Reuters blog archive
By George Hay
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
2014 has been a good year so far for incurable euro zone optimists. Even though the euro zone crisis is fresh in the memory, and deflation remains a risk, Greece’s five-year bond yields are below 5 percent. Greek banks have easily attracted foreign capital, helped by global funds flowing back into Europe after the U.S. Federal Reserve started its “tapering” policy. Still, foreign investment into Bank of Cyprus would represent a new bullish peak.
It has been barely more than a year since the Cypriot banking system capsized, ushering in a haircut of uninsured depositors, capital controls, and an emergency deal to merge Laiki, the country’s worst-off bank, into rival BoC - whose depositors still cannot access about 1.5 billion euros of their cash.
There are some reasons for the rosy view. Cypriot GDP fell much less than the 9 percent predicted by the euro zone authorities for 2013. National deposit inflows turned positive in April, for the first time since December, 2012. John Hourican, BoC’s chief executive, is getting to grips with bad debts by shoving 12 billion euros into a restructuring division. The bank made a profit in the first quarter, and the last significant internal capital controls were lifted on May 30.
from Photographers' Blog:
By Neil Hall
If you look at a map of Cyprus, there is a line that cuts across the island like a scar. This is the buffer zone, a United Nations-controlled no-man’s land, also called the ‘Green Line’. It is a constant reminder that the country remains physically and symbolically divided.
The zone is a product of Cyprus’ turbulent history. When the island became independent from Britain in 1960, tension simmered between Greek and Turkish Cypriot communities, boiling over into political disputes and violence in 1963. Soon the first peacekeeping troops were sent in and the capital was effectively partitioned.
Investors have spent months looking askance at Turkey’s corruption scandal and Prime Minister Tayyip Erdogan’s response to it – purging the police and judiciary of people he believes are acolytes of his enemy, U.S.-based cleric Fethullah Gulen. But it appears to have made little difference to his electorate.
Erdogan declared victory after Sunday’s local elections and told his enemies they would now pay the price. His AK Party was well ahead overall but the opposition Republican People's Party (CHP) appeared close to seizing the capital Ankara.
from Hugo Dixon:
Sunday marked the anniversary of Cyprus’ shock plan to raid the tiny island’s bank deposits. The envisaged tax, backed by the euro zone, covered all banks and all deposits, whether insured or not.
Although that unwise scheme was later rescinded, much damage was done to a country already deep in financial crisis. Uninsured deposits of the island’s two large troubled lenders still suffered big haircuts. Capital controls were imposed as well.
A reported 0300 GMT deadline, which Russian forces denied had been issued, for Ukraine’s troops to disarm in Crimea or face the consequences has passed without incident and in the last hour President Vladimir Putin has ordered troops that took part in military exercises in western Russia to return to base.
That has helped lift the euro but the situation remains incredibly tense. Russia’s stock market is up a little over two percent and the rouble has found a footing but they are nowhere near clawing back Monday’s precipitous losses.
Worrying escalation in Crimea. Interfax reports Russian servicemen have take over a military airport in the Russian-speaking region of Ukraine and armed men are also patrolling the airport at Crimea’s regional centre of Simferopol.
Kiev has condemned the moves as an “armed invasion”.
There has been no bloodshed and there are more constructive noises from Moscow to weigh in the balance.
Russia’s next move remains the great unanswered question for Ukraine but there are glimmers that things might be starting to move elsewhere.
IMF chief Christine Lagarde said last night she would send a technical support team to Ukraine soon if Kiev makes a request. It can’t do so until an interim government is formed, probably tomorrow. That would be step one, but only step one, down the road to an international aid package.
Italy’s president will meet centre-left leader Matteo Renzi today and is likely to ask him to form a government following the ousting of Enrico Letta as prime minister.
Renzi will need to reach an agreement with the small New Centre Right party to continue the current coalition and there is common ground. The 39-year-old has already said he backs lower taxes affecting employment, but they differ on issues such as immigration and laws allowing gay and lesbian civil partnerships.
Any sense of euphoria EU leaders felt about agreeing a plan to underpin Europe’s banks – which should have been muted anyway – may be tempered by S&P’s decision to cut the bloc’s credit rating to AA+ from AAA.
In global terms that’s still rock solid but the rationale – flagging “rising risks to the support of the EU from some member states” has some resonance. On the upside, the agency affirmed its rating of Ireland following its bailout exit and kept its outlook positive. Presumably, S&P is clearing the decks before Christmas because it also reaffirmed the UK’s top notch AAA rating, and reaffirmed South Africa too.
The Slovenian government is poised to publish the results of an external audit of its banks, which will say how much cash the government must inject to keep them afloat. We’ve heard from sources that the euro zone member needs as much as 5 billion euros to recapitalize largely state-owned banks.
The central bank said on Tuesday that sufficient funds were available to an international bailout but, while the euro zone might breathe a sigh of relief, Ljubljana’s problems are far from over. A fire sale of state assets will be triggered and the banks are so embedded into the Slovene economy that deleveraging will cause great damage.