Saturday, 16 March 2013

Bank run in Cyprus, 0% interest in Germany

In Cyprus a bank run started, according to this article.

And it all started because of this:

"Eurozone leaders and the IMF on Saturday announced an unprecedented levy on all deposits in Cypriot banks as the sting in the tail of a 10-billion-euro bailout for the near-bankrupt government in Nicosia.

Intended to apply to everyone from pensioners to Russian oligarchs alleged to have billions stashed away in what officials say is a bloated Cypriot banking sector, the "stability levy" immediately raised a flood of concerns among finance experts over a possible bank run in bigger eurozone economies, where fragile public finances are also under scrutiny.

Dutch Finance Minister Jeroen Dijsselbloem, after chairing some 10 hours of talks to strike the deal with counterparts including International Monetary Fund head Christine Lagarde and the European Central Bank's Mario Draghi, said the "upfront, one-off" tax is expected to raise 5.8 billion euros on top of the loans still to be finalised by eurozone parliaments.

The levy will see deposits of more than 100,000 euros in Cypriot banks hit with a 9.9 percent charge when lenders re-open their doors on Tuesday after a scheduled bank holiday on Monday. Under that threshold and the levy drops to 6.75 percent."

Meanwhile Germany is issuing government bonds at the "generous" interest rate of ..... zero per cent!

This is what the Telegraph wrote about it:

Germany's status as a safe-haven during the eurozone crisis was confirmed after its central bank said it would issue two-year bonds at zero interest for the first time.

The Bundesbank said it would issue €5bn (£4bn) of the bonds at an auction on Wednesday, which are expected to sell as investors rush to buy the eurozone’s safest bonds amid renewed fears over Greece.

While some eurozone countries are suffering from rising borrowing costs Germany enjoys low interest rates on its sovereign debts as investors are certain that the financial future of Europe’s largest economy is assured.

“If this is not a signal of complete financial market dislocation, nothing is,” said Marc Ostwald, strategist at Monument Securities.

This starts to sound worrisome. The 2008/9 crisis was never structurally resolved (money printing will just postpone problems, not solve them), and financial tensions are appearing again. Is it possible we will see another crisis?

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