Cyprus jumps into bed with Russia- and bounces straight back out again

The Cyprus saga continues to dominate euro trading, but there looks to be an end in sight after Cypriot finance minister Michalis Sarris left Moscow without a Russian backed deal in place.Cyprus jumps into bed with Russia- and bounces straight back out againWhether a deal was ever on the table or was simply a bargaining tool by the Cypriot government is unclear, but not even an extension to a €2.5 billion loan was agreed, the very minimum hoped for.

Today the Cypriot parliament will vote on proposals to restructure the two largest banks imposing up to a 40 per cent tax on deposits over €100,000 according to reports this morning.

Under the 100,000 mark are expected to be protected. With Banks closed until Tuesday a ‘no’ vote today would not be the end of the world, but would certainly test the patience of its Troika paymasters which is already at breaking point after an initial deal was rejected and Cyprus tried to hop into bed with Russia.

In fact German Chancellor Angela Merkel stated Monty Python style in parliament this morning that Cyprus is a very naughty country indeed. We can expect this to go down to the wire. The euro will remain under pressure until a deal is in place.

Away from the eurozone and the debate over Wednesday’s budget rumbles on, mostly over government backed guarantees for mortgages and a relaxation of planning law’s.

You get the feeling George Osborne would happily have cancelled this year’s budget, but obliged to say something he trotted out the very minimum possible.

Sterling was relatively unaffected by a fairly bland fiscal budget overall, so we’ll leave it at that.

More importantly Mr Osborne did announce new powers for the Bank of England, including forward guidance and the Banks new powers that will dictate the path of the Pound over the coming months.

Next week should be a busy one with the early part taken up with a bail-out of Cyprus (hopefully). US durable goods orders and consumer confidence follow midweek and finally German unemployment on Thursday.

Leave a Reply