“Investment banks were rolling out those opinions on whether Cyprus really matters on Tuesday. Among these, J.P. Morgan Cazenove warns we’re all getting a little too relaxed, too soon.
(Markets are looking a hair calmer Tuesday – the Nikkei nearly recouped all of its prior-day losses, U.S. stock futures rose a bit, though Europe stocks were lower. That’s after Monday’s chaos, triggered thoseplans to levy deposit holders in Cyprus. )
J.P. Morgan Cazenove says Cyprus is between a rock and a hard place and predicts its parliament will refuse to pass the deposit levy/bailout package in current terms. The analysts give Cyprus three options, none of them great:
- Insured depositors pay nothing, uninsured pay 15.4%. This isn’t workable because the bulk of that would fall on Russia, who would then likely play hardball with its existing €2.5 billion loan to Cyprus. And Cyprus needs that money.
- Ask for more Troika support. But J.P. Morgan says it’s unlikely Cyprus is going to get much tweaking on the deal hammered out.
- Tweak the deal so that less pain falls on insured depositors, such as those with less than €100,000 pay 3%, those with less than €500,000 pay 10% and more than €500,000 pay 14%. J.P. Morgan says this looks like “shifting deckchairs,” and Cypriots are likely to stay angry no matter what….”
