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25 Mar 2013
Eurogroup reaches agreement with Cypriot authorities
FXstreet.com (Barcelona) - Already finished Eurogroup and FMI press conference, attending IMF chief Christine Lagarde, Eurogroup Chairman Jeroen Dijsselbloem, EU's commissioner for economic affairs Olli Rehn , European Central Bank (ECB) board member Jorg Asmussen, and ESM managing director Klaus Regling, the Eurogroup has reached an agreement with the Cypriot authorities “on the key elements necessary for a future macroeconomic adjustment programme,” the official Eurogroup statement reads.
The agreement comes from all sides of the table, including all Euro area members states, along with the ECB, the IMF, and the ESM, also known as Troika. No further Cyprus parliament voting will be needed as the levy part of the deal has been “avoided”, EU chairman said, remarking “should be no doubts about that,” referring to any kind of discount on deposits below insured € 100k accounts.
A bad bank, and a good bank
Main focus on the deal has been reduced to the banking sector, also explained Mr Dijsselbloem, where "solution focuses on troubled banks," and the insured deposits. Among other measures, solution passes through a “split in a good and a bad bank”, said EU's chairman, with the “bad” one “gone” in some uncertain future time. Laiki Bank, the “bad” bank, “will ultimately disappear," said IMF's Lagarde. Bank of Cyprus would be the “good” one, where under € 100k secured deposits would be transferred. Asked if there is any chance the “bad bank” survives, Dijsselbloem said there could be a small part left, but that only time could tell.
According to EU's Dijsselbloem and as stated in the memorandum, there has only been “changes in instruments,” Jeroen said, while the basics of the agreement are “as stated already on 16 March,” reads the statement. After several questionings from different reporters on considering rising the levy option on secured deposits could be understood as a mistake, officials did not directed recognized such, nor of course apologized or anything alike. On the contrary, as Dijsselbloem said, by far the one who spoke the most, he believes now the EU comes stronger than before.
He doesn't believe this episode has been a come back of any “major return of Euro zone crisis,” but “only a banking crisis,” and so it has been treated, focusing in splitting the biggest troubled banks, he said. "Measures will concentrate in these two banks," said EU's chairman, describing these measures as "necessary" and "not general, like in previous agreement," he added. He also stated that economy in Cyprus can “pick up quickly.”
Capital controls?
Questioned about one of major uncertainties still unclear, capital controls, answers did not satisfied anybody. According to EU's commissioner for economic affairs Olli Rehn, the decision to “introduce capital restrictions” will have to be taken locally by Cyprus government, and it'd be only temporary, and supervised by the EU, despite the fact this goes against “free movement of capital” within the EZ, one of main reasons behind the union. Jeroen Dijsselbloem expressed to be “convinced this solution is better,” referring to capital controls.
About if banks will open on Tuesday, Dijsselbloem said "details to open banks will be given tomorrow," also mentioning ECB will have to decide on this; "Can't tell for certain when banks will reopen," he stated. He said first condition for ECB was there should be a program and now there is one. Next ECB must decide whether the program is good enough of not.
How much for the haircuts
For the amount of haircuts in unsecured deposits, no concrete answers were also given, saying "numbers will have to be calculated," noted Dijsselbloem, adding: "can't put a number on that yet." Olli Rehn also referred to upcoming EU memorandum by mid April as a source for further answers. When questioned if all this agreement was mainly just to “buy some time,” EU commissioner denied it.
Also questioned by the BBC reporter on previous headlines saying Cyprus PM had threatened to resign during negotiations, both Dijsselbloem and Rehn declined to comment on it saying they don't quote participants speeches. Sounds like a confirmation, specially when answers were given amid relaxed laughs from the speakers.
When asked about if the mentioned till date € 10B amount for the bail out will be enough, they repeatedly said so far they think it will be, which at the same time adds for the Netherlands, Germany and Finland parliaments to approve the measure, as this was one of the prerequisites. “Still think we can work with the 10B,” said Dijsselbloem.
According to Spanish Fin Min asked on his way out of the meeting about the deal, he said it is a “conclusive deal,” and with “adequate conditions,” De Guindos noted. "Greek businesses ring-fenced," said IMF Lagarde during the press conference, would be one of the important parts of the deal, as it reduces the risk side of the Greek part.
When asked if further negotiations with the Russians will take place, Dijsselbloem said he expects they do, specially regarding the current loan they already have in place.
No levy for insured deposits below €100k
Probably both the press conference and the EU statement leaves many questions open, but there is still plenty to go through for the hours ahead, At least, looks like an immediate agreement has been reached to stop most urgent uncertainties. EUR/USD reacted on the news spiking to 1-week highs 1.3051, still unable to fill the initial gap down when first news on Cyprus bailout deal came out one week ago, and the possibility on applying a levy on deposits below € 100k. Now that part at least has been clarified, and it will not happen.
The agreement comes from all sides of the table, including all Euro area members states, along with the ECB, the IMF, and the ESM, also known as Troika. No further Cyprus parliament voting will be needed as the levy part of the deal has been “avoided”, EU chairman said, remarking “should be no doubts about that,” referring to any kind of discount on deposits below insured € 100k accounts.
A bad bank, and a good bank
Main focus on the deal has been reduced to the banking sector, also explained Mr Dijsselbloem, where "solution focuses on troubled banks," and the insured deposits. Among other measures, solution passes through a “split in a good and a bad bank”, said EU's chairman, with the “bad” one “gone” in some uncertain future time. Laiki Bank, the “bad” bank, “will ultimately disappear," said IMF's Lagarde. Bank of Cyprus would be the “good” one, where under € 100k secured deposits would be transferred. Asked if there is any chance the “bad bank” survives, Dijsselbloem said there could be a small part left, but that only time could tell.
According to EU's Dijsselbloem and as stated in the memorandum, there has only been “changes in instruments,” Jeroen said, while the basics of the agreement are “as stated already on 16 March,” reads the statement. After several questionings from different reporters on considering rising the levy option on secured deposits could be understood as a mistake, officials did not directed recognized such, nor of course apologized or anything alike. On the contrary, as Dijsselbloem said, by far the one who spoke the most, he believes now the EU comes stronger than before.
He doesn't believe this episode has been a come back of any “major return of Euro zone crisis,” but “only a banking crisis,” and so it has been treated, focusing in splitting the biggest troubled banks, he said. "Measures will concentrate in these two banks," said EU's chairman, describing these measures as "necessary" and "not general, like in previous agreement," he added. He also stated that economy in Cyprus can “pick up quickly.”
Capital controls?
Questioned about one of major uncertainties still unclear, capital controls, answers did not satisfied anybody. According to EU's commissioner for economic affairs Olli Rehn, the decision to “introduce capital restrictions” will have to be taken locally by Cyprus government, and it'd be only temporary, and supervised by the EU, despite the fact this goes against “free movement of capital” within the EZ, one of main reasons behind the union. Jeroen Dijsselbloem expressed to be “convinced this solution is better,” referring to capital controls.
About if banks will open on Tuesday, Dijsselbloem said "details to open banks will be given tomorrow," also mentioning ECB will have to decide on this; "Can't tell for certain when banks will reopen," he stated. He said first condition for ECB was there should be a program and now there is one. Next ECB must decide whether the program is good enough of not.
How much for the haircuts
For the amount of haircuts in unsecured deposits, no concrete answers were also given, saying "numbers will have to be calculated," noted Dijsselbloem, adding: "can't put a number on that yet." Olli Rehn also referred to upcoming EU memorandum by mid April as a source for further answers. When questioned if all this agreement was mainly just to “buy some time,” EU commissioner denied it.
Also questioned by the BBC reporter on previous headlines saying Cyprus PM had threatened to resign during negotiations, both Dijsselbloem and Rehn declined to comment on it saying they don't quote participants speeches. Sounds like a confirmation, specially when answers were given amid relaxed laughs from the speakers.
When asked about if the mentioned till date € 10B amount for the bail out will be enough, they repeatedly said so far they think it will be, which at the same time adds for the Netherlands, Germany and Finland parliaments to approve the measure, as this was one of the prerequisites. “Still think we can work with the 10B,” said Dijsselbloem.
According to Spanish Fin Min asked on his way out of the meeting about the deal, he said it is a “conclusive deal,” and with “adequate conditions,” De Guindos noted. "Greek businesses ring-fenced," said IMF Lagarde during the press conference, would be one of the important parts of the deal, as it reduces the risk side of the Greek part.
When asked if further negotiations with the Russians will take place, Dijsselbloem said he expects they do, specially regarding the current loan they already have in place.
No levy for insured deposits below €100k
Probably both the press conference and the EU statement leaves many questions open, but there is still plenty to go through for the hours ahead, At least, looks like an immediate agreement has been reached to stop most urgent uncertainties. EUR/USD reacted on the news spiking to 1-week highs 1.3051, still unable to fill the initial gap down when first news on Cyprus bailout deal came out one week ago, and the possibility on applying a levy on deposits below € 100k. Now that part at least has been clarified, and it will not happen.