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Rates rise in Italy while Cypriot pension funds withdraw cash

Wednesday, 3 August 2011 12:50pm
By Alison Bevege | In Investment

Troubles have again surfaced in the Eurozone with markets concerned over Italian public debt and Cypriot pension funds withdrawing cash from banks exposed to the Greek sovereign debt crisis.

The yield on 10-year Italian BTP bonds has risen to 6.26 per cent, the highest level since 1997, Reuters has reported.

Funding costs have risen for Italian banks thanks to the rising yields, driven up by fears that Italy will be the next victim in the spreading sovereign debt crisis.

Italy reportedly has a 1.9 billion euro public debt coupled with poor economic growth and political tensions.

The Bank of Italy said each percentage point rise in Italy's debt yields adds 3 billion euros to interest payments in the first year, and double this in the second, according to news reports.

Elsewhere in the troubled region, Cypriot pension funds have begun withdrawing cash from local banks that are highly exposed to the Greek sovereign debt crisis.

The Central Bank of Cyprus said deposits by financial intermediaries had fallen from 7.5 billion euros in May to 6.1 billion euros in June, a fall of 1.4 billion euros in just one month, reports said.

Ratings agency Moody's Investors Service has reportedly downgraded major Cypriot banks Marfin Popular Bank and Bank of Cyprus for their Greek debt exposure.

Global risk management services firm Aon Hewitt estimated in its latest pension fund survey that Cypriot pension funds had allocated as much as 60% of their capital to cash deposits with the majority in local banks, news reports said.

Investment & Pensions Europe has reported that Cypriot pension funds have reduced their cash deposit allocations and are looking at alternative investments such as pooled money market funds, other banks, hedge funds, private equity and infrastructure.

http://www.financialstandard.com.au/news/view/12155093/

As the only large privately invested pension funds in Cyprus are those of semi-government organisations (Cyta, EAC, Cyprus Airways, etc.), they are obviously not happy with just being a major part of the problem, they want to try and make things worse!!!!!

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How is Cyta and EAC part of the problem? These are profitable organizations that contribute a lot of money to the state.

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How is Cyta and EAC part of the problem? These are profitable organizations that contribute a lot of money to the state.

BS. They are over staffed, overpaid, and inefficient! If they were privatised and run properly they would contribute a lot more to the economy without burdening the consumers with excessive bills. Just because the Government nicks €20 million or so from them once a year is not much of a contribution when you consider their turnovers (in 2009 the EAC's turnover was €664 million and Cyta's €463 million).