Rejoyce! Cyprus is saved!
From what, you may ask?
Who cares? They will take 40% of uninsured (over 100,000 euros) deposits at one bank, and take 100% of such deposits at another bank so that they can pay international creditors, and say "it's for the people of Cyprus".
It's for the people of Cyprus but the Cypriot Parliament doesn't need to vote, says Germany's fin min Wolfgang Schaeuble.
Stock market futures jump on this merry news of yet another save for the large financial institutions in Europe and the US.
(Photo is Cyprus President Nicos Anastasiades emerging from the meeting, from Nikkei.)
From Bloomberg News (3/24/2013):
Cyprus Said to Reach Tentative Deal to Avert Default
Cyprus agreed to the outlines of an international bailout, paving the way for 10 billion euros ($13 billion) of emergency loans and eliminating the threat of default.
The accord between Cyprus and the “troika” representing international lenders was reached in overnight talks in Brussels and ratified by finance ministers from the 17-nation euro area.
“It’s in best interest of the Cyprus people and the European Union,” Cyprus President Nicos Anastasiades told reporters.
...The agreement calls for Cyprus Popular Bank Pcl (CPB) to be shut down and split. The Bank of Cyprus Plc would take over the viable assets of the failed bank along with 9 billion euros in central bank-provided emergency liquidity aid, according to three EU officials who asked not to be named because talks are ongoing.
Deposits below the EU deposit-guarantee ceiling of 100,000 euros will be protected, and a loss of no more than 40 percent will be imposed on uninsured depositors at the Bank of Cyprus, two EU officials said. Uninsured depositors at Cyprus Popular would largely be wiped out, two other officials said.
(Full article at the link)
Much more and with appropriate sarcasm at Zero Hedge (who still shows me ANA's horrendous "maid" with contact-lens-augmented blank eyes).
I wonder how Cyprus residents react to this wonderful news. Since most of their savings are guaranteed (under 100,000 euro) and it will be mostly Russians who will get wiped out, will they breathe a sigh of relief?
Or will some of them recall what one Nazi camp survivor said long time ago?
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13 comments:
"It's for the people of Cyprus but the Cypriot Parliament doesn't need to vote, says Germany's fin min Wolfgang Schaeuble".
How come? I don't think the president alone can impose such measure on Parliament.
(Anyhow, I often wonder if there would be some differences today if the RAF would have actually killed that criminal against Humankind that is Schauble - probably not but who knows!)
@Maju: they already passed a law on Friday permitting the measures taken and, apparently, the measures are within that law. Thus, no need to take it to parliament.
I've read over there that it still awaits voting... but maybe the source was wrong on that.
Friday's vote was about capital control. For this wonderful new deal that will drive out wealthy Russians, no vote needed because it's basically between ECB and the Cyprus central bank. Bankers to bankers.
They targeted the second-largest bank for dissolution, as that's where they believe Russian's money is, mostly. So I hear.
Recently we are seeing a surge in the usage of this bad bank/good bank technique (or good GM/bad GM, replace your favourite bankrupt company).
Under this scheme most of the liabilities go to the bad company and most of the assets go to the good one. As I see it, this is a fraud to circumvent bankruptcy laws so that the assets are not used to pay rightful creditors. This fraudulent mechanism is usually applied only to large companies (law is more equal for some than for others), sometimes after their assets have been dilapidated by their overpaid managers.
Beppe
In many countries corporate tax is higher than 40%; it could be construed that "wealthy Russians" seeking tax shelter in Cyprus are just paying their due. Only difference is that they ultimately pay to the Greek government (or to GS if you believe it was GS who profited from the Greek collapse).
Besides, Russia did not provide gas to Europe (as per its contractual obligations) when it needed more gas at home because of an exceptionally cold winter so, as a country, it can't complain too much about having to swallow the same medicine.
Orthodox church in Cyprus is set to lose a huge chunk of money it unfortunately parked in the largest bank.
I don't buy the argument that Russians deserve it.
No worry about Russians. They've already withdrawn. "Have The Russians Already Quietly Withdrawn All Their Cash From Cyprus?" http://www.zerohedge.com/news/2013-03-25/have-russians-already-quietly-withdrawn-all-their-cash-cyprus
So, all the German fin min and his pals managed to hurt was domestic businesses and individuals and the church in Cyprus.
Last time I checked, if the government screws up, the population has to pick up the tab (see Japan & nuke power). Whether the population includes foreign account holders is immaterial. So I don't get the Cypriot/Greek "The EU/Germans/IMF/Bankers/Gods are at fault. not us, it's so unfair to take our money" excuse.
I wonder what Sir Thomas Gresham and his predecessors would have said about this. Sure it is an act of robbery. Now that does not explain the whole story, nor give a way to get out of this trap.
The Euro was not designed to fit Cyprus ( and Greece, and Ireland, and Iceland.. ) nor were Cyprus, etc.. in condition to fit the Euro.
These countries have been allowed to have dumping tax levels on companies : see the booming sector of financial services. Hence the boom or temporary wealth, of money laundering, tax evasion, homing of foreign companies "headquarters", and their long history of convienience flags.
This is the background of this mess.
See also that the EU bureaucrats knew how the Greeks were cooking their books, and did'nt raise an eyebrow. Nor did they for some remaining wonders, such as the Church paying no taxes, a very high level of tax fraud, common use of bribes etc.
This was not of real profit to the fruits or fish seller at the open maket. So who are the culprits ? Who made or accepted this mess ?
A question for those who want to see some heads shown on pikes, or to learn history.
Phillipe
Philippe here again,
I did not mention the EU banks lending like crazy ( and earning fees just as crazy ) to Greece, Portugal, (the delicately called PIGS or PIIGS in the UK ) ... and Cyprus, knowing they could blackmail and threaten governments of a bankrupt ( how words can be truth-telling sometimes ! ) in case it turns wrong.
Putin was not so worried. London branch of closed Cyprus bank was open all of this time enabling Russians to withdraw money in person or electronically.
Persons suffering, as usual, will be regular citizens because of proposed tax and because of economy breakdown. Rich foreigners to deposit money in Cypriot banks in future is finished. It's big screw up.
Who are the thieves here ? What about the F.T. repeatedly bashing down South Europe countries naming them PIGS for years, pages after pages, whenas US, Ireland, Scotland, and others of the UK world were or are broke ?
What's the matter of calling for the finance police when every one knew it was a rotten kind of game.
OK I can credit ZH for claiming it a rotten game before the MSM.
There were others together with him ( Roubini & affiliated ) to display a very dark future.
As a European, I think we need reforms, rather than bashing down by non-European folks from the heavy-weight countries people who both benefited the hard-core exploitation of a land they never cared of.
Same comment about global warming.
The has-been most energy consuming and most polluting country, the wealthiest also, did its best to backward anything like pollution and climate control. Thank you, wealthy America. Now just swep your own door.
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