Economy Watch: Bailout Terms for Cyprus Cause Big Upset
- Mar 19, 2013
The euro-zone crisis has been somnolent lately, but over the weekend it returned to mini-panic mode in a hurry when word broke that as part of Cyprus’ bailout, the EU wants depositors in the island nation’s banks to pay a 6.75 percent tax on their deposits up to 100,000 euros, and a higher tax on deposits higher than that. Cypriots are resisting this idea, enough to force the government to postpone a vote in parliament to accept the terms of the bailout. International markets were roiled by this turn of events, even though Cyprus represents less than 0.5 percent of the euro zone’s economy.
The demand seemed to be a thunderbolt out of the blue. But then again, euro-zone taxpayers from solvent nations have been ponying up bailout funds since the onset of the Great Recession—so far to Ireland, Greece, Portugal and Spain—and apparently sentiment among the public and policymakers in those countries (especially Germany) is that bond holders and—in this case anyway—bank depositors in the bailed-out nations ought to pony up, too.
Also a factor: it’s an election year in Germany, and the Germans are steamed about the bailouts. The demand for depositors’ money has steamed the Cypriots as well, who see the euro-zone demand in terms of blackmail: if they don’t pay up, Europe will let the Cyprus’ insolvent banks fail, which would cost depositors a lot more than 6.75 percent, since their nation can’t cover all the losses. Also, if Cypriot banks are allowed to fail, the country might leave the euro, which so far no one has done—with consequences that are hard to predict.
All state unemployment rates below 10 percent
The Bureau of Labor Statistics reported on Monday that no state had double-digit unemployment rates as of January 2013. Some states are still pretty high—with the top two being California and Rhode Island, at 9.8 percent. Still, the fact that all official rates are below 10 percent is some kind of psychological milestone.
For the month, 25 states and the District of Columbia recorded unemployment rate increases, eight states posted decreases and 17 states had no change. Compared with last year, however, 40 states and DC saw unemployment rate decreases, while only seven states experienced increases and three had no change.
North Dakota again enjoyed the lowest jobless rate among the states, according to the BLS, coming in at 3.3 percent mainly because of the oil boom in that part of North America. All together, 24 states reported jobless rates significantly lower than the U.S. figure of 7.9 percent, while nine states had measurably higher rates, and 17 states and DC had rates not much different from that of the nation.
Homebuilders a bit more glum
Homebuilder confidence dropped for a third consecutive month in March. The National Association of Home Builders/Wells Fargo Housing Market Index dropped two points to 44. Anything below 50 means that builders are pessimistic about the direction of their industry.
“In addition to tight credit and below-price appraisals, home building is beginning to suffer growth pains as the infrastructure that supports it tries to re-establish itself,” NAHB chief economist David Crowe explained in a press statement. “During the Great Recession, the industry lost home building firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots. The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year.”
Wall Street seemed a little spooked on Monday, with the Dow Jones Industrial Average down 62.05 points, or 0.43 percent. The S&P 500 was off 0.55 percent and the Nasdaq dropped 0.35 percent.