Cyrpus vote on bailout delayed; China now fifth-largest arms exporter; budget cuts won't affect military readiness, US assures South Korea; Australia pledges extra $20 million to Burma; new pope to meet Argentine president;

Top of the Agenda: Cyprus Bailout Vote Delayed

A crucial vote in Cyprus's parliament on a $13 billion bailout plan that has ignited public anger has been delayed (FT) for a second day until Tuesday. The controversial package agreed to by the EU and IMF had stipulated that all bank customers must pay a one-off bank deposit levy (WSJ), triggering heavy cash withdrawals across Europe. Russian President Vladimir Putin called the tax "unfair, unprofessional and dangerous," as Russian companies and individuals have $31 billion of deposits in the country. The euro slid as much as 1.9 percent, and borrowing costs (Bloomberg) in other debt-strapped nations rose.

Analysis

"The hope of righting the eurozone's listing ship relies on divorcing the debt problems of a sovereign from those of the country's banks. Last June, the eurozone's leaders finally acknowledged the nature of the problem. Cyprus seemed a possible salutary test for the more enlightened approach," writes a Financial Times editorial.

"The bail-out appears to move Europe further away from the institutional reforms that are needed to resolve the crisis once and for all. Rather than using the European Stability Mechanism to recapitalize banks, and thereby weaken the link between banks and their governments, the euro zone continues to equate bank bail-outs with sovereign bail-outs," writes the Economist.

"A better approach would be to look at the full range of liabilities that make Cyprus' position untenable, including the sovereign as well as the banks. That would point to both a restructuring of the government's private external debt (PSI), and for relief on its official sector claims (OSI)," writes CFR's Robert Kahn.

 

PACIFIC RIM

China Becomes Fifth-Largest Arms Exporter

China has surpassed the UK to become the world's fifth-largest arms exporter (Bloomberg), its highest ranking since the Cold War, according to a Swedish think tank. Its weapons export volume rose 162 percent since 2008 compared to the previous five-year period, with Pakistan as its top recipient.

SOUTH KOREA: U.S. Deputy Secretary of Defense Ashton Carter reassured South Korea during a four-nation Asia tour that U.S. budget cuts won't affect military readiness (Yonhap) for Seoul.

This CFR Backgrounder traces the progress of the Six Party Talks aimed at denuclearizing North Korea.

ELSEWHERE:

Australia pledges extra $20 million to Burma

New pope to meet Argentine president

 

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.

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