Russian Depositors use loophole to take billions out of Cyprus

Another very disturbing piece of news has emerged today, it appears that large amounts of money in the order of billions have been withdrawn from Laiki and Bank of Cyprus during the one week blockade; should this be confirmed the hole in the two banks could be much larger than thought; which in exchange would guarantee a total wipe out of the two banks' deposits.
If the purpose of all this was to punish dirty Russian capitals in Cyprus well it seems it failed miserably.

From FAZ, Google translation edited:

Despite the closed banks and a lock for payments in the past week, more money flowed out of Cyprus than in previous weeks, Frankfurter experts report.

Prior to the escalation of the crisis in Cyprus accruing on the payment system targetting liabilities of Cypriot central bank to the European Central Bank (ECB) had increased daily at approximately 100 to 200 million euros. In the days after Parliament rejection of the stabilization program, the daily risk has risen to more than double.
Just in the last week so cash assets have been withdrawn from Cyprus in the billions, regardless of the fact the Cypriot central bank had issued a lock.

Cyprus Central Bank Board nonetheless left exemptions from capital controls
such as transfers for humanitarian aid reasons and "special payments", which are not defined in detail.
The unusually high outflows from Cyprus in recent days indicates that the central bank of Nicosia has interpreted this capital control rather liberally.

From Reuters:

While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money.

No one knows exactly how much money has left Cyprus' banks, or where it has gone. The two banks at the centre of the crisis - Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus - have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks' largest depositors.

Global Economic Indicators

Congratulations to Italy for scoring the worst GDP growth and worst unemployment, bets are open won how soon Russia and India will leave Italy behind.

ECB threatens stopping purchase of Italian Bonds

Three months ago, in exchange for the ECB's purchase of Italian bonds, allegedly the only backstop that has prevented Italian bonds from experiencing an all out collapse to date, Italy was presented with a list of strict "austerity" demands, among which were spending cuts, higher revenues and labor reform. Since then none of these has occurred... or will occur, simply because Berlusconi has no control over the government and cannot care less while taken with more important judicial issues. Well, It appears that the ECB has just made it clear that the status quo is about to end, unless Italy does in fact push with something the ECB will have no choice but to play hard ball. Reuters has just confirmed that The European Central Bank had discussed the possibility ending the purchase of Italian government bonds if it concludes Italy is not adopting promised reforms.
ECB Governing Council Member Yves Mersch said. "If we observe that our interventions are undermined by a lack of efforts by national governments then we have to pose ourselves the problem of the incentive effect," Mersch said according to extracts of an interview with Italian daily La Stampa published today.
The ECB has issued an ultimatum to Berlusconi to get his house in order. The problem is that he can't. Not without stepping down and that will not happen. If the ECB will stop purchasing Italian bonds it will start a death down-spiral on the markets forcing Berlusconi out of power but paving the road to Italy default and economy collapse. We will see how far they will go with the threat and their bluff and how tenacious will be Berlusconi in his preservation fight.
And here is what an ECB ultimatum sounds like:

Asked if this meant the ECB would stop buying Italy's bonds if it did not adopt reforms it has promised to the European Union, Mersch, who heads Luxembourg's central bank, replied:

"If the ECB board reaches the conclusion that the conditions that led it to take a dec
ision no longer exist, it is free to change that decision at any moment. We discuss this all the time."

Since the ECB resumed its bond buying programme (SMP) around three months ago it has purchased some 100 billion euros of government bonds, a majority of which are thought to be Italian BTPs.

Mersch said the ECB did not want to become a lender of last resort to help the euro zone solve its debt crisis and said it was concerned that its job could be made more difficult by governments that "don't meet their responsibilities."

And the punchline:

"Our job is not to remedy the errors of politicians," he said.

Prisoner Swaps: Israel – Arabs

Prisoner Swaps: Israel – Arabs

European Banks Rating

Do-it-yourself Euro banks stress test

For those who want to experiment with financial armageddon, a useful calculator from Reuters.
Click on the image to start.

Greece sovereignty massively limited by EU following bailout

The 5th bailout tranche to Greece, has now been approved.

From Reuters:

"Euro zone finance ministers agreed on Saturday to disburse a further 12 billion euros to Greece and said the details of a second aid package for Athens would be finalised by mid-September. After a conference call, the 17 euro zone ministers agreed that the fifth tranche of the 110-billion-euro bailout agreed with Greece in May 2010 would be paid by July 15, as long as the IMF's board signs off on the disbursement. The IMF is expected to meet on July 8 to approve it. The payment will allow Greece to avoid the immediate threat of default, but the country still needs a second rescue package, which is also expected to total around 110 billion euros and which will now likely only be finalised in September. Between now and then, finance ministers will work on the "precise modalities and scale" of the private sector's involvement in the second aid package, which Germany hopes will eventually total around 30 billion euros. Greece said it expected a final decision on a second bailout programme by mid-September to keep the country financed.


The question is how long will the money last, 1-2-3 months at best and then we are back again to square one.
Greece has 18.2 bn in debt payments in August, 12 billion clearly are not enough to cover the shortfall, where will they get the rest?


As if it was not enough 1 hour ago a new warning has been issued by the Eurogroup chairman Jean-Claude Juncker. He warned Greeks that help from the EU and International Monetary Fund would have unpleasant consequences.


"The sovereignty of Greece will be massively limited," he told Germany's Focus magazine in the interview released on Sunday, adding that teams of experts from around the euro zone would be heading to Athens.
"One cannot be allowed to insult the Greeks. But one has to help them. They have said they are ready to accept expertise from the euro zone," Juncker said.
Juncker also said Greece must privatize on a scale similar to the sell off of East German firms in the 1990s.
"For the forthcoming wave of privatizations they will need, for example, a solution based on a model of Germany's 'Treuhand agency'," Juncker said, referring to the privatization agency that sold off 14,000 East German firms between 1990 and 1994.
Athens must sell off 5 billion euros in state assets this year alone or risk missing targets set under its EU/IMF program, which could cut off its funding needed to keep the government running and avoid a debt default.
"The current package of measures, which Athens has agreed to, will bring a solution to the Greek question," said Juncker. However, he added that the Greek tax collection system was "not fully functional."
Financial markets still see an 81 percent chance that Greece will eventually default, and German Finance Minister Wolfgang Schaeuble told Der Spiegel in an interview that Berlin was making preparations for such an event -- even though it does not expect it to happen.