Spain’s minister warns Cyprus crisis could spread

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Eurogroup meet to discuss Cyprus


Spanish Economy Minister, Luis de Guindos, said at Sunday’s emergency meeting of finance ministers, that unless countries including Spain reached a ‘conclusive decision’ the Cyprus crisis could spread to other European countries. He added, that there could be an ‘undesirable situation for the whole of the Union’ if they fail, El Pais newspaper reports.

‘Problems in Cyprus go well beyond the Cypriot economy,’ he added, before attending the Eurogroup meeting.

The Spanish minister said that 10 days ago, when the Eurogroup met to establish a levy on all Cypriot bank deposits to finance the bailout, including those below €100,000 (the limit under which savings are, in principle, guaranteed in all European countries) Spain opposed the move.

Following that controversial decision, the Cypriot authorities proceeded to freeze all bank accounts on the island to prevent a massive capital flight. This is an unprecedented move in Europe bringing back memories of what occurred in Argentina during 2001 to 2002.

So far, the crisis in Cyprus has not prompted any flight of bank-deposits from Spain, the  economy minister said in an interview on Sunday with Spanish newsagency Europa Press.

 

Luis de Guindos said that the problems facing the island were exceptional and unique. ‘To generalise the Cypriot situation to other economies in the eurozone is completely out of place,’ he said during an interview .

 

Cyprus’s crisis has put the spotlight back on the eurozone’s weaker members, such as Spain and Italy.

 

The minister also said in the interview that Spain had ‘absolutely’ ruled out asking for international aid to help with its economic problems.

 

2 COMMENTS

  1. ~~~

    What happened in Cyprus was confiscation of capital (in Cyprus banks) by the EU to offset losses (i.e., the EU/ECB knows the Cyprus debt is unsustainable and they won’t be paid back). When they confiscated the depositor’s money, they set an ugly precedent. They intend to use this “method” going forward as they continue to bail-out other countries (most likely Spain, Italy or Greece next).

    Time-out: Quick reality check. Banks need depositors. They take those deposits and leverage them (as they should) putting that money to work. We all know the scene from “It’s a Wonderful Life” where the depositors want their money and James Stewart talks them out of it – right ?

    Well, if banks start confiscating their depositor’s money – people won’t deposit their money in the banks anymore. Then – as deposits decrease – the banks [that are basically over ratio or insolvent] begin to collapse and need further bail-outs, etc. It won’t take much to get this snowball rolling with the Euro and that’s what you just saw in Cyprus – a small peek behind this curtain at a potential trigger event.

    Get your money out of the Euro !!!

    ~~~

  2. I think it already has spread to Spain. The Spanish Finance Minister said last Friday he was going to put a levy on the total amount of deposits in Spanish banks. A bit different in Spain from Cyprus – this time the local bankers will be working in cooperation with a somewhat-less-than-honest national government. Either way, savers will have less money as governments in debt decide they need it more. Savers and asset holders in Spain, Italy, Greece and Cyprus should all be concerned, especially ex-pats. See more on this at:
    http://tinyurl.com/cedrumy

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