World View: Cyprus's Banks Reopen with Harsh 'Capital Controls'
This morning's key headlines from GenerationalDynamics.com
- Madagascar faces food crisis over locust plague
- Cyprus's banks reopen on Thursday with harsh 'capital controls'
- Will Slovenia be the next Cyprus?
- China conducts naval military drills deep into South China Sea
Madagascar faces food crisis over locust plague
Locust swarm in Madagascar (FAO)
About half of Madagascar is currently infested by hopper locusts and
flying swarms. Each swarm is made up of billions of plant-devouring
insects. The plague now threatens 60 per cent of the country's rice
production, a staple crop in Madagascar, where 80 per cent of the
population lives on less than $1 per day. The locust swarms are also
consuming green vegetation that might normally serve as pasture for
livestock. The U.N. Food and Agriculture Organizations (FAO) is
asking for $41 million to fight the plague through aerial spraying.
Cyprus's banks reopen on Thursday with harsh 'capital controls'
Banks in Cyprus will open their doors on Thursday for the first time
in almost two weeks, under harsh restrictions designed to prevent
money from leaving the country. Large deposits will lose 40-80% of
their principal, depending on which bank the account is in.
Individuals will be limited to 300 euros per day withdrawals. The
strict limits on credit cards and checks will make their use almost
impossible. Individuals leaving the country may not take more than
3000 euros with them. The controls are supposed to expire within a
week or two, but that claim seems to be contradicted by another rule:
students abroad cannot receive more than 10,000 euros per quarter.
Procedures will be set up for companies doing business abroad to prove
to government-appointed officials that money transfers are OK.
The capital controls could last weeks, months or years, in complete
violation of European Union market rules. So analysts point out that
these rules in effect create a "Cyprus euro" that's different from the
regular euro, and has a different exchange rate. According to one
"If you were to impose restrictions equally on capital
transfers and payments [in Cyprus], then economically a Cyprus
euro would be a different currency vis-a-vis a non-Cyprus euro.
You would have to buy non-Cyprus euros to pay for goods and
services in other countries. With the rules of supply and demand,
the Cyprus euro could then take on a different exchange
This two-level euro situation is going to cause major distortions in
Europe's markets. If the controls are in place only a few weeks, then
it will be OK. But if they go on for months, then there will be major
problems. Cyprus Mail and Reuters
Will Slovenia be the next Cyprus?
Slovenia's Prime Minister Alenka Bratusek says that the country is
different from Cyprus, although the country's banks are deeply in debt
and will require 4 billion euros in funding to avoid bankruptcy
According to Bratusek:
"Slovenia won't need aid, we can do this on our own.
Our banking system is stable and safe and comparisons with Cyprus
aren't valid. Deposits here are safe and the government is
Unfortunately, this laughable. Deposits were safe and
government-guaranteed until three weeks ago, but things changed
overnight. And we know from experiences with Greece, Spain, Portugal
and others that every country's president or prime minister ALWAYS
says that they don't need a bailout -- and they say it up until a
nanosecond before they ask for a bailout.
So where is Slovenia going to get the 4 billion euros it needs?
The plan is to sell bonds -- that is, go more deeply into debt.
Unfortunately, we're already seeing a familiar pattern,
in that Slovenia's bond yields are starting to surge.
Insured bank accounts of under 100,000 euros came close to being taxed
in Cyprus, though finally they were safe, provided that you don't want
to withdraw your money. But accounts over 100,000 euros were
confiscated at the rate of 40-80%. So small deposits in Slovenia may
or may not be safe, but people with a large bank accounts in Slovenia,
including Slovenia's citizens, should be thinking very hard about
getting their money out while they can. Bloomberg and Washington Post
China conducts naval military drills deep into South China Sea
China's president Xi Jinping has been in Africa the last few days,
telling people that China opposes strong countries bullying weak
countries. As he was saying those words, China's navy was bullying
Malaysia, deep into the South China Sea. James Shoal is an island 50
miles from the coast of Malaysia, clearly within Malaysian waters.
But China has sent a naval flotilla, including China's most advances
amphibious landing ships, to take military control of Malaysia's
island. Last week, a Chinese naval vessel fired flares at a
Vietnamese fishing boat that was returning from a fishing ground near
the Paracel Islands in the South China Sea. The flares caused the
boat to catch fire, although no one was hurt. China announced last
year that in 2013 it would start boarding and taking control of other
countries' ships in the South China Sea. AP and VOA
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