Today saw Spanish and Italian bonds weaken considerably, and a continuing fall in the value of Italian and Spanish stocks (off by 4.5% and 3.5% in the last week).
The Euro v US Dollar rate had a teensy rallyette, but was last seen languishing at a horrendous 1.2854 to the Buck. In mid February it was 1.3563.
European bond spreads are now wider than they’ve been for five months. European bank bonds are also at a five-month low.
So it’s all going really rather well, as a Whitehall mandarin might say.
In Athens, Greece’s Piraeus bank announced that it will acquire the branches of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank in Greece for €524m. The branches of these banks will open on Wednesday March 27th 2013, and all operations will be performed as usual. If anyone knows WTF this means in terms of good or bad news, could they please write to me at the usual address: I’m an old man, and I get confused from time to time.
Meanwhile – as regards the island of Cyprus itself – Morgan Stanley is opining that Cyprus has just left the Eurozone. The reasoning goes like this: In order to reopen Cypriot banks (now rererererescheduled for Thursday) Cyprus will need to impose strict capital controls to prevent a bank run. This is merely another way of saying that a euro in a Cypriot bank isn’t worth the same as a euro in a German bank, since the latter has far more mobility. Ergo sum, Nicosian euros are in a sort of limbo between the eurozone and Britain.
This is the Morgan Stanley view in summary:
‘It looks like the eurozone policymakers are keen to keep Cyprus in the eurozone, even though, as a result of these capital controls, Cyprus is effectively no longer a full member of the eurozone. In other words, while it formally stays within the currency union, a euro in a bank deposit in Cyprus is not the same as a euro in another member country. Only once all capital controls are lifted again will Cyprus’s full euro membership be restored.’
Like I said, I’m confused. But I will leave the last word to this seemingly objective site which, I suspect, is an oasis of sanity in this European Gobi-sized desert of derangement:
‘Cyprus has few sources of capital besides its capacity as a banking shelter, so Brussels required that the country raise part of the necessary funds from its own banking sector — possibly by seizing money from certain bank deposits and putting it toward the bailout fund. The proposal has not yet been approved, but if enacted it would undermine a formerly sacred principle of banking in most industrial nations — the security of deposits — setting a new and possibly destabilizing precedent in Europe.’
The Portuguese Government today echoed this same sentiment. As of Thursday it’s a unique one-off, by Sunday it’s a template, and on Monday it’s a precedent. A thousand years of constitutional development telescoped into four days. Only in the European Union of Sorry Shithead Reconciliation (USSR).
The Slog 