Cyprus bank savings raid raises fresh eurozone contagion fears
Investors dump bonds raising borrowing costs of Italy, Spain, Greece and Portugal
Monday 18 March 2013
The one-off tax raid on savers in Cyprus raised fresh contagion fears today as spooked investors dumped debt in the eurozone’s strugglers and the euro took a battering.
The implications for other nations in the single-currency bloc triggered a bond market sell-off which pushed up the borrowing costs of Italy, Spain, Greece and Portugal in a turbulent session.
Spain’s benchmark cost of borrowing for 10 years pushed beyond 5% while Portugal’s rose above 6%. Italy – where markets had calmed after last month’s inconclusive election – saw yields jump 11 basis points to 4.67%. Investors instead turned to safe-havens such as US, UK and Germany, which all saw falling debt costs.
CooperCity analyst Louise Cooper said: “The damage is done. Europeans now know that their savings could be used to bail out banks.”
The pound rose more than a cent to €1.1721 against the euro before falling back as investors absorbed the news of the unprecedented €5.8 billion (£5 billion) hit to depositors in return for a €10 billion rescue loan. The single currency also crashed to 14-month lows below $1.30 against the dollar.
The cost of insuring against sovereign defaults also soared. Investors looking to protect themselves against Italy going bust had to pay $295,000 to insure $10 million of debt for five years, according to financial data provider Markit — up $22,000.
The eurozone’s biggest banks saw their shares tumble amid fears that the savings swipe could prompt investors to pull their cash out.
Royal Bank of Scotland analyst Alberto Gallo warned: “Despite Cyprus being a special case in terms of the size of its banking system relative to GDP, we could see a general deterioration in deposit flows for smaller institutions in the periphery.
“In the worst case scenario, deposit flight could re-emerge in Spain and Greece.”
Guide dog mauled while helping owner deliver Christmas cards
Life on Earth may have developed below rather than above ground, reveal scientists
Nelson Mandela’s complex bond with Britain
The poorest pay the price for austerity: Workers face biggest fall in living standards since Victorian era
10 stone five-year-old taken into care
- 1 Gurdwaras-turned-food banks: Sikh temples are catering for rise in Britain’s hungry
- 2 Council bans use of word ‘Commie’ – but ‘fascist’ and ‘Nazi’ are fine
- 3 The man who made Femen: New film outs Victor Svyatski as the mastermind behind the protest group and its breast-baring stunts
- 4 The poorest pay the price for austerity: Workers face biggest fall in living standards since Victorian era
- 5 Mass murder in the Middle East is funded by our friends the Saudis
- < Previous
- Next >
iJobs Money & Business
£2000 - £25500 per annum + Benefits: Flight Centre Limited: We are seeking an ...
£55000 - £70000 per annum + Benefits + Bonus: Harrington Starr: Senior Java De...
£25000 - £35000 per annum: Harrington Starr: PHP Developer (Web Developer, MyS...
£55000 - £75000 per annum + 28 Days Holiday: Harrington Starr: Flex Developer ...