The top bankers expressed concern that the treatment of Cyprus has set a new precedent and as a result nervousness in the region is reaching dangerous levels.“Leaders need to moderate their language. This could be very bad,” Ricardo Espírito Santo Salgado, chief executive of Banco Espirito Santo, told the Financial Times.“If someone had designed a plan to hurt the European market, it would be difficult to think of something better. You can’t keep playing with fire,” President of Millenium BCP, Nuno Amado said, talking about a “Cyprus virus.” In March Cypriot account holders were told to take a cut on their savings so that their government could qualify for a bailout package from the troika of international lenders. The impact of the shock decision is still being felt in Portugal and other Eurozone countries, economist Tobias Blattner told RT, stressing that EU leaders need to come up a concrete plan before they meet for an EU Summit in June this year.“There is a very strong consensus that the Cypriot bail-out was certainly not made in the best way, because it was made in unpredictable way and I think it clearly rose to the uncertainty among investors everywhere in euroarea. So there is a strong consensus there should be a bail-in, which is certainly something good in a long run but it should be according to clear spelled out rules and that essence it’s now very important that leaders in summit in June at the very latest will come out with a very clear bail-in packing order that uninsured depositors will not be hit in any restructuring of banks in euroarea in the future.” … Read More
Counting the Cost – Debt: Trouble in paradise
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Saving Cyprus: IMF approves $1.3bn rescue package
The IMF has approved a three-year, $1.3 billion loan to jump start recovery in Cyprus and restore financial credibility to its indebted banking industry.The funds will be distributed to stabilize the banking industry, tame the state deficit, and to restore economic growth on the island.The IMF announced on Wednesday it had approved the first $111 million (86 million euro) installment of the loan, which was made immediately available to the Cypriot government. The next installment of $1.3 (1 billion euro) will be wired before June 30th, 2013 and fostered by the European Stability Mechanism, based in Luxembourg.The bailout is part of a $13 billion (10 billion euro) monetary package funded by Troika lenders over the next three years.The financial assistance is intended to prevent a further crisis and to revive the economic pulse of the debt-stricken nation.The loan “is intended to stabilize the country’s financial system, achieve fiscal sustainability, and support the recovery of economic activity to preserve the welfare of the population,” the IMF said in a statement.Klaus Regling, chief of the European Stability Mechanism, said on Monday, “The loans granted by the ESM help to maintain financial stability in the euro area and buy time for Cyprus. This time enables Cyprus to undertake the reforms necessary to rebuild its economy on a sustainable basis.”This is the fourth eurozone loan from the IMF crisis lending fund. Greece, Portugal, and Ireland have all received bail-out support from IMF lending. Taking out loans from the IMF increases the organization’s power in the eurozone. The more debt it owns, the more influence it holds over policy.The IMF is optimistic at Cypriot prospects, but is still cautious about a possible debt relapse.“Challenges ahead are significant, including restoring credibility in the banking sector and reducing fiscal deficits and debt to sustainable levels,” IMF Managing Director Christine Lagarde said of Cyprus.“There is no room for implementation slippages.”On Wednesday, the EU statistics office confirmed the 17 nation eurozone remained in recession with an overall regional contraction of 0.2 percent in the first financial quarter, from January to March. The Cypriot economy shrank by 1.3 percent.Official figures show France has returned to its second recession in four years, as the economy shrank by 0.2 percent in Q1 of 2013, after shrinking the same amount in the final of quarter of last year.The eurozone’s strongest economy, Germany, also showed some sluggish signs of growth. GDP grew by just 0.1 percent in the first quarter, far less than 0.3% expected by economists, showing sluggish signs of growth.The Netherlands, which entered recession three months ago, also showed contraction, with GDP falling by 0.1 percent in the first quarter of this year. Once one of the strongest-looking members of the eurozone, the Netherlands suffers from rising unemployment and the housing market bubble bursting. … Read More
Slovenia to adopt austerity plan in bid to avoid bailout
Earlier this week, Slovenia’s government revealed an austerity plan to raise €540 million in new taxes to balance the budget and avoid an international bailout.“Everybody who has been in trouble in the eurozone in the last years in the first phase of the crisis always refused to admit that they are really in trouble. And that of course is first of all some kind of psychological game they are trying to play with the markets and with the public at large,” Johan van Overtveldt, editor in chief of financial magazine Trends told RT.“All the countries that came into the danger zone eventually had to ask for help which is something national governments don’t like, because then obviously to a certain degree at least they have to answer to and to obey to foreign powers, be it the European Central Bank or the European Commission, the IMF or the three together in the famous Troika,” he said.The government is planning to partially privatize 15 state-run companies, including Slovenia’s second-largest bank Nova Kreditna Banka Maribor, Ljubljana airport, Adria Airways airline and Telekom Slovenija communications operator. The austerity plan must be approved by Slovenia’s parliament and will be then handed to the European Commission, which is expected to discuss it later this month. Slovenia, a nation of 2 million, is one of the 17 nations that uses the Euro currency. Government debt has seen eurozone nations Greece, Ireland, Portugal, Spain and Cyprus receive emergency loans, which Slovenia is attempting to avoid.In late April, up to 2,500 protesters gathered in the Slovenian capital to protest against tax increases and public sector wage cuts. While unemployment in the country recently reached a 14-year high, many are still hoping that a bailout can be avoided Five state-controlled banks – with an estimated €7 billion in bad loans on their books – are at the epicenter of Slovenia’s economic crisis. The government is scrambling to find a way to support the banks and avoid a collapse of the country’s entire banking system. According to a document released on Friday, Slovenia plans to transfer €3.3 billion in bad loans, held by its three largest state-controlled banks, to a newly established ‘bad bank,’ due to open in June. In return, the three banks combined will be given state-guaranteed bonds worth €1.1 billion The country’s sales tax will increase from 20 percent to 22 percent, and the government is set to introduce further taxes next year.”We are aware that tax increases won’t have a positively impact on the economy and the recovery, but we have opted for the least harmful option,” Prime Minister Alenka Bratusek was quoted as saying. “I believe this will satisfy the European Commission.” Slovenian Economy Minister Stanko Stepisnik explained that the government is planning to propose a temporary crisis tax on all incomes, which could be introduced at the end of the year. The government has been negotiating a public-sector wage freeze. Slovenia has been in recession since 2011, with an unemployment rate of 13.5 percent. Slovenia’s economic output is forecast to shrink 2 percent this year and 0.1 percent in 2014, according to the European Commission. Last week, ratings agency Moody’s cut Slovenia’s rating by two notches to ‘junk.’ However, the Slovenian government managed to raise €3.5 billion from international bond markets in early May. On Friday, the European Bank for Reconstruction and Development (EBRD) said that Slovenia’s recession was likely to continue into 2014, with output set to shrink 0.9 percent next year following a forecasted 2.5 percent contraction in 2013. … Read More
UKIP LEADER NIGEL FARAGE TALKING ABOUT THE "EURO UNFOLDED DISASTER"!
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Cypriot parliament approves bailout
By a show of hands, 29 lawmakers approved ratification of the bailout bill against 27 opposed. The government had warned that without approval the economy was in imminent danger of default. Cyprus is expected to get the first tranche of a total of 10 billion euros ($13.10 billion) in aid in May, with the finances coming from the European Union and the International Monetary Fund. The conditions of the bailout could see Cyprus falling into at least two years of economic misery, according to some analysts, with fears that the eurozones third smallest economy will be dragged down by skyrocketing unemployment rates. The measures have fueled massive calls from Cypriots to exit the euro block. … Read More
Eurozone unemployment hits record-breaking 12.1%, 19.21mn out of work
The overall number of people currently out of work in the eurozone has reached 19.21 million.The EU member hardest hit by austerity – Greece – has the worst unemployment, according to Eurostat’s survey for March 2013, published on Tuesday. The country has more than a quarter of its citizens jobless (Eurostat reveals figure of 27.2% for January 2013). The number out of work is expected to rise even further after Athens agreed to sack 15,000 civil servants as part of the requisite for the 2.8 billion euro part of its latest bailout tranche. Other subjects to austerity, Spain and Portugal, also see their unemployment levels nearing those seen only during the Great Depression. And it’s not only a problem for countries forced to tighten their belts. France has its unemployment – with 5 million jobless – at all time high.For those aged 25 and below, in countries like Spain and Greece, the unemployment rate is as high is close to 60%, with very little sign of improvement.Fleeing unemployment To find out the real extent of the problem RT’s Tesa Arcilla spoke to some of those who were forced out of their homeland by unemployment. Nicollo Regalzi, a biology graduate from Italy had to come to Brussels and embark on a chocolatier career.“The situation in Italy was actually awful. Because the only thing I was able to get is a really short contract like three months or six months with absolutely no possibility of growing up in an industry,” Regalzi complains.He says it wasn’t a walk in the park in Belgium, either, as many companies required working knowledge of both French and Dutch — a barrier that may be hard to overcome, but it was still more attractive for him than going back home.“I read that in 2012, the percentage of young people who emigrate from Italy grew by 30-40%. I really don’t know what it will be in 2013 because the situation is going from worse and worse,” according to the young Italian.And it’s not just EU citizens feeling the pinch. Foreigners who came to Europe to seek new opportunities — starting their own businesses and building their lives — have now also changed their minds.For Adriana Moreno, this meant leaving Greece and going all the way back to her native Ecuador. And while homesickness was the initial reason for the move, she has no regrets about making that decision.“Many foreigners decided to leave Greece and move to countries like Germany and Switzerland. But the Greeks who stayed behind are saying that the situation is really difficult there. For instance, servicemen who used to get 1,500 Euros are now paid just 900,” Moreno says. Ireland saw 63,000 people leave the country last year, which is the highest level of emigration in a decade.“It’s a trend. If you look at the figures, countries like Ireland, some people argue that a whole generation has left,” Pieter Cleppe, Head Of Brussels Office of Open Europe says.The “current plan is that Germany has to bailout the rest of the eurozone,” the expert told RT. But, he went on, some people claim that “the Germans are selfish,” since they are able to do so, but are not willing to.This myth is however debunked with figures, Cleppe says. Germany is “suffering as well,” the expert noted. “Its economy is not great: it’s not negative growth, but the unemployment is slowly going up. And this should be a lesson,” he pointed out. Alternative solutions have also been discussed, “but most of them until having a second look at which countries can share a currency union,” the analyst said. “So far, this is still an absolute and unconditional taboo in the European capitals, but I suspect that will change at some point.”As job rates in Europe plummet to their all time lows, some analysts see it as a sign that billions of euro in bailouts could work fine for balancing a country’s finances, while at the same time not making economies any healthier. … Read More
