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Hong Kong’s top court announced that foreigners can enter the city as maids and domestic helpers, but cannot expect to settle there as permanent residents.
The verdict deals a blow to a huge contingent of Filipino maids and nannies – estimated at some 300,000 females, usually unmarried and under 35 – who make up a diaspora in Hong Kong. The domestic workers are increasingly seen as an indispensable part of the fast-paced city's social fabric, helping keep the Chinese family working and orderly in a highly competitive environment.
Yet sadly for the maids, today’s ruling reverses a lower court verdict that would have allowed the women to seek residency. Had it been upheld, the ruling would have been a breakthrough for the rights of domestic workers, who often complain of overwork, second-class status, and occasionally, abuse.
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While other foreign workers can apply for permanent residency after spending seven consecutive years in the Hong Kong Special Administrative Region, domestic helpers are excluded from the law.
Justice Ma wrote in his ruling that foreign domestic helpers are "told from the outset that admission is not for the purposes of settlement."
The ruling was greeted with disappointment by campaigners.
"It's very unfortunate and it's sad but in a way it will make us stronger as it highlights the social exclusion that foreign domestic workers face in Hong Kong," said Cynthia Tellez, General Manager of the United Filipinos in Hong Kong.
In recent years the ubiquitous Filipino maid has become a staple part of Hong Kong culture. They are known for hard work, dignity, and efficiency. Collectively, they have built a kind of mini-civic society: They have their own postal system, often police themselves, have a variety of support groups, and even run ballots and campaigns for elections back home.
Most middle- and upper-echelon Hong Kong families hire a maid, and apartments usually include a tiny space as the maid’s quarters or abode.
For many years on Sundays, usually their only day off, Filipino nannies peacefully and colorfully gathered in central Hong Kong, along the main boulevard, past the city hall and the old Admiralty building, putting down blankets or chairs and pulling out lunch baskets, stretching out two-or three deep on a sidewalk in a line that often is a half-mile long.
Yet the right of maids to assemble has been under attack, and their overall legal status has been shrinking, as the city contemplates the costs (said to be $3 billion or more) of offering them the kinds of equal access that would involve education and other social services.
The judgment ends the right of abode saga started by a judicial review sought by Evangeline Vallejos Banao, a mother of five, who has worked in Hong Kong since 1986. She had argued that an immigration provision barring domestic workers from permanent residency was unconstitutional.
Mark Daly, a lawyer for Vallejos, said his client was “speechless but calmly resigned and said ’no problem.’
Vallejos won a High Court ruling in 2011 granting her the right to request permanent residency status, denied to the city’s 300,000 foreign maids until then. The decision however was overturned later on a government appeal.
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The press of humanity at Jerusalem’s Machane Yehuda market just might cause the uninitiated visitor to do a face-plant in a heap of eggplants.
On the eve of Passover, which begins in Israel with tonight’s traditional seder meal, the shuk is jammed with everyone from hippie tourists to religious Jews with black hats and tight side curls. Amid the shouts of vendors and the swish of plastic bags, the ultra-Orthodox and ultra-modern jockey for everything from live fish to fresh garlic stalks to rich Israeli cheese and artisan breads. Nearly everything (except the bread) is labeled “Kosher for Passover.”
“It’s the new and old noodling together. I love the feel of the past and the progression of the future,” says Yochanan Lambiase, a fifth-generation chef who fairly glides through the aisles of Machane Yehuda as he explores the magnificent palette with a small group of journalists. “That’s very much Israeli society.”
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While most of the shoppers here are Jewish, it’s no longer just Jews who are buying food grown and packaged in accordance with Jewish law, especially in North America.
Vegetarians, vegans, Hindus, Seventh-Day Adventists, and even Muslims have been increasingly choosing kosher products, driving a 64 percent growth in the US kosher market from 2003 to 2008, when it was estimated to be worth $12.5 billion. Since then the increase has been more gradual, but kosher foods remain one of the most steadily growing sectors of the expanding ethnic food market in North America, according to a March 2012 Agri-Trade Service report.
“I feel the kosher food industry has reached a pinnacle, and now we have to move it into the 21st century,” says chef Lambiase, who established the world’s first kosher culinary institute in the world here in Jerusalem in 2004 and is co-launching a new tour of the Mahane Yehuda market with guide Cliff Churgin.
Mr. Lambiase sees himself as a pioneer of sorts. He was raised in a secular British home, and his kosher career was sparked by a love of cooking rather than of Jewish law, which forbids the consumption of pork and shellfish; requires that meat and dairy dishes be kept separate; and has strict rules governing the slaughter of animals.
But he quickly became drawn in by the religious aspects. “Kosher isn’t anything to do with physical health, it has to do with spiritual health,” says Lambiase, who follows the Chabad-Lubavitch movement, a Hasidic branch of Judaism. Today, he sees other newly observant Jews as playing a role in bringing kosher food to the gastronomic attention of the world.
“I think there’s been a huge revival in Jewish religiosity over the past 10 years and … Jewish people normally know what good food is and they’re not going to take [their non-Jewish friends] out for gefilte fish.”
He heads back to his culinary institute, journalists in tow. We are more adept with our pens than with chef's knives, but he and fellow kosher chef Zev Beck are patient.
Despite the cilantro flying, tomatoes squirting on chef Beck’s jeans, and a stray garlic bulb rolling under the stainless-steel tables, after a couple of hours the rich aroma of fresh bread, shakshoukas (poached eggs in a spicy tomato base), and broiled eggplants garnished with homemade tahina wafts through the school.
If Lambiase and Mr. Beck can teach even journalists to be kosher cooks, their prospects for expanding the global ranks of kosher chefs look promising.
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Boris Berezovsky, once a wealthy Russian oligarch, was found dead in his home in Surrey, England.
The cause of death is unknown at this time. But speculation that Berezovsky committed suicide is rampant, especially in Russian media.
Two things are prompting the speculation. First, a Russian lawyer, Alexander Dobrovinsky, was among the first to announce his death and posted in social media the following, according to RT.com:
“Just got a call from London. Boris Berezovsky committed suicide. He was a difficult man. A move of disparity? Impossible to live poor? A strike of blows? I am afraid no one will get to know now,”
There's no indication of the quality of Dobrovinsky's source. Certainly, British police have not yet made public a cause of death.
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The second factor fueling the suicide talk is the very public decline in Berezovsky's wealth. He had lost several court cases and was known to be selling off real estate, a yacht, and art to raise funds. As The Guardian of London reports:
"Berezovsky's death comes only months after he lost a high-profile and personally disastrous court case against fellow Russian oligarch Roman Abramovich. He had accused the Chelsea football club owner of blackmail, breach of trust and breach of contract in relation to a Russian oil company. After the claims were dismissed, he was ordered by the high court to pay £35m of Abramovich's legal costs.
His financial difficulties were recently further exacerbated after his former mistress Elena Gorbunova, 43, claimed that Berezovsky owed her $8m (£5m) in compensation over the sale of their $40m residence in Surrey."
Just days ago, Berezovsky sold his Andy Warhol limited edition print of Vladimir Lenin, known as "Red Lenin," for just over $200,000, according to the Russian media outlet RIA Novosti.
Berezovsky's political and financial success follows the arc of recent Russian history. In the 1980s, with the political opening and rise of free enterprise, he went from a quiet mathematician to powerful oligarch. His first business foray - which Russian prosecutors later said was illegal profit skimming - involved car sales for the state auto giant AvtoVAZ. Berezovsky used his initial wealth to build a media empire that included partial ownership of two national television networks and several respected newspapers.
As his wealth grew, so did his political clout.
In 1996, Berezovsky was among a group of businessmen who helped Boris Yeltsin's career. "It is no secret that Russian businessmen played the decisive role in President Yeltsin's victory," Berezovsky later told Forbes magazine. "It was a battle for our blood interests."
In return, Yeltsin sold to his backers Russian national industries at a fraction of their actual value. By the late 1990s, Berezovsky had an 80 percent ownership share in Sibneft, an oil company.
But as Agence France Presse reports "his most significant political move was the one that inadvertently sealed his fate: helping Yeltsin choose then-secret services chief Vladimir Putin as Russia's second president.
Berezovsky quickly became a key target of Putin's crackdown on the oligarchs' political independence. He fled the country and fired back with his entire media arsenal, painting the new president as a budding dictator."
The Guardian notes that "Berezovsky is been on Moscow's most wanted list since 2001 on charges of fraud, money-laundering and attempted interference in the Russian political process. A Russian court sentenced Berezovsky in absentia for embezzling $2bn from two major state companies."
But in the past year, there are reports that Berezovsky was seeking to return to Russia. The Irish Times reports that he had recently written to Mr. Putin seeking a pardon, according to Putin's spokesman Dmitry Peskov.
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The instant saga of Cyprus – and whether it will go belly up, default, and shake the European, if not the world, economy like some crazed mouse that roared – continues along with enough hourly news to bring live updates here and here.
Cyprus has until Monday to come up with $7 billion and a reform plan, or face losing its creditors and sinking into ignominious pools of red ink.
Today the Russians said "nyet" to Cypriot officials, who waited in Moscow for three days to get a possible bailout. Russian oligarchs hold at least 40 percent of Cyprus bank deposits. Cypriots had hoped, for some reason, that Russia might bail out what is essentially a banking system that thrives on helping the wealthy evade paying Russian taxes.
“The next few hours will determine the future of the country,” Reuters reports Cypriot government spokesman Christos Stylianides said today, ahead of a vote on a slew of different and changing plans to stay solvent. “We must all assume our share of the responsibility.”
What first caught world attention was an EU-inspired plan, voted on and killed by Cyprus lawmakers this week, to tax or expropriate private bank deposits in the country. That sent a shudder through the minds of ordinary Europeans, not to mention a lot of Russians and Cypriots themselves.
Yet facing looming insolvency, the largest Cypriot bank today called for the nation’s parliament to levy a tax on holdings over 100,000 euros ($120,000), arguing the alternative is collapse.
Plans on Cypriot tables include the creation of “good” banks with credible holdings and “bad” banks with toxic holdings, and to cordon off the bad Greek bank debt whose exposure helped cause the problem in the first place, in the midst of a three-year euro crisis that started in Athens.
EU approval is essential to get the tranche of bailout funds from the European Central Bank. Today the Germans said no to a Cyprus pension raiding scheme that has been floated for days.
Cypriot banks remain closed, ostensibly until Tuesday, when no one knows what will happen; bank ATMs are for now providing petty cash for the commercial sustenance of regular folk and lines are long.
As the world starts to focus on why an island making up 0.2 percent of the EU economic picture could shake world markets, the question is being asked: Why would Cypriot officials turn their island into a quasi-money laundering center for offshore oligarchs and at the same time buy Greek debt that was already shaky – and imagine this would somehow turn out fine?
Paul Krugman of The New York Times continues to probe the story, writing Thursday that Cyprus has combined on one tiny Mediterranean island all the mistakes made by the European economies of Portugal, Greece, Spain, Italy, Ireland, and so on (the so-called “PIIGS”) that have helped bring the euro crisis to bloom.
This includes “runaway banking,” the all-too familiar real estate bubbles brought by “massive overvaluation,” and the problem of not having enough productive capacity to pull out of a dive into debt when things went sour.
Mr. Krugman asks:
So then what? As a number of people have pointed out, Cyprus is arguably better positioned than Iceland to do an Iceland, because devaluing a reintroduced Cypriot currency could bring in a lot of tourism. But will the Cypriots — who haven’t even reconciled themselves to the end of their round-tripping business — be willing to go there
The United States has two clear choices in dealing with China: Engage or isolate the world’s most populous nation. “You cannot have it both ways,” argues Lee Kuan Yew, prime minister of Singapore for more than three decades, who led his tiny Asian nation to Western-style prosperity despite being in the shadow of its giant communist neighbor. “You cannot say you will engage China on some issues and isolate her over others. You cannot mix your signals.”
Competition between the US and China is inevitable, but conflict is not, Mr. Lee argues in an excerpt from his new book in The Atlantic.
“This is not the Cold War. The Soviet Union was contesting with the United States for global supremacy. China is acting purely in its own national interests. It is not interested in changing the world.”
The complex Chinese-US relationship is underpinned by an essential truth: Each side needs the other.
“Chinese leaders know that U.S. military superiority is overwhelming and will remain so for the next few decades,” he writes. “[T]he Chinese do not want to clash with anyone – at least not for the next 15 to 20 years.”
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The best outcome, he writes, would be for China and the US to arrive at “a new understanding that when they cannot cooperate, they will coexist and allow all countries in the Pacific to grow and thrive.”
Get back to feminism’s roots
Women have risen to prominence in business and academia, but don’t look for private enterprise to finish the job of ensuring equal rights between the sexes.
In a new book called “Lean In,” Facebook executive Sheryl Sandberg says women are responsible for their own lack of progress in the workplace, notes Judith Shulevitz, writing in the New Republic. But the recent directive from Yahoo chief executive officer Marissa Mayer that bans telecommuting shows that women executives hold business success above feminist goals. “Yahoo employees now understand that, when unregulated market forces go head-to-head with policies that facilitate gender equality, the policies stand down,” Ms. Shulevitz writes. “It doesn’t matter who runs the company.... Competent female executives run better companies than incompetent male executives, but they’re no more likely to make universal day care the law of the land.”
Where lies progress in gender equality, which seemed to halt three decades ago with the defeat of the Equal Rights Amendment? It’s time to get back to changing laws, she says. “What we are not talking about in nearly enough detail, or agitating for with enough passion, are the government policies, such as mandatory paid maternity leave, that would truly equalize opportunity. We are still thinking individually, not collectively.”
The Bolshoi’s dark side
The bizarre acid-tossing attack on Sergei Yurevich Filin, the artistic director of the Bolshoi Ballet, would seem to have come only from the fetid mind of a writer for a fictitious “CSI: Moscow.” Mr. Filin was severely injured when an assailant confronted him at the door of his Moscow apartment building late one evening and splashed sulfuric acid in his face.
Who did it? As David Remnick unravels the tale in The New Yorker, the suspect list grows and grows into a confusion worthy of Agatha Christie. Did an angry ballerina or danseur or, more likely, one of their wealthy oligarch patrons, order it? Or maybe a bitter rival eager to replace him?
Mr. Remnick takes his time to reveal the not altogether conclusive answer, first weaving his way through the history of the celebrated ballet company from its charter in 1776 under Catherine the Great. (Stalin loved the Bolshoi, but President Vladimir Putin is indifferent.)
Perhaps no result would satisfy a jaundiced Russian public. “Russians, in the contemporary version of their fatalism, see their country as a landscape of endless bespredel, lawlessness, a world devoid of order or justice or restraint...,” he says. “After witnessing so many phony trials – most recently of [the feminist rock band] Pussy Riot – the Russian public has developed a general distrust of the country’s legal system.”
Saving the Irish manor
“Downton Abbey” has nothing on the autobiographical tale of Selina Guinness and her sometime desperate efforts to hang on to her ancestral home in Ireland.
“Houses for the middle classes are just places to live in, but for the gentry they are evolving organisms, repositories of cherished memories, full of treasured knick-knacks and wrinkled old retainers, as much living subjects as physical sites,” writes Terry Eagleton in the Dublin Review of Books. “Individuals come and go, but the grange or manor house lives on, more like a transnational corporation than a bungalow.”
He continues: “Like a slightly dotty but much-loved relative, the house has its own quirky ways, its distinctive aura and personality. One almost expects to encounter it settled on one of its own sofas, granny glasses perched on its nose, knitting and crooning.... Such houses are more sacred texts than bricks and mortar.”
The home Ms. Guinness is trying to keep in the family is known as “The Crocodile” for the stuffed animal that greets visitors at the front door. Like Lady Mary Crawley in “Downton Abbey,” she confronts the problem of how to save her beloved estate without ruining its essence and character. All she can do is muddle on and hope for the best.
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Monkeys are poised to take back the corridors of power in the world's largest democracy. Once literally overrun with packs of small but troublesome rhesus monkeys, Delhi's government zone began to fight back the menace a decade ago with large langur monkeys who were trained to them chase away.
Now, an animal rights activist is putting a stop to the hiring of langurs and their handlers, leaving residents of the capital poised for a return of the monkey business from years past: Packs of monkeys had broken into the parliament, invaded the prime minister's office and defense ministry, at times ripping up wiring and tearing through files. Those who resisted them sometimes got bitten – or worse. In 2007, one deputy mayor in Delhi died after falling from his terrace while fighting off a rhesus attack.
The arrival of the black-faced langurs brought the red-bottomed rhesus situation under control and became a normal part of life in Delhi.
The langurs' human handlers keep them on a leash. It is commonplace on Delhi's clogged streets to see handlers bicycling to a job site with the giant monkey sitting side-saddle on a back rack. Each morning, langurs would chase the rhesus monkeys out of Parliament, then out of ministry buildings and down the streets past the living quarters of top officials. Each night, the rhesus would return, encouraged by offerings of food like bananas and peanuts left by Hindus who view monkeys as a living incarnation of the monkey god Hanuman.
So valuable were the langurs' services, that they commanded a salary higher than the vast majority of Indians.
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But, now Delhi’s langur handlers have come under fire after animal rights activist and opposition politician Maneka Gandhi began protesting the practice of chaining and training the wild langurs and putting them to work. Under the country’s Wildlife Protection Act, 1972, the langurs are a protected species and cannot be owned, traded, bought, sold, or hired out. Any violation of the law entails a three year jail term or a fine or both.
Following pressure from the activist who is also a member of Parliament, India’s Ministry of Environment and Forests issued letters to Delhi state government and several federal ministries alerting them that hiring service of the chained langurs was illegal.
Then, last month India’s urban development ministry issued a notice to different agencies in Delhi asking them to stop using the langur guards. Fearing legal action some offices have stopped hiring the handler-langur teams to curb the rhesus menace. Some others are still using the langur guards in Delhi but are apparently in the process of ending the practice soon, said one New Delhi Municipal Corporation (NDMC) officer.
That has some in the city worried.
“The urban rhesus monkey population in Delhi is rising. So, the threats of rhesus attacks on offices are also on the rise,” says Mahaveer Singh, an NDMC officer who looks after the hiring of the langur guards by the city's civic agency. “The trained langurs provide a very efficient service. But the pressure to stop using them is rising following the recent ban by the [urban development] ministry. I think we have to stop hiring our langur guards soon.
“But it will be very difficult to tackle the rhesus menace in the absence of these langur guards.”
Mr. Singh adds that the NDMC have 40 langur guards on its roll and the agency would be in big trouble if it faced further pressure and was finally forced to stop using them.
Some handlers say their langurs would not lose the jobs in Delhi that easily.
“All other strategies to keep the rhesus monkeys at bay in Delhi failed in the past,” says handler Mohammad Nishar. “Only our langurs can keep the parliament, courts, police stations, and other offices free from the rhesus menace. Powerful citizens are working at these places. I believe they will help amend the wildlife laws and will let our langurs continue their smart service.”
* Monkey stories from India are a proud sub-genre of journalism. Here is an archive of some of the best stories.
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The clock in Nicosia is ticking a lot louder: Tiny Cyprus has four days to come up with about €6 billion ($7.5 billion) or lose its current lender of last resort, the European Central Bank (ECB).
Tensions and emotions are high after ECB officials declared on Thursday that Cyprus must guarantee a €10 billion ($13 billion) bailout by Monday or forfeit and presumably go into default, with unknown consequences for the eurozone economy and beyond.
Cypriot officials are scrambling to conjure new sources of revenue – a so-called Plan B – including a look at pension fund leveraging and sales of offshore gas exploration prospects. The finance minister and energy minister have now lingered in Moscow for a second day of talks regarding a potential bailout deal with Russia.
Cypriot banks will remain closed this weekend even as bankers there worry about huge outflows of capital next week if some kind of deal, whether with the European Union or Moscow, is not in the offing. (Reportedly Russian officials yesterday told their EU counterparts they would not add to a current €2.5 billion ($3 billion) loan to Cyprus.)
Cypriot lawmakers vowed Thursday that they would not raise again the idea of a levy or tax on private accounts. However, EU and ECB authorities continue to state that available resources are so limited that the Cyprus parliament will need to revisit the issue, perhaps in a smaller percentage.
Meanwhile, Reuters notes, EU officials continue to up the ante and put pressure on Cyprus. "I cannot rule out a Cyprus insolvency," Austrian Finance Minister Maria Fekter told the newspaper Oesterreich. "A euro exit would not achieve anything. Cyprus must act now."
The ECB hard deadline comes a day after Cypriot lawmakers rejected the controversial EU terms of the bailout, engineered mysteriously last week, which require a “tax” allowing Cypriot authorities to reach into the accounts of private bank deposits and withdraw some 10 percent of funds in accounts over €100,000 ($130,000) and about 7 percent in accounts under that figure.
The idea of such a tax brings mingled perplexity and outrage in many parts of the world, but especially in Russia, which uses Cyprus as an offshore tax haven.
Deposits in Cyprus’s banks were seven times the size of its economy at the end of 2012, an unusual situation fostered by low taxes and reputation for lax regulation. Many European policymakers suspect it is a hub for Russian money laundering. Cypriot banks hold $88 billion in deposits, of which $49 billion is in the form of deposits over $129,000, according to analysts’ estimates.
The Christian Science Monitor reports that Moscow is playing “hardball” with the Cypriot finance minister in order to protect its massive stake in Cyprus' banking system.
According to official Russian figures, more than $114 billion has flowed into Russia since 2007 from Cyprus, almost all of it in the form of dividends paid by Cyprus-registered holding companies. Big Russian firms, including most metals giants, the state-owned banks Sberbank and VTB, and the independent gas producer Novatek all have important holdings in Cyprus.
"The price of crisis in Cyprus is very high for Russia," says Igor Nikolayev, director of strategic planning for one of Russia's leading auditing firms.
Like Jerry McGuire, who won his wife back with a simple "hello," President Obama seemed to capture the hearts of Israelis with the first word of his speech upon touching down at Ben Gurion airport: Shalom.
As Obama moved into a carefully scripted speech that swept back millenniums to recognize Abraham and Sarah as the ancient claimants to the land of Israel, Amir Mizroch, editor of the English edition of Israel Hayom, tweeted: "Stop it, stop it, you had me at Shalom."
Obama even trotted out a bit of Hebrew, telling his listeners: tov l'hiyot shuv b'aretz – It's good to be back again in "the land," the colloquial term for Israel. It was the first clip played in an unusually long evening news program about his visit.
To be sure, there were hiccups as well. Obama's "beast," the super-duper secure limo that ferries him around even on foreign visits, broke down when someone – the Israelis insist it was the Americans – put in the wrong kind of gas. Prime Minister Benjamin Netanyahu's joke about preparing Obama a fake moustache so he could ditch his security people and secretly sample Tel Aviv's bars fell flat. And there were complaints that several ministers in the new government had asked Obama to free Israeli spy Jonathan Pollard, to which he reportedly responded: "Nice to meet you," or "Nice to see you again."
Unlike a wedding, state visits have to be orchestrated without the benefit of the main actors rehearsing – and sometimes it shows. Obama and Israeli President Shimon Peres, a Nobel laureate now in a largely ceremonial position, bumped into each other more than once as protocol officers pulled and prodded them into the proper formation and they tried to smoothly insert themselves into photo ops with cute kids waving the Star of David and the Stars and Stripes.
But overall, Obama managed to sail right through the awkward moments and hit all the notes Israelis wanted to hear. He outlined his vision of a two-state solution as a strong Jewish state next to a sovereign Palestinian one, without mentioning anything about curbing Israeli settlements in the West Bank; promised continued foreign aid; insisted on calling Netanyahu by his nickname, Bibi; complimented his wife Sara, saying the Netanyahu boys must have gotten their good looks from her; and, in a more serious moment, recognized the sacrifice of Netanyahu's family, who lost his brother Yoni in the 1976 Entebbe operation to rescue more than 100 Israeli and Jewish passengers whose plane had been hijacked.
One senior Israeli official who was asked ahead of time about what Obama would have to do to make his visit a success, reportedly replied simply, "Land." Indeed, before Obama even addresses the Israeli public in a speech tomorrow; before he visits the Dead Sea Scrolls, thus implicitly acknowledging that Israel's right to exist here dates back thousands of years before the Holocaust; before he visits the grave of Theodor Herzl, the founder of Zionism ... in the eyes of many Israelis, his mission is already accomplished.
For the Palestinians, the feelings are quite the reverse. But more on that tomorrow.
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Cyprus is today looking at a “Plan B” to save itself from a catastrophic banking default, though it appears that hopes for an immediate loan from Moscow, explored by Cypriot officials today, will not be forthcoming.
Lawmakers in Nicosia on Tuesday decided against a highly controversial proposed levy on private bank depositor holdings that would impose a nearly 10 percent “levy” or “tax” on private bank deposits in order to secure an EU bailout.
The possibility of private bank accounts being targeted by a government brought enormous world attention in recent days.
The Los Angeles Times today called the tax an “expropriation” of funds in a piece that warns the Cypriot situation could trigger a larger crisis for the euro.
Now Cyprus still needs to find some $8 billion or find itself in default. It would be the first eurozone member to do so. Cypriot banks are already closed and may remain so this week until a solution is found, causing at the minimum, anger among citizens.
The tiny island represents all of 0.2 percent of the mighty eurozone economy. But its need for a bailout and its personae as a huge offshore shelter for Russian oligarchs – brings speculation that a default will act as a wrench tossed in the mechanism of the EU economy, just as talk of the “eurocrisis” was quieting down.
Today a visit to Moscow by the Cypriot finance minister for a possible bailout of $2 billion to $8 billion, yielded no offers according to Reuters.
Cypriot political and financial leaders are huddling in Nicosia the capital, even as banks in Cyprus may continue to stay closed in coming days, if no solution is found.
In Europe, the Austrian finance minister claimed that the European Central Bank, which has provided a steady supply of loans in recent years to continental banks to avoid their default, will not do so for Cyprus indefinitely.
The Federal Reserve in Washington said it was committed to continue providing further liquidity and stimulus rather than adopt the kind of financial austerity the EU has shown a preference for.
As Reuters put its, "If anything, developments in Cyprus, where the announcement of a tax on bank deposits to help fund the country's bailout sent jitters through the global financial system, are likely to reinforce the resolve of Fed officials to bolster the US economy."
New York Times columnist Paul Krugman today cites an exhaustive report by the Financial Times showing the dimensions of Cyprus as an offshore haven for Russians, and speculates the oligarchs will soon realize they don’t need Cyprus and can find shelters elsewhere.
At that point Cypriot officials will give up on the Russian business and, Krugman writes, “a resolution will become much easier. But they’re not there yet.”
The Russian business link is known as “round tripping”:
This link occurs through CIS [Commonwealth of Independent States] commodity-based shell companies that deposit transactional balances of their CIS-based legal subsidiaries engaged in oil, mineral, and metals exports, often involving transfer pricing and other tax minimization strategies. The Central Bank of Russia classifies Cyprus as the largest single source of FDI in the Russian Federation, with a total of $41.7 billion in cumulative inbound FDI into Russia’s non-financial sector between 2007 and 2010 (over 2.7x German levels)… Cyprus is also counted among the top FDI investing nations in several Central Asian countries (likely Russian capital reinvested via Cyprus, a process known informally as “round-tripping”).
Sony Kapoor of the Brussels based reform-minded think tank ReDefine writes that an alarmist response to the Cyprus crisis as causing the fall of the euro is over the top. Spain and Italy are not in the same grooves or orbits as Cyprus and apocalyptic runs on banks in those nations are unlikely.
Mr. Kapoor also suggests that a levy or tax on the deposits of those banking in Cyprus may in fact be a better answer than the effect of a default.
…the alternative of sovereign default would have been much worse; it is impossible to imagine a safe banking system in a sovereign undergoing restructuring of debt. Remember how much capital Greek banks needed after it defaulted? In fact, Cyprus would probably not have needed a bailout if its banks had not incurred huge losses on holdings of Greek debt. Add to this the complication that half of Cyprus’s sovereign bonds are under foreign (English) law that makes a successful restructuring of sovereign debt much harder. Moreover, Cypriot banks hold large swathes of its sovereign bonds, so it would be further bankrupted by any sovereign restructuring.
The tiny divided sun-dappled Mediterranean island of Cyprus rarely rides above the radar in European thinking – but is now suddenly raising a five-alarm panic in the European Union, just as financial crisis talk there was starting to abate.
Cyprus desperately needs a 10 billion euro ($13 billion) bailout, and to do so the EU has engineered a plan, now being voted on by the Cypriot parliament, to guarantee an EU loan with – and here is the kicker – money secured from the banking accounts of private depositors.
Accounts with more than 100,000 euros ($130,000) would be taxed 9.9 percent; those under that marker would be taxed at 6.7 percent. The idea is to raise 5.8 billion euro ($7.5 billion) to ensure against a catastrophic default.
Since the EU in Brussels must approve the plan, and since Germany is on board, this is a fateful example that is sending a chill around the continent, particularly in nations like Spain and Italy that have troubled banks that have been unable to climb out of the pit of debt and exposure.
Whether one calls this measure a tax, a levy, a “dip” into bank accounts, or a seizure of funds to avert a national disaster, ordinary Europeans interpret the plan as a major Rubicon that has been crossed: Their private accounts can be invaded by the public sector.
“The damage is done,” Louise Cooper, who heads the financial research firm CooperCity in London, told the Associated Press. “Europeans now know that their savings could be used to bail out banks.”
Though some dispute that the decision entails a realistic threat to American and European bank accounts. In a statement sent to EU correspondents, Andriy Bodnaruk, an assistant professor of finance at the University of Notre Dame Mendoza College of Business, wrote that “While Cyprus' proposed tax on deposit holders sets a precedent, there is little reason for depositors in Europe or the US to lose sleep."
"...It is highly unlikely (if not improbable) that such policy could ever be forced on depositors in any other EU country, as it would be politically suicidal. Cyprus is a different animal as it is effectively an off-shore area within Europe," he wrote.
The president of Cyprus, Nicos Anastasiades, told his nation on Sunday that he supported the plan as “the least painful option,” saying that, “Cyprus is in a tragic situation … and I bear the political cost for this, in order to limit as much as possible the consequences for the economy and for our fellow Cypriots.”
Michael Steininger wrote yesterday in The Christian Science Monitor that: “…for the first time, at the insistence of the German government, private account holders were being asked to shoulder a part of that [Cyprus] bailout, around 5.8 billion euros ($7.5 billion), through a special levy on their savings."
“The German taxpayer is willing to help Cyprus,” says Michael Fuchs, a member of Parliament for Chancellor Angela Merkel’s Christian Democrats. “But the Cypriots have to help themselves and pay a tax on their deposits.”
With large Russian offshore accounts in Cyprus, President Vladimir Putin in Moscow called the new tax “dangerous.”
Banking columnist Peter Gumbel of Time magazine pointed out that:
At the insistence of both the E.U. and the IMF, Cyprus would only receive a bailout if as much as $6 billion of the money could be recouped from bank depositors. That solution was aimed primarily at the Russians and other wealthy depositors, with more than $130,000 in their accounts. But under the terms of the agreement finalized on Friday night, all depositors will take a hit. A one-time levy of 9.9% will be charged on deposits over $130,000, and accounts with less will be charged 6.75%.
A new plan being voted on today in Cyprus would exempt depositors with less than 20,000 euro ($26,000) in their accounts.
Since the advent of what has been called the “eurocrisis” several years ago – which has caused a number of governments to fall and occasionally spun the global economy downward – Europeans have become adroit at halting panic and crisis just as it seems ready to bring a full-scale meltdown.
The crisis was originally sparked by public debt and bad accounting in Greece. But it spread across Europe – most prominently in Ireland, Portugal, Italy, and Spain – as bond markets attacked what appeared to be weakness in those economies, due to their inability to devaluate under the single currency.
But the European Central Bank showed this summer and fall that it would go so far as to sidestep its own rules and charter to protect the euro by lending trillions to troubled banks.
Still, as the Associated Press put it in a report today:
…Down the road, the Cyprus precedent, even if quickly reversed, could come back to haunt eurozone policy makers by making depositors less sure about the safety of their money in case of trouble. It could also complicate creation of an EU-wide system of bank deposit insurance, part of long-term efforts to create a more robust financial system and prevent future crises.