Cyprus bail-out is a template, after all. The European Commission has given the markets another shake by saying large depositors could be "bailed in" (i.e. their savings could be raided) for future bank rescues. Speaking at a press briefing, Commission spokeswoman Chantal Hughes said: In the Commission's proposal, which is under discussion, it is not excluded that deposits over 100,000 could be instruments eligible for bail-in. It is a possibility. 11.45 Confusing messages are coming from the European Commission, whose spokesman is being reported as saying that insured deposits (those under 100,000) cannot be raided to prop up failing banks, despite such an option being contained in the original proposal rejected by the Cypriot parliament last week.
FGoria Fabrizio Goria RTRS: EU Commission says at no point is it possible to bailin depositors below 100K, now or in future // LOL
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MatinaStevis Matina Stevis Ok, enough. If you insured depositors in EU are sacrosanct WHY DID YOU AGREE TO WHACK THEM LAST WEEK? [venting. sorry for caps]
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11.38 Meanwhile we've heard that the deal for Greece's Piraeus Bank to acquire the Greek branches of Bank of

Cyprus and Laiki has completed. The takeover excludes these branches from the bail-out measures imposed on Cyprus' two largest banks.
EfiEfthimiou Efthimia Efthimiou Deal btwn Piraeus Bank and #Cyprus banks is done RT @capitalgr:
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11.30 More on Bank of Cyprus chairman Andreas Artemis' reported resignation. Local news website Stockwatch said he quit due to the condition in the bail-out agreement that the Bank of Cyprus would have to absorb Laiki's debts. He also cited the appointment of an administrator for the Bank of Cyprus without first informing the group's managment, and the sale of the bank's branches in Greece. Speaking to Reuters, an anonymous source said: He sent a resignation letter this morning which will be examined by the board of directors convening this afternoon.

11.26 There has been no capital flight from the eurozone periphery following the Cyprus bail-out deal, according to Dutch finance minister and Eurogroup head Jeroen Dijsselbloem, who yesterday alarmed markets by hailing the Cyprus bail-out as a template for other struggling economies in the single currency. In a letter to the Dutch parliament, he said: Currently there are no apparent signs of a higher-thannormal withdrawal of savings or of transfer of savings from peripheral to core countries.

11.12 A second European Central Bank heavyweight has chimed in to insist that Cyprus should in no way be seen as a template for other eurozone rescues, contrary to suggestions by Dutch finance minister and Eurogroup head Jeroen Dijsselbloem. Earlier (08.58) we had the ECB's Benoit Coeure on on the issue. Now his ECB governing council peer, and Austian central bank head Ewald Nowotny, has joined a growing chorus. Speaking to reporters in Prague, he said: Cyprus is a special case. It is no model for other instances.

Head of Austrian National Bank and ECB governing council member Ewald Nowotny. Credit: Reuters

10.30 German finance minister Wolfgang Schaeuble, who was reported as being "particularly irascible" during the lastditch bail-out talks in Brussels overnight on Sunday, has said that Germany is a target of jealousy in the eurozone. Speaking to local broadcaster ZDF this morning, he said: It always works out like that. This also happens in classrooms. Sometimes when you have better results, others have difficulties with this, sometimes they are even a little jealous.

Wolfgang Schaeuble, Germany's finance minister, centre, speaks with Pierre Moscovici, France's finance minister, far left, Christine Lagarde, managing director of the International Monetary Fund, second from left, and Maria Fekter, Austria's finance minister, ahead of the eurogroup meeting in Brussels, Belgium, on Sunday. He is reported to have become "particularly irascible" during the night's negotiations. Credit: Josh Fistick/Bloomberg

10.22 Greek journalist Efthimia Efthimiou is reporting that the president of the board of the Bank of Cyprus, Andreas Artemis, has resigned. The full report, in Greek, says his resignation is linked to the sale of the Greek branches of Bank of Cyprus to Greece's Piraeus bank . The Bank of Cyprus is set to take on all Laiki Bank deposits under 100,000. However its large depositors face a severe haircut on their savings over and above 100,000, which the finance minister Michalis Sarris admitted this morning could be as high as 40pc.

EfiEfthimiou Efthimia Efthimiou President of Bank of #Cyprus resigns RT @capitalgr: .. http://t.co/DHILXRNIx1

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10.10 Channel Four's Faisal Islam is tweeting pictures from a

student protest in Nicosia where thousands of young people have taken to the streets shouting anti-Troika chants.

Students on the streets of Nicosia, courtesy of @fasalislam. Source: Twitter

faisalislam Faisal Islam Astonishing scenes in Nicosia. 1000s (all?) schoolchildren left classes burst on to streets to chant against Troika http://t.co/dLDTUgT45K
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faisalislam Faisal Islam In Argentina it was housewives with their pots & pans coming on to streets, in Cyprus could it be teenage schoolkids with wrecked futures?
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faisalislam Faisal Islam "Exo i Troika tora" to the tune of white Stripes Seven Nation Army, is the chant of choice. means Troika Go Home Now http://t.co/EE9e8mddCa
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10.05 Earlier we reported on snippets of the drama from the fraught all-nighter in Brussels late Sunday/early Monday (09.10). The Wall Street Journal has been talking to insiders on negotiations, and paints an equally tense picture, with reports that German finance minister Wolfgang Schaeuble grew "particularly irascible". Tensions were running high Sunday in Brussels as key officialsincluding IMF chief Christine Lagarde, ECB head Mario Draghi, EU President Herman Van Rompuy and other top EU officialsmet Mr. Anastasiades over a lunch of lamb and baby potatoes. Mr. Anastasiades complained that his country was being treated more harshly than any of the euro zone's other bailout victims. He backtracked on an earlier agreement to wind down Cyprus Popular Bank. According to a senior Cypriot official, Mr. Anastasiades was appalled by the way he was spoken to at the lunch. The president threatened to resign. Mr. Dijsselbloem told him he didn't care about the president's political future, only the

future of the euro zone, the senior official said. The lunch ended two or three hours later "and not in a good mood," said a second official. Germany'sFinanceMinisterWolfgangSchublegrew particularly irascible, officials said. At one point, Ms. Lagarde went to calm him down. She also tried to raise spirits in Mr. Van Rompuy's fifth-floor suite, where top EU officials were meeting with Mr. Anastasiades. The IMF chief handed out M&Ms, as officials say she often does at late-night European negotiations. Full report here. 09.50 Meanwhile Fitch has downgraded Cyprus' three largest banks - Bank of Cyprus, Laiki and Hellenic Bank. Bank of Cyprus, which is to take on all Laiki Bank deposits under 100,000 but see its large depositors suffer a haircut as high as 40pc on their savings has been downgraded to 'restricted default' from B. Laiki Bank, which is to be wound down, with its insured deposits going to Bank of Cyprus and anything else being hived off into a 'bad bank' has been set to default. Hellenic Bank remains on negative watch. 09.30 Ratings agency Standard and Poor's has downgraded its eurozone growth forecast. It now predicts the 17-nation economy will shrink by 0.5pc, rather than 0.1pc.
TradeDesk_Steve Steve Collins S&P downgrades 2013 GDP f'cast to -0.5% from -0.1% : for EUROZONE
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09.10 Much of the drama that unfolded behind closed doors late on Sunday night will remain forever a mystery, but our foreign correspondent Nick Squires has gained some valuable insight, including the fact that, at the height of tensions, Cypriot president Nicos Anastasiades wanted to throw chairs around.

Cyprus's president was so infuriated by the demands placed on his country during emergency bail out talks in Brussels that he felt like throwing chairs around the room, it was reported on Tuesday. Nicos Anastasiades told Cypriot MPs during a conference call that at one point he was so exasperated he wanted to pick up a chair and throw it. At which point one of the politicians back in Nicosia taunted him: Why dont you throw an ashtray instead?(apparently he is known for chucking ash trays around). It was also confirmed that the president at one ponint threatened to resign during tense negotiations with

international lenders in the early hours of Monday morning. His outburst came during a heated exchange with the IMF that their proposal to saddle the Bank of Cyprus with 9 billion in emergency liquidity assistance owed by the Popular Bank to the European Central Bank, effectively signaled the lenders closure in six months, according to a report in the Cyprus Mail today. Anastasiades known for his fiery temper apparently lost it when Lagarde proposed a 60pc haircut on uninsured depositors with the Bank of Cyprus.

09.02 We'll be hearing more from Dutch finance minister and Eurogroup head Jeroen Dijsselbloem, who is set to debate the Cyprus bail-out in the Dutch parliament at 4pm GMT. 08.58 More from the ECB's Benoit Coeure, who in addition to emphasising the need for a single supervisor for eurozone banks, criticised Eurogroup head Jeroen Dijsselbloem for suggesting the Cyprus bail-out could be seen as a blueprint for other struggling eurozone lenders. His is the latest attempt to mitigate the fallout from Mr Dijsselbloem's comments, which yesterday wiped off market gains made in the wake of the bailout deal. Speaking to Europe 1 radio, he said: Mr Dijsselbloem was wrong to say what he said The experience in Cyprus is not a model for the rest of the eurozone because the situation had reached a level that is not comparable with any other country.

08.50 Cypriot finance minister Michalis Sarris has described the situation in Cyprus as an "emergency" and "unprecedented. He said he hopes capital controls will only be in place for a few weeks. He also warned that large depositors could face losses as high as 40pc. Speaking to Radio Four's Today Programme, he said: The exact percentage is not yet decided but it's going to be significant. People who have larger than 100,000 [in their savings accounts] have to exchange them for bank shares. Asked if 40pc was a fair guess, he said: It could be in that neighbouhood but what I have seen, such is the number. He also expressed optimism that Russia would step in with more aid in addition to easing the terms of an existing 2.5bn loan. I believe Russia will be looking at us with a greater desire to do more work with some economic cooperation that will be helpful to the recovery of the economy. Mr Sarris also cautioned that the next few years will be painful for Cypriots.

I think it's fair to say we have taken a step backwards. As you know the Irish economy had similar problems and contracted by as much as 20pc. We now have to pick up the pieces but we have faced difficult situations before, and we now have the prospect of an energy boom. There will be adjustment downwards of the standard of living and income, but Cypriots have shown entrepreneurship and ingenuity. We will overcome it in time.

Cypriot Finance Minister Michalis Sarris gestures during a press conference following a Eurozone meeting early on Monday morning at EU headquarters in Brussels. Photo: AFP/Getty Images

08.06 European markets have opened and seem to have shrugged off yesterday's jitters. The FTSE 100, predicted to open flat, has risen 0.21pc in early trading. Meanwhile the MIB in Milan and IBEX in Madrid, which were expected to tumble this morning, have climed 0.7pc and 0.39pc respectively. 08.00 Cypriot business analyst Professor Hari Tsoukas has warned that unemployment on the island could double, to reach 30pc, in the wake of the bail-out. Speaking to Sky's Tom Parmenter, he said: Unemployment is likely to at least double from 14pc to at least 25pc and possibly up to 30pc. Not so long ago it was just 5pc. It is a huge challenge now facing the Cypriot people, we have been resilient before and we will need all that again. Sky has the full story here. 07.50 Senior ECB official Benoit Coeure has said the banking crisis in Cyprus highlights the need for a single supervisor of banks in Europe. Speaking to Europe 1 radio, Mr Coeure, a member of the ECB governing council, said: The first lesson is that we need better control of banks. We need an independent European regulator, and that will be the case by mid-2014 and it will be the ECB, and we need to identify problems earlier in the eurozone.

07.35 Foreign correspondent Nick Squires is still in Nicosia, where he tells us that on the 11th day of bank lockdown

businesses are finding it hard to buy stock and pay staff.

A man passes a sprayed entrance of a store that buys gold which reads in Greek " thieves" in capital Nicosia, Cyprus on Monday. Credit: AP

07.30 When banks finally re-open on Thursay after nearly two weeks, they will be subject to strict capital controls restricting the amount that can be transferred of withdrawn. Reuters Hugo Dixon has just been on Radio Four's Today Programme pointing out that it is unclear whether such measures will be imposed on all depositors, just those in the two largest lenders, or just those with deposits of more than 100,000. Attention will now turn to the capital controls. Jeremy Warner on Friday argued that such measures effectively make the Cypriot euro into a national currency. as it will severely limit people from getting euros out of Cyprus and render them virtually worthless int he wider eurozone. Guntram Wolff, deputy director of the Bruegel think tank, writing in the FT this morning, makes a similar point. He is sceptical of the Eurogroup's assurances that the measures will be temporary, proportionate and non-discriminatory. I hope that non-discriminatorymeans that no distinction will be made between a transfer between two banks in Cyprus and a transfer between two banks in two different eurozone countries. Ideally, proportionatemeans that the administrative measures will only be applied to banks that are troubled not all of them. Temporaryshould mean a period of a few days. But the capital controls in Iceland, introduced in 2008, are still in place. They ought to serve as a reminder that even temporary capital controls can be hard to get rid of.

07.00 Overnight Asian shares followed those in Europe and the US to close down on jitters over Jeroen Dijsselbloem's suggestion that the Cyprus bailout could act as a blueprint for other struggling eurozone countries. The Nikkei closed down 0.6pc, while the Hang Seng fell 0.28pc. The Shanghai Composite fell 1.25pc. Futures markets predict European shares will drop this

morning, with the worst losses predicted in stock markets in the eurozone periphery. While the FTSE 100 is expected to open flat, the Italian MIB and Spanish IBEX are predicted to fall 2.34pc and 2.4pc respectively. The German DAX and French CAC are expected to drop 0.48pc and 1.13pc respectively.

People at a cafe in Nicosia watch Cypriot President Nicos Anastasiades on television addressing the nation on Monday after he flew home from Brussels where he negotiated a bailout deal. Anastasiades acknowledged the terms of a eurozone bailout deal he struck in Brussels were "painful" but vowed the island would recover. Credit: AFP

06.00 Good morning. In the first day of "a new era for Cyprus", its banks will stay closed today and tomorrow, after the central bank reversed an announcement yesterday saying all but the two largest lenders would open their doors this morning. The island is still reeling from an eleventh-hour deal struck by its president Nicos Anastasiades in the early hours of Monday morning following almost 12 hours of talks with Cyprus' EU and IMF lenders. Mr Anastasiades, addressing his public yesteray evening, described the agreement as "painful but the best we could get under the circumstances." He also verbally ushered in "a new era" for Cyprus and announced that there would be a criminal investigation into how Cyprus was led into crisis. Although global markets were initially buoyed by news of the deal, gains were sharply wiped out when Dutch finance minister and Eurogroup head Jeroen Dijsselbloem announced that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe. The Eurogroup swiftly backtracked, releasing a statement asserting that Cyprus is "a specific case with execptional challenges" and that programmes are "tailor-made to the country concerned and no models or templates are used." Nonethless markets across the board closed down. Bruno Waterfield has the full story here. We also got confirmation yesterday that the European Central Bank will continue its emergency funding to Cyprus' banks. On Thursday the ECB told Cyprus it would stop the programme on Monday unless a satisfactory bailout deal was reached.

In case you missed it, here are the details of the new deal: The country's second-largest bank, Laiki, will be dissolved immediately into a bad bank containing its uninsured deposits and toxic assets, with the guaranteed deposits those under 100,000 - being transferred to the nation's biggest lender, Bank of Cyprus. Although the deal avoided the controversial bank levy which saw the original proposal overwhelmingly rejected by the Cypriot parliament, even the best-protected senior bondholders investing in Laiki Bank would see their holdings "wiped out", said Mr Dijsselbloem. Since the new deal does not involve a new tax, it does not need parliamentary approval. While the Bank of Cyprus survives, it will suffer a major "haircut" - a forced wipeout of investment value - on all deposits of more than 100,000. These forced losses on large deposit holders in the island's two largest banks are expected to raise 4.2bn of the 5.8bn that Cyprus is required to contribute to the bailout. The remaining 1.6bn is expected to come from tax increases and privatisations.

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