BREAKING NEWS: Cyprus

Cyprus Parliament Approves Law to Give Government Power to Impose Capital Controls on Banks

The Cypriot Parliament adopted a law Friday that will give the government power to impose capital controls on banks.

CNBC,

22 March, 2013

This came after Moody's Investors Service on Friday cut the deposit and senior unsecured debt ratings of three Cypriot banks on worries about potential losses for depositors as well as uncertainty around recapitalizing the ailing banking sector.

The ratings for Bank of Cyprus Public Company Limited, Cyprus Popular Bank Public Co. Ltd. and Hellenic Bank Public Company Ltd., down to Caa3 from Caa2, have also been placed under review for downgrade, Moody's said in a statement.

A plan to tax bank accounts in Cyprus to help fund a bailout roiled global markets this week. Lawmakers voted the plan down, leaving a bailout for the country in disarray and investors uncertain about the fate of the euro zone member.

But the ruling party said on Friday that the country was just hours away from a deal to raise billions of euros and unlock a bailout from the European Union that could avert financial meltdown and exit from the euro.

"The situation in Cyprus remains very fluid and the risk of significant losses has increased, as has the risk of a bank liquidation scenario," said the Moody's statement.

Cyprus Officially Passes Capital Controls Into Law

While it is unknown if the Cypriot parliament will agree to, and enact into law, the Troika-demanded deposit haircuts, after the shocking vote of mutiny against Merkel earlier this week that saw not one politician vote for the Europe suggested deposit tax levy (and even the ruling party abstained), a vote which will once more take place tomorrow, moments ago Cyprus became the first Eurozone country to officially implement governmental capital controls into legislation. 

At this point it had no choice: whatever happens with the deposit haircut, or with everything else, it is now inevitable that the local Cypriots will do all they can to pull as much money from domestic banking system as possible following the complete loss of faith and trust in banks, which is why the government had no choice but to intervene with its own "controls." 

Sadly, this marks a milestone in the development of the Eurozone - it's all downhill, and accelerating, from here.

There are various other proposals which are currently being voted on, all of which are secondary to the Capital Controls one (the restructuring of the broke banks is perhaps the next most important one), until tomorrow's vote on deposit haircuts

http://www.zerohedge.com/news/2013-03-22/cyprus-officially-passes-capital-controls-law