CYPRUS EXIT RISK REAL, AS EUROGROUP MORE SANGUINE THIS TIME - ANALYST
Cyprus's parliament rejected a plan yesterday to tap on bank deposits to raise 5.6 billion euros as part of a bailout. Lawmakers are now trying to come up with a plan B. Cyprus needs to come up with one, as the Eurogroup seems more willing to let a country go this time, says Daiwa Capital Markets Euro Area Economist Tobias Blattner.
SHOWS: LONDON, ENGLAND, UK (REUTERS - ACCESS ALL) (MARCH 21, 2013)
1. DAIWA CAPITAL MARKETS TOBIAS BLATTNER, SAYING:
"(Question: What do you think of Plan B? Is there anything workable here out of Cyprus?) Oh I mean for sure, at least they are struggling I think to come up with a plan. I think that meets the criteria of the Eurogroup, namely that you have to have something that is debt sustainable, that is debt-neutral. And that, I think, looks very, very difficult because the only viable plan was actually that Russia, the Russian government will take a stake in one of the country's largest lenders. I think that seems to be a non-viable solution for now. The Russians don't want to do that. And so all of the other rumors that we have, we have plenty of them, of course but I think, for example, that they will set up a domestic fund that will then issue government bonds that would be bought by domestic institutions. That again raises of course the issue of debt sustainability. So it seems very, very difficult for the Cyprus government to come up with something. (Question: What do you guys at Daiwa think? Is the previously unthinkable now likely to happen, i.e., an expulsion of a country from the Eurozone by the ECB, by Germany, whoever?) I think if we look at how the crisis has been handled in the first place, if we look at the most recent comments that we see from representatives of the troika, of the Eurogroup, then yes, it really suggests that this time, the Eurogroup will be more willing to let potentially a country go if it doesn't stick to the plan. And they have put in place measures that contain contagion most notably the OMT, of ...
