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Monday, March 25, 2013

Cyprus Bailout Creates New Doubts About Solidity of Euro Zone

Cyprus and the European Union (EU) reached a deal on a bailout package last night that may force owners of accounts larger than €100,000 at the Bank of Cyprus, the country’s largest bank, to take as much as 40 percent in losses. Under pressure from its three last-resort creditors (the EU, the European Central Bank and the International Monetary Fund), the government of the small island also promised to split its second largest bank, the Cyprus Popular (Laiki) Bank, into “good” and “bad” assets. The Bank of Cyprus will absorb the good and the rest, including accounts larger than €100,000 (uninsured) and bondholders, will be wiped out. The deal creates a precedent in the EU, where nowhere before have large depositors been made to take such a hit. While the group of EU finance ministers repeatedly tried to appease investors with assurances that Cyprus’ was an exceptional case, Dutch Finance Minister Jeroen Dijsselbloem, who heads the group, said today the latest ordeal could be used as a model for future bailouts, causing global stocks to drop again. The EU has a rule that bank deposits under €100,000 are protected in such situations, but had mostly avoided involving larger depositors and bondholders until now. These guarantees, tacit and explicit, led to the collapse of the Irish banking system after the government refused to create uncertainty with forced contributions from depositors. Now many Cypriots will be unemployed and confidence in their banks is shot. It also appears ATM withdrawals made during the banks’ closure last week were much larger than expected.

U.S. Hands Control of Bagram Prison to Afghanistan

The U.S. army has now transferred custody of all but “a small number” of inmates at the Bagram Prison to Afghanistan’s government today as new U.S. Secretary of State John Kerry made a surprise visit to meet President Hamid Karzai. This decision resolves a difficult issue between the two nations as Afghanistan has released prisoners that quickly took leadership roles among insurgents, attacking both Americans and Afghan security forces. Now that the U.S. is looking to wind down its occupation in the Central Asian nation while still maintaining a presence after 2014, the deal came as a peace offering in a dispute where both sides dug in their heels. Both nations are “on the same page,” Kerry said today, referring to peace talks with the Taliban. “Todays was a very good day,” Karzai said of the transfer of prisoners. There is no information as to how many remain in U.S. custody, or for how long.

U.S. Pushed EU for More Sanctions on North Korea

The U.S. is asking the European Union (EU) to create sanctions against North Korea’s Foreign Trade Bank, believed to fund the nation’s weapons program, according to an official at the U.S. State Department. “Our decision to sanction the Foreign Trade Bank is a big deal and we hope the European Union looks hard at this,” he told reporters. New sanctions were unanimously approved by the United Nations Security Council, receiving the backing of China, which has been North Korea’s most steadfast ally. The official added that this latest request may be a problem as many EU embassies in Pyongyang use it for their business.

U.S. Supreme Court to Hear Arguments on Gay Marriage

The U.S. Supreme Court will hear two arguments on the issue of same-sex marriage this week. They will spend an hour on the first one, tomorrow, which challenges the legality of California’s proposition 8, which bans gay marriage. The second one will last two hourse and take place on Wednesday, examining the constitutionality of the Defense of Marriage Act (DOMA), which defines marriage as the union of a man and a woman. The hearings come after a recent ABC-Washington Post poll showed 58 percent of Americans now support gay marriage, and after former Secretary of State Hillary Clinton also said she backed it. Earlier this month, Republican Senator Rob Portman of Ohio came out in support of marriage equality after his son told him he was gay. Yesterday, Democratic Senator Claire McCaskill of Missouri also announced her support, five months after defeating Republican Todd Akin, of “legitimate rape” fame. Today Democratic Senator Mark Warner, of Virginia, joined the pro-equality chorus. Justice John Roberts’ lesbian cousin Jean Podrasky, who hopes to marry her partner, was invited to attend the hearing on proposition 8.

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