Last Monday a new support plan for Cyprus, based on the same fundamentals already under discussion, was agreed upon. Deposits up to €100,000 will not be affected, even if the second-largest Cypriot bank will be liquidated in due course.
This means savings deposits up to €100,000 will be transferred to the largest Cypriot bank which in the meantime will be recapitalised, by accessing shareholders, bank bonds and savings over the €100,000 threshold. The current solution will allow the central bank to continue financing Cypriot banks, although the limitations of the country’s payment transactions will remain in force for the time being to delay the expected capital outflows.
In the meantime, while Cyprus is being considered as a special case, the markets reacted to Dutch Finance Minister Jeroen Dijsselbloem’s comments that Europeans can expect a similar fate for uninsured deposits elsewhere in the eurozone if their banking system needs restructuring in the future.
Despite the nervous sentiment as a result of Cyprus, Italy took up €8.5 billion on the money market without problems during the week. In the meantime, meetings last week between Italy’s President Giorgio Napolitano and the main political leaders left more to be desired as it appears increasingly likely that the President will ask a non-politician to form a caretaker government that would complete a limited set of tasks, such as electing a new President, before calling a fresh election later in the year.
US durable goods orders, registered a 5.7 per cent month-on-month rebound in February, propelled by vehicles and a 95.3 per cent increase in commercial aircraft orders. Additionally, business investment in new equipment is picking up as companies look past the budget negotiations in Washington and focus on expanding capacity as demand improves.
However, excluding transportation, core orders actually fell by 0.5 per cent month-on-month last month. Moreover, new home sales fell 4.6 per cent month-on-month driven mainly by favourable valuations, low interest rates and reduced competition from deeply discounted existing homes. In the meantime the higher petrol prices in March led to a sharp drop in the Conference Board’s measure of consumer confidence to 59.7 from 68.0.
This article was compiled by Bank of Valletta plc for general information purposes only.