Cyprus

As you know, the futures rallied last night and gave most of it back, first because a deal had been struck which the Cypriot parliament could not strike down, however the terms of the Russian loan have not been settled, they have been quiet until they see the full plan and details, they can certainly shake things up. Then the German parliament will have to vote to support or kill the deal so in essence this is a rally that there was some deal and that it would not be killed by a Cyprus vote as none is required the way it was structured. What damage has been done to the EU banking system remains to be seen, I doubt many high net worth individuals feel safe with their money in EU banks anymore, one because of the banks' condition and two because the EU ha set the precedent that anything above the insured $100k is fair game for an arbitrary confiscation, Russia may actually come out of this looking like the sensible, calm, rational party who was cheated and I'd say that won't be good after the last 20 years of encroachment on former Soviet territory, many EU members now.

The deal not only hits depositors above $100k and protects those under it, but junior and senior bond holders of both banks will get a haircut too.

With public opinion severely damaged, the other damage may in fact be the government and president of Cyprus as a groundswell movement is underway to replace them-all Goldman-ites should send resumes to the ECB and Euro-Group ASAP.

So far the Russian response has been calculated, very calm, very strategic-like, as in "Why is my Vodka glowing-Uh, ahhh-nooo!!!!";  where as Merkel is panting like a new puppy with a bone. The Deputy PM did note they don't know whatRussian losses will be, but Russian money in Cyprus was/is legal, that's the state response. However PM, Medvedev who is nothing more than a sock puppet for Putin had a different tone.

"The stealing of what has already been stolen continues," Prime Minister Dmitry Medvedev was quoted by news agencies as telling a meeting of government officials.

Another official said...

"What is happening is a good signal to those who plan to move their capital to ... Russian banks," he was quoted as saying. "We have very stable banks."

Open-Europe doesn't see this as such a good deal for the Cypriot people as their president said last night...

"The most positive aspect of last night’s deal was that a deal was reached at all, and that some steps have been taken to counter moral hazard. However, overall, this is a bad deal for Cyprus and the Cypriot population. Cypriot GDP is likely to collapse in the wake of the deal with the possible capital controls hampering the functioning of the economy. The large loan from the eurozone will push debt up to unsustainable levels while the austerity accompanying it (along with the bank restructuring plan) will increase unemployment and cause social tension. There is a strong chance Cyprus could become a zombie economy – reliant on eurozone and central bank funding, with little hope of economic growth. Meanwhile, the country will remain at the edge of the single currency as tensions increase between members with Germany, the ECB and the IMF now looking intent on a more radical approach to the crisis."

I'd say Nat Gas is probably going to perform VERY well next winter. I'd also be looking in to snow-gear/apparel makers and lumber for fireplaces, perhaps some radio-active detection units for your cocktails. We haven't even begun to see the fall-out from this most viscous of European blunders-oh and Italy still doesn't have a government.