There are many lessons to be learned from the Cyprus bailout, and plenty of implications for how things may develop in the future. We list 25 here, but there are more.
Lesson 1: Do not underestimate the ability of the eurozone to do the right thing – after all the alternatives are exhausted;
Lesson 2: Eleventh hour deals can often lead to mistakes and have unintended consequences. The decision to haircut depositors under EUR 100k was a pothole the Troika fell into. It questioned the integrity of the EUR 100k deposit guarantee;
Lesson 3: The disappearance of Mario Monti from the scene has reduced the influence the South has on decisions about the future of the euro; Continue reading “25 Lessons from CYPRUS”
Cyprus Closes Banks Until Next Week as Fear of Runs Continue: Cyprus is reportedly keeping banks closed until..that was the latest we heard from the financial media. What can we make it from it ? where the Bailout has gone wrong ?
Cyprus can’t really be about Cyprus, can it? After all, the banking sector in that country pales in comparison to things like the London Whale trade and the amount of capital the big banks have to raise to meet Basel III.
Some will say it is about depositor insurance. Fair enough.
Continue reading “CYPRUS – What next ?”
Recently Jörg Bibow was interviewed have tried to put the points in English stating that Mario Draghi’s announcement promise of ECB support for government bond markets seems to have calmed fears of an imminent euro breakup, at least for the time being. That does not mean the euro crisis is over though. Not at all, as the underlying problems remain largely unresolved. Liquidity can buy time but it cannot solve the imbalances inside the euro area and related debt overhangs that are the deeper cause behind the euro crisis. It is important in this context that the ECB promise is for conditional support. Continue reading “The Euro Crisis not over”
Recall the financial crisis in 2008 and the first thing that will knock the head will be structured finance deals. In the last posts we have tried to put on the explanations to these structured product.
The financial media reported “At the end of last year we started to see a surge in CLO [collateralized loan obligation] issuance, and now we are going to start to see a surge in CDO issuance. These are the same instruments Continue reading “Are CLOs, CDOs returning Back !! Déjà vu 2004”
The European Central Bank has slashed its euro zone growth forecasts and warned that recession will drag on into the middle of next year, sending the euro plunging below €1.30 to the dollar.
Mario Draghi, the ECB’s president, said the governing council had discussed a cut in overnight deposit rate to below zero for the first time, and was “operationally ready” to do so if needed.
The comment sent the euro into a nosedive, Continue reading “Europe’s economic crisis deepens. – ECB mulls”