Cyprus Stands Up and Rejects Savings Account Seizure

The Cyprus Parliament rejected a bail out plan that would have seized almost 10% of private savings deposits and used the money to bail out Cyprus banks. The vote was almost unaminous.

Cyprus Savers Get Robbed By Eurozone Bail Out

Size matters when it comes to bank bail outs and European politics. In the most brazen bail out deal yet, the citizens of Cyprus just had their savings seized to give the money to the banks. I kid you not. Here is the Eurogroup statement:

The Never Ending Shrinking European Economy

The United Kingdom's bond rating was just downgraded by Moody's from AAA to AA1, in part due to the U.K.'s austerity measures which repressed economic growth.

Saturday Reads Around the Internets - Mafia Supplanted by Banks

shocknews Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.

Moody's Downgrades, IMF Warns and Cyprus is Next

Moody's downgraded 15 banks, primarily because banks are busy placing bets in the great capital markets gambling casino. As a result of these downgrades, banks borrowing costs will increase and they will have to pony up more collateral to cover their holdings and trades.

More Austerity and Bail Outs for Greece as Conservative Party Wins Election

greece Greece is in turmoil. Austerity demands and debt have ravaged the nation. In spite of this, the pro bail-out and corresponding austerity political party just won the election:

The pro-bailout New Democracy party came in first Sunday in Greece's national election and could gather enough support to form a pro-bailout coalition to keep the country in the eurozone.

The world's eyes have been on Greece and their elections. The reason is one party wanted to default and leave the Eurozone. The two main parties are the New Democracy and the Syriza. The New Democracy party are the conservatives and support the European bail outs, austerity demands and want to stick with the EU and the Euro. The left Syriza wants to default, get out of those austerity demands and leave the Eurozone.

Most are reporting the New Democratic Party of Greece can form a parliamentary coalition.

The euro strengthened as official projections showed Greece’s two largest pro-bailout parties winning enough seats to forge a parliamentary majority, easing concern the country would be forced from the currency bloc.

Ay, Caramba! Spain Asks for a Whoppin' Bail Out

Well, it's happened as we earlier said it would. Spain is getting a bail out, worth €100 billion. Guess where that money is going - directly to Spanish banks! The loan is purely to recapitalize the banking system and to be given to Spain's FROB, a financial restructuring fund. From the Eurozone press release:

The Eurogroup has been informed that the Spanish authorities will present a formal request shortly and is willing to respond favourably to such a request.

The financial assistance would be provided by the EFSF/ESM for recapitalisation of financial institutions. The loan will be scaled to provide an effective backstop covering for all possible capital requirements estimated by the diagnostic exercise which the Spanish authorities have commissioned to the external evaluators and the international auditors. The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to EUR 100 billion in total.

The Eurogroup considers that the Fund for Orderly Bank Restructuring (F.R.O.B.), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned. The Spanish government will retain the full responsibility of the financial assistance and will sign the MoU.

Embattled Euro Zone Hunts for Plan B

europestorm Spain is desperate, pleading and begging for help. Literally Spain said it does not have access to markets to refinance their debt. This is after the G7 decided to do nothing.

Spain said on Tuesday it was losing access to credit markets and Europe should help revive its banks, as finance chiefs of the Group of Seven major economies conferred on the currency bloc's worsening debt crisis but took no joint action.

Treasury Minister Cristobal Montoro sent out a dramatic distress signal about the impact of his country's banking crisis on government borrowing, saying that at current rates, financial markets were effectively off limits to Spain.

"The risk premium says Spain doesn't have the market door open," Montoro said on Onda Cero radio. "The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt."

Now Spain is up against it, testing the market with a bond sale, all in hope of avoiding a bail out, with all of the austerity demands that come with one.

Spain will try to raise between one and two billion euros in bonds on Thursday, a crucial yet cautious test of Madrid's ability to tap investors after a minister said the country was being cut off from the markets.

The Never Ending European Financial Crisis

greekdominoes Last Friday we saw horror headlines from Societe Generale.

Euro zone stocks could plummet up to 50 percent if Greece makes a disorderly exit from the euro zone.

Additionally it was proclaimed bank runs have started in Europe.

A bank run is now happening within the eurozone. So far it has been relatively slow and prolonged, but it is a run nonetheless. And last week, it showed signs of accelerating sharply, in a way which demands an urgent response from policy-makers.

Right now the ECB is pressuring the Euro Zone to come up with deposit guarantee scheme to stop depositors from existing the Euro and various European banks:

Now investors are worried about the contagion effect a Greek exit from the euro zone could have on savers in other countries.

"Preventing bank runs in Italy, Spain and Portugal should be the top priority," said Berenberg Bank economist Holger Schmieding. "Policymakers need to make sure that the potential Greek precedent of a forced conversion of domestic euro deposits into a weak new currency would not spark a run on banks ... elsewhere."

The ECB is pressing the euro zone to set up a fund that would prevent this dangerous ripple effect, a message reinforced by ECB policymaker Joerg Asmussen last week.

You've Been Warned!

europestorm You've Been Warned. So says the European Central Bank about an impending collision between the never ending European debt crisis and Europe's increasingly slowing economies.

Risks to euro area financial stability increased considerably in the second half of 2011, as the sovereign risk crisis and its interplay with the banking sector worsened in an environment of weakening macroeconomic growth prospects. Indeed, several key risks identified in the June 2011 Financial Stability Review (FSR) materialised after its finalisation. Most notably, contagion effects in larger euro area sovereigns gathered strength amid rising headwinds from the interplay between the vulnerability of public finances and the financial sector. Euro area bank funding pressures, while contained by timely central bank action, increased markedly in specific market segments, particularly for unsecured term funding and US dollar funding.

Here's the money shot statement from the ECB. Things are worse than right after Lehman Brother's, the OMG Economic Armageddon global meltdown almost, collapse:

The transmission of tensions among sovereigns, across banks and between the two intensified to take on systemic crisis proportions not witnessed since the collapse of Lehman Brothers three years ago.

domino
Here come the dominoes in the form of global economic malaise. Contagion is when one nation's economic disaster spills over and affects the globe. That's the United States folks.

Eurozone