December 4, 2021

Cyprus’s Bailout Plan Meets With Skepticism

The Parliament put off until later this weekend a vote on a crucial new proposal that would confiscate 22 to 25 percent of uninsured deposits above 100,000 euros through a new tax on account holders in one of the nation’s most troubled banks.

So with a deadline imposed by the European Central Bank looming on Monday, it appeared there was still no immediate path to a lifeline of 10 billion euros, or $13 billion, that Cyprus needs to keep its banks from collapsing.

Cyprus’s so-called troika of lenders — the International Monetary Fund, the European Commission and the European Central Bank — must still approve any plan. President Nicos Anastasiades was scheduled to fly to Brussels on Saturday to meet with European Union leaders, a spokesman said.

Monday is a national holiday in Cyprus, but banks are supposed to reopen on Tuesday for the first time in more than a week. There is widespread fear of a classic bank run.

On Friday, Cypriots jammed into supermarkets after lining up all day Thursday at automated teller machines to withdraw as much cash as possible. Gas stations were taking cash only, and some retailers reported that they would no longer accept credit.

One of the provisions Parliament approved Friday would impose new restrictions on withdrawing cash or moving money out of the country when the banks reopen. These new capital controls would prohibit or restrict check-cashing and bar “premature” account closings or any other transaction the authorities deemed unwarranted.

Lawmakers also voted to restructure the nation’s largest and most troubled bank, Laiki Bank, by splitting off its troubled assets into a so-called bad bank. Accounts with no problem would be transferred to the nation’s largest financial institution, the Bank of Cyprus. Lawmakers also voted to require that any bank on the verge of bankruptcy be split apart in the same way.

By effectively shutting down one of the banks needing support, the government could lower the 5.8-billion-euro sum that international lenders are demanding in exchange for a bailout. The consolidation of Laiki, also known as Cyprus Popular Bank, effectively relieves the government of a large expense of supporting the banking system, which is on the verge of collapsing under a mountain of souring loans to Greek businesses and individuals.

Still to be voted on is the measure to impose a tax of 22 to 25 percent on uninsured deposits at the Bank of Cyprus. That proposal was made after lawmakers rejected a plan earlier in the week to tax insured deposits to help raise the amount needed to secure the bailout. The Parliament appears to be trying to make up the difference in part by shifting the burden to large account holders.

When euro zone finance ministers negotiated the original bailout terms last weekend, Cypriot officials had resisted limiting the tax to large accounts, evidently to avoid damaging the country’s reputation as a haven for wealthy banking clients. Many of the wealthiest citizens of Russia have euro-denominated bank accounts in Cyprus, which is one reason that euro zone finance ministers have taken such a hard line.

The decision to tax uninsured deposits came after Cyprus proposed nationalizing the pension funds of state-owned Cypriot companies.

Lawmakers approved the pension takeover on Friday, but the move was denounced in Germany, whose political and financial influence in the euro zone tends to dictate policy.

  “When you consider that there was massive resistance against involving the savings, then it is not easy to see how tapping the pension funds, which we view as socially a much more drastic step, is a very good idea,” Steffen Seibert, a spokesman for the German chancellor, Angela Merkel, told reporters.

The suggestion of tapping pension funds touches off a visceral response in Germany, where history has proved the dangers of such ideas. German pensions were tapped to finance both world wars, and the idea remains anathema to German leaders today.

Contributing reporting were Melissa Eddy in Berlin, James Kanter in Brussels, David M. Herszenhorn in Moscow, Niki Kitsantonis in Athens and Andreas Riris in Nicosia.

Article source: http://www.nytimes.com/2013/03/23/business/global/cyprus-bailout-vote.html?partner=rss&emc=rss

Cyprus Delays Vote on Bailout Plan

President Nicos Anastasiades was trying to compel policy makers in Brussels to soften demands for a tax to be assessed on Cypriot bank deposits, saying European Union leaders used “blackmail” to get him to agree to those conditions early Saturday in order to receive a bailout package worth 10 billion euros, or $13 billion.

Cyprus, whose banking system is verging on collapse, is now the fifth nation in the 17-member euro union to seek financial assistance since the crisis broke out three years ago.

As anger in this country swelled against the measure, Mr. Anastasiades delayed an emergency vote parliamentary vote on the bailout plan until Tuesday, the second step in as many days. Faced with a lack of support from lawmakers, the vote could be delayed until as late as Friday.

The government also said it would keep Cypriot banks shuttered until at least Friday, well beyond a bank holiday that was supposed to end Monday, a move aimed at staving off a possible bank run.

For the first time since the onset of the euro zone sovereign debt crisis and the bailouts of Greece, Portugal and Ireland, ordinary depositors — including those with insured accounts — were being called on to bear part of the cost, €5.8 billion.

The previous bailouts have been financed by taxpayers, and the new direction raised fears that depositors in Spain or Italy, two countries that have struggled economically of late, might also take flight.

A crowd of protesters gathered in front of the presidential palace, shouting angrily at Mr. Anastasiades and inveighing against Germany and European leaders as he entered the building to meet with his cabinet. “Merkel, U stole our life savings,” read one banner tied to a bus stop. “EU, who is next, Spain or Italy?” read another.

The group of finance ministers from the 17 countries using the euro were on standby Monday for a possible conference call later in the day to assess the outcome of discussions among party leaders in Cyprus. Jeroen Dijsselbloem, the president of the group, had declined Saturday to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not being actively considered.

A key question for the finance ministers was expected to be whether any revised formula for the tax on deposits could still deliver the 5.8 billion euros agreed to in the bailout deal. The plan, a so-called bail-in, also includes junior bondholders in Cypriot banks, and that component of the deal still was expected to bring in about 1.4 billion euros.

Russia’s support of the plan was also essential because of the large amount of Russian funds held by Cypriot banks. But President Vladimir Putin on Monday described the bailout plan as “unfair, unprofessional and dangerous,” the Interfax news agency quoted a Kremlin spokesman, Dmitry Peskov, as saying.

Foreign deposits made up 26.8 billion euros in deposits out of a total of 64.8 billion as of December, 15.4 billion euros of which were deposits from Russians in Cyprus, according to the Regional Banking Association of Russia.

As financial markets absorbed the implications of the news, finger-pointing quickly ensued. In Berlin, the German finance minister, Wolfgang Schäuble, sought to deflect criticism for the damage to depositors, saying the “levy on deposits below 100,000 euros was not the creation of the German government,” according to Reuters. “If one reached another solution, we would not have the slightest problem.”

But Mr. Anastasiades denied that he refused the proposal to exempt deposits under 100,000 euros from the levy, according to the government spokesman, Christos Stylianides.

Article source: http://www.nytimes.com/2013/03/19/business/global/asian-markets-drop-on-latest-euro-concerns.html?partner=rss&emc=rss

European Leaders Gather for a Trillion-Euro Budget Debate

BRUSSELS — European Union leaders are arriving here Thursday afternoon for the start of a two-day summit where they hope to hammer out a nearly €1 trillion budget to support farming, transportation and other infrastructure, as well as big research projects for the 27-nation bloc.

The budget, negotiated every seven years, represents only about 1 percent of the Union’s total economic output and around 2 percent of total public spending. But it still involves furious horse-trading as leaders focus on getting the best deal for their own countries’ citizens, rather than putting pan-European considerations first.

An attempt to reach an agreement in November failed, creating need for the leaders to take up the budget again now.

Enda Kenny, the prime minister of Ireland, which holds the rotating presidency of the Union, warned Irish lawmakers on Wednesday that the talks in Brussels would probably “continue into the night” and be “long and difficult.”

One of the complications in the current round of negotiations have been calls for budgetary rigor from leaders like Prime Minister David Cameron of Britain, who says the European Union should tighten its belt at a time when many European governments have been compelled to impose stringent budget cuts.

That approach has been met with suspicion, and even hostility, in other parts of the Union.

This week President François Hollande of France said he was willing to make cuts in the Union’s budget, but he pointedly warned Mr. Cameron against cutting too deeply into funds that could generate jobs.

“Why should one country be able to decide in the place of 26 others?” Mr. Hollande said, referring to Britain, as he took questions from lawmakers at the European Parliament.

Mr. Cameron, for his part, prepared for the meeting with a series of telephone discussions, seeking to forge an alliance with other leaders likely to support his aim of curbing the budget.

On Wednesday Mr. Cameron spoke to the German chancellor, Angela Merkel, and the Swedish prime minister, Fredrik Reinfeldt, and followed those discussions with phone conversations Thursday morning with the Dutch prime minister, Mark Rutte, and with Herman van Rompuy, president of the European Council who will be chairman of the summit.

“There are like-minded countries among the 27 and we are going to work with our allies to try to reach agreement,” said a spokeswoman to Mr. Cameron who, in line with British government policy, could not be identified by name. Those allies include the Netherlands, Denmark and Germany, she said, adding that Mr. Cameron was expecting to have further bilateral discussions with leaders including those from Sweden, the Netherlands and Denmark.

But others say that separate phone conversations that Chancellor Merkel has held this week with Union leaders could prove more influential.

After the failure to reach a budget agreement in November, another impasse this time would be a severe embarrassment for the Union’s leaders who have already spent years bickering over how to save the euro. Another failure also would force the Union to use provisional annual budgets costing more and could delay any further chance of a long-term agreement to 2015.

To avoid that, leaders are expected to meet into the early hours of Friday morning to hash out a deal that would limit the cash that governments give the Union a total of about €905 billion, but leave the door open to projects requiring an additional €55 billion.

That formula could be enough to satisfy net contributor countries like Britain, which have been fighting most vigorously to freeze E.U. spending, while also accommodating the demands of countries like France to maintain generous payments for agriculture.

The pressure will be on Mr. Van Rompuy, president of the European Council, the body that organizes summits. to present a blueprint for the budget that leaders can use as a basis for their discussions. Mr. Van Rompuy will invite the leaders to make clear their complaints in a roundtable session rather than be allowed to break into small groups.

This article has been revised to reflect the following correction:

Correction: February 7, 2013

An earlier version of this article misspelled the surname of Martin Schulz, the president of the European Parliament.

Article source: http://www.nytimes.com/2013/02/08/business/global/european-leaders-gather-for-a-trillion-euro-budget-debate.html?partner=rss&emc=rss

Luxembourg Banker Named to E.C.B. Board

BRUSSELS — European Union leaders have appointed Yves Mersch of Luxembourg to the executive board of the European Central Bank despite opposition from some lawmakers who wanted a woman to fill the post.

Mr. Mersch, head of the Luxembourg central bank, will take his seat Dec. 15 for an eight-year term after a decision late Thursday at a summit meeting in Brussels, where European Union leaders were seeking to negotiate a long-term budget for the bloc.

Mr. Mersch, known for his hawkish stance on inflation and for views in line with those of German central bankers, was nominated by euro zone finance ministers in July to succeed José Manuel González-Páramo of Spain on the six-person board.

But the post had remained vacant amid a debate over diversity on the board, opposition from Spain and skepticism about some of Mr. Mersch’s views. The European Parliament rejected the nomination last month, saying it was fed up with having only men in top jobs at the central bank.

Even though the Parliament does not have the power to require that women be considered, its decision carried weight in a period of heightened concern about making European institutions more democratically accountable.

Spain then blocked the appointment of Mr. Mersch this month, saying it would have preferred a Spaniard in the post.

There have been no women on the board since 2011, when Gertrude Tumpel-Gugerell of Austria left her post at the end of an eight-year term.

But the reasons for opposition to Mr. Mersch went beyond gender.

Some members of the European Parliament were uncomfortable with some of Mr. Mersch’s economic ideas, in particular his wariness of inflation. Others, including the Spanish, would have preferred that someone from Southern Europe had been selected.

The decision by European leaders to appoint Mr. Mersch met with criticism immediately from one of the members of the European Parliament who had fought to give women more prominence in central banking.

“The E.C.B. now has a member on its highest board without a democratically established mandate,” said Sharon Bowles, chairwoman of the economic and monetary affairs committee.

Ms. Bowles called on European leaders to make good on promises to establish a plan for greater diversity at central banks.

The dispute over Mr. Mersch is part of a broader push to advance the role of women in business in Europe that has met with opposition.

This month, Viviane Reding, the European justice commissioner, had to drop plans to penalize companies that did not have at least 40 percent of their board seats filled by women.

Facing resistance from Britain and other countries, Ms. Reding said sanctions would apply only in cases where noncompliant companies did not establish adequate selection procedures.

That proposal still needs the approval of national governments and the European Parliament to become law.

Article source: http://www.nytimes.com/2012/11/24/business/global/despite-objections-luxembourg-banker-named-to-ecb-board.html?partner=rss&emc=rss

Europe Presses Greek Parties to Commit to Bailout Terms

Though the ministers said they welcomed the deal to form a coalition government in Greece, European officials insisted that political consensus over a tough austerity program was a precondition for payment of the loan. Mr. Juncker said the ministers had “underlined the importance of sustained cross-party support for the program in Greece.”

“We have been calling for a coalition of national unity,” added Olli Rehn, the European commissioner for economic and monetary affairs. “It is essential that the new government will express a clear commitment on paper, in writing.”

He added, however, that provided the assurances were forthcoming, the loan to Greece could be disbursed this month. That could be done by teleconference and without a formal meeting of finance ministers, he said.

The meeting on Monday in Brussels was dominated by the political dramas unfolding in Greece and Italy. Mr. Juncker urged the authorities in Rome to begin the economic reform measures pledged by Prime Minister Silvio Berlusconi in a letter to European Union leaders last month. “What we are expecting from Italy is that Italy will be implementing all the measures which have been announced in Silvio Berlusconi’s letter,” Mr. Juncker told reporters.

The ministers also discussed a seven-page document outlining technical options for quickly expanding the firepower of their bailout fund, including one option that would hope to raise investment from outside Europe. The Dutch finance minister, Jan Kees de Jager, said the discussions remained a “work in progress.”

Officials are struggling to resolve technical details over how the 440 billion euro rescue fund could be leveraged to 1 trillion euros. The document did not refer to the difficulties European leaders have faced in persuading emerging countries to support their plans.

Under one model, the euro zone’s bailout fund would offer first loss insurance to buyers of some new issues of sovereign bonds. The other would set up “co-investment funds,” which would purchase bonds on the primary or secondary markets after attracting external investment.

But fears are growing that, even if achieved, 1 trillion euros will be insufficient if Italy fails to restore confidence in its economic management and cannot reduce its soaring borrowing costs.

The loss of market confidence in the euro zone was demonstrated Monday when its bailout fund, the European Financial Stability Facility, raised 3 billion euros via 10-year bonds to help finance its rescue of Ireland. The yield to be paid to investors was 3.591 percent, much higher than the 2.825 percent for five-year bonds issued in June.

“The yield was the highest we have had so far,” said Klaus Regling, the head of the bailout fund. “In light of the difficult market conditions, it is understandable that yields have gone up.”

Article source: http://feeds.nytimes.com/click.phdo?i=ee984d0dbdf4ee55f2378456f042c100

News Analysis: Europe Ponders Changes to Finance Ministers Group

More than 18 months after Europe’s monetary union first toppled into trouble, officials are debating whether more streamlined decision-making — and better presentation — could help their epic battle with the financial markets.

France and Germany agreed last month that the leaders of the 17 European Union countries in the euro zone should meet as a group at least twice a year under the chairmanship of Herman Van Rompuy, the president of the European Council. He now runs summit meetings of the full 27-member European Union.

That has prompted speculation that Mr. Van Rompuy might also lead the monthly meetings of the Eurogroup, made up of euro zone finance ministers. That is a job held since 2005 by Jean-Claude Juncker, the longtime prime minister of Luxembourg.

In part, the debate, which may reach its peak next month when the European Union leaders discuss proposals to strengthen the euro, reflects grumbling over the performance of Mr. Juncker. His influence has waned as his relations with the two main power brokers, Germany and France, have become more and more strained.

On top of some perceived public relations blunders, he also did not help his position when he began advocating jointly issued euro bonds last year — knowing full well that Berlin was staunchly opposed.

“It was always clear that his ability to do the job would suffer substantially if and when lines of communication with Berlin and Paris broke down,” said Thomas Klau of the European Council of Foreign Relations and author of a book on the creation of the euro. “His advocacy of euro bonds damaged his relationship with Berlin and Paris and impaired his ability to function.”

In an e-mailed response, Mr. Juncker’s spokesman, Guy Schuller, said Mr. Juncker intended to complete his mandate, which ends in June.

“Not one single head of state or government or finance minister has ever publicly, or in the presence of Prime Minister Juncker, criticized his leadership of the Eurogroup,” he added.

The European debt crisis has strained all the euro zone’s ramshackle structures and drawn attention to the need for deeper economic integration, something well beyond the ability of any single person to resolve.

The chain-smoking Mr. Juncker was once one of the most influential figures in the bloc. Though the country he has led since 1995 is tiny, Mr. Juncker, who speaks fluent French and German as well as English, specialized in playing the go-between and deal maker.

As head of the Eurogroup of finance ministers, Mr. Juncker vied with the president of the European Central Bank for the informal title of Mr. Euro. But under his leadership, the Eurogroup has failed to emerge as a body able to broker big deals during the latest crisis, often having to refer difficult decisions to national leaders.

During one meeting this year, Mr. Juncker canceled the customary news conference afterward, only to give ad hoc interviews in different languages as he left the building. Officials of the International Monetary Fund, who attended the meeting, said privately that they were shocked by the chaotic presentation.

According to a senior official, who spoke on the condition of anonymity, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France have pulled back from the idea of trying to oust Mr. Juncker before the end of his term. “They decided the downside of doing that exceeded the upside,” he said. “No one is going after Juncker.”

One complication is that, under part of the European Union’s governing treaty, the finance ministers themselves “shall elect” their own president, so imposing a candidate from outside would be difficult.

An emerging proposal, however, would make the Eurogroup chief accountable to Mr. Van Rompuy. Under this plan, the agenda of euro zone finance ministers would be discussed with Mr. Van Rompuy before meetings, as would any decision to call an emergency meeting of finance ministers.

That arm’s-length approach would probably suit Mr. Van Rompuy, whose position was instituted less than two years ago, since he is supposed to operate at the level of government leaders, not finance ministers.

Mr. Schuller said that Mr. Juncker favored the selection of “a full-time president for the Eurogroup” after his term expires, someone who would have that “as his or her only job.” Ideas being discussed include tapping “a former finance minister or even an outstanding expert,” he added.

Some within the European Commission are pressing for the economic and monetary affairs commissioner, Olli Rehn, to get the job, but that idea is likely to be resisted by Germany and France, who want to retain as much control as possible.

It would also blur the lines of the structure in which the European Commission is supposed to be policing the finance ministers, ensuring that countries meet their economic objectives.

All this means that the most likely solution is one that ties the head of the euro zone finance ministers group more clearly into a new line of command with Mr. Van Rompuy at the head.

While Mr. Klau said he believed that more streamlined structures made sense, he warned that they were only a small element of any long-term solution for the euro.

“Tinkering with the chairmanship is no alternative to devising a form of governance that operates on politically integrated or federal grounds,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=bba28827ff2baad4c78c1d39c5ba1f19

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Opinion »

Editorial: Some Sense in Europe

The European Union leaders have finally approved a bailout loan for Greece and others, but the economic crisis is far from over.

Article source: http://feeds.nytimes.com/click.phdo?i=3eb559fab991899d8083aa4b17db6aaa