Capital controls an unpalatable option for Athens

February 10, 2015

The risk of a Greek euro exit increases the pressure for capital controls. The policy did less harm than expected in the Cyprus crisis, and would buy time for Athens and its international creditors. The snag is that Greece’s position is weaker, and the politics more toxic.

Greek deposits fly between a rock and a hard place

January 30, 2015

One remedy to capital flight would be to give so-called emergency liquidity assistance to Greek banks. But heavy use of ELA could mean big losses if Greece left the euro. The alternative is to copy Cypriot capital controls. That, though, would be politically toxic in Greece.

Bank of Cyprus is bank of choice for EU über-bulls

June 2, 2014

Half the loans of the last major Cypriot bank are in arrears. Two-fifths of its funding comes from central banks. Yet Bank of Cyprus may still be able to secure foreign capital after the EU stress tests, if needed. If so, that would mark a new high in tapering ebullience.

Cyprus bond swap is good publicity, bad economics

July 2, 2013

The creditor banks of Cyprus “voluntarily” exchanged 1 bln euros worth of sovereign debt at cheap rates. That lowers the bailout bill for the euro zone, but the burden falls unevenly on the country’s banks. Exchanging all creditors’ debt would have been fairer - but messier.

How capital controls are prolonging Cypriots’ pain

May 27, 2013

After March’s brutal haircut on bank deposits, the island state’s economy will shrink this year whatever happens. But punitive controls on Cypriots’ access to their own money are making things worse. Efforts to stop the rot clash with the need to avoid financial instability.

Mafia and Cyprus may release IPO animal spirits

April 22, 2013

High debt didn’t deter buyers from Intelsat and SeaWorld stock sales. Now comes Qiwi, a Cyprus-domiciled, Russian payment system warning about risks from organized crime, the island’s bailout, money laundering and dual-class shares. It puts investor appetite to the ultimate test.

Bank hierarchy of pain could become a hydra

April 18, 2013

Who should lose money when banks fail? Talk of making deposits senior to bondholders might reassure savers rattled by the Cyprus bailout, and avoid bank runs. But it could lead to unhealthy arbitrage between loans and deposits. Vigilance is needed, and lots of capital.

Gold teeters on edge of bigger falls

April 11, 2013

The safe-haven metal is vulnerable. The Cyprus crisis and Korean fears have helped it surprisingly little. Cypriot gold sales and analysts’ downgrades are soft blows. Barring Korean disaster, gold faces nemesis in the Fed’s growing unease about money printing and a tapering of QE.

Cyprus and Jamaica – a tale of two island bailouts

April 10, 2013

Both have a $25 bln tourism-led economy, and both will get about $1 bln in help from the IMF. Sure, Cyprus has its banks, while Jamaica has bauxite. Those differences aside, no euro shackles are needed for low growth and declining productivity to make it hard to keep on moving.

Cyprus will struggle to make gas math work

March 22, 2013

The struggling island is thinking about bundling future gas revenues into a fund to stave off financial collapse. But Breakingviews calculations suggest the recent discoveries off the country’s south coast won’t be enough to plug a 5.8 billion euro funding gap.