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Council on Foreign Relations Daily News Brief
March 28, 2013

Top of the Agenda

Top of the Agenda: Cyprus Banks Reopen

Banks in Cyprus reopened for the first time (BBC) in nearly two weeks amid tight security on Thursday, although customers faced strict restrictions on transactions (FT). The country had closed its banks, which feared potentially large-scale withdrawals, during discussions with international lenders on a bailout package. As part of the ten billion euro deal, which was reached in the early hours of Monday, Cyprus agreed to close (Bloomberg) its second-largest bank and inflict heavy losses on uninsured depositors. An earlier plan to tax small depositors by up to 10 percent was vetoed by the Cypriot parliament last week.

Analysis

"Capital controls may slow deposit flight, but after the threats of taxes, levies and now the conversion of large deposits into equity, foreign (especially Russian) money will very likely go elsewhere. Worse, the crash will shrink the economy," writes The Economist.

"Cyprus is on the verge of an unprecedented financial experiment: imposing controls on money transfers in an economy that doesn't have its own currency. Countries from Argentina to Iceland have used similar measures in the past to defend against devaluation. Being part of the eurozone may make it harder for the Mediterranean island to enforce restrictions, as any money that leaves the banking system can be taken out of Cyprus without losing value," writes Yalman Onaran for Bloomberg.

"The International Monetary Fund's tough line in talks on Cyprus shows its shift from enthusiastic helper of the eurozone in 2010 to its more familiar role of stern disciplinarian in 2013. That shift that has added to growing strains in the crucial relationship between the IMF and the European Commission – prompting one eurozone official to complain of the 'ayatollahs on the fund's staff,'" writes Robin Harding for the Financial Times.

 

PACIFIC RIM

U.S. Bomber Conducts Drill in Korea

The United States flew B-2 stealth bombers over the Korean peninsula on Thursday, carrying out its first ever regional firing drill (Yonhap) in a strong warning to North Korea. Pyongyang has threatened a preemptive nuclear attack on the United States and South Korea in retaliation to UN sanctions.

CFR's Scott Snyder discusses South Korea's nuclear debate and the credibility of U.S. deterrence in this blog post.

THAILAND: Five people were reported killed as the Thai government began talks with Muslim separatist rebels in Malaysia (al-Jazeera).

 

SOUTH AND CENTRAL ASIA

Muslim Leaders Plead With Myanmar

Myanmar's Muslim leaders urged President Thein Sein to take immediate action (AFP) in quelling religious violence, accusing security forces of passivity during riots. At least forty people have been killed and mosques burned in central Myanmar in a new wave of sectarian conflict.

PAKISTAN: An Afghan minister said Wednesday that Kabul was ready to move forward in the peace process (FP) without Pakistani involvement.

 

MIDDLE EAST

Syrian Opposition Opens Embassy in Qatar

The Syrian opposition opened its first embassy (GlobalPost) in Qatar a day after the Syrian National Coalition chief Ahmed Moaz al-Khatib took Damascus's seat at the Arab League conference. The original Syrian embassy in Qatar remains closed.

TURKEY: A senior Palestinian official said yesterday that Ramallah is opposed to Turkish Prime Minister Recep Tayyip Erdoğan's planned visit (Hurriyet) to the Gaza Strip in the coming weeks.

This CFR blog post by Steven Cook delves into the recent rapprochement between Israel and Turkey.

 

AFRICA

Skepticism Remains Surrounding BRICS Fund

Leaders of Brazil, Russia, India, China, and South Africa agreed to launch a new development bank (IPS) during the BRICS summit in Durban, although some officials remain skeptical about its potential impact. Key details of the deal are yet to be worked out.

SOUTH AFRICA: Former South African president Nelson Mandela, who underwent surgery last December, was readmitted to the hospital due to a lung infection (SAPA).

 

EUROPE

Italy Faces Continued Stalemate

Pier Luigi Bersani, leader of Italy's center-left Democrats, will likely to abandon his attempt to form a minority administration (FT) after facing opposition from the anti-establishment Five Star Movement. Earlier this week he was rebuffed by Silvio Berlusconi's center-right alliance.

 

AMERICAS

Chile's Bachelet Announces Candidacy

Former Chilean president Michelle Bachelet officially announced Wednesday that she is running in the country's November election (MercoPress). Bachelet was the country's first female president from 2006 to 2010 and must first win a June primary election.

MEXICO: President Barack Obama will travel to Mexico (MiamiHerald) and Costa Rica at the beginning of May, meeting with Mexican President Enrique Peņa Nieto to discuss a "broad array of bilateral, regional, and global issues."

Economic change is on Mexico's horizon, says CFR's Shannon O'Neil in this interview.

 

 

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