THE rescue package for Cyprus hammered out over the past week includes a highly controversial and unpopular levy on bank deposits.
Those with bank deposits under €100,000 will lose 6.75%, while those with more than €100,000 will lose 9.9%.
The Cypriot parliament was due to vote on the measure on Sunday. But in a dramatic turn of events, the vote was put back to Monday, which has led to speculation that the government does not have enough support to get the bill through parliament. There is further speculation that the President may have to declare additional bank holidays on Tuesday & Wednesday to give the government more time to garner support.
Although ex-pats with savings in Cypriot banks will be hit, George Osborne has pledged that the UK government will compensate British troops and civil servants based in Cyprus.
Monday is a public holiday in Cyprus – Green Monday, which marks the start of lent in the Orthodox calendar. Celebrated with picnics and children flying kites, the atmosphere this year will be subdued.
Analysts have described the decision to raid all bank accounts in Cyprus as a threat to the entire economy of the island. Some are predicting a run on the banks as depositors rush to withdraw cash when they re-open after the holiday.
Long lasting damage
“The damage will be long-lasting,” said Fiona Mullen, a leading economic analyst and Director of Sapienta Economics.
“Business and financial services were the only sectors generating jobs and tax revenue and they have just had a double whammy with both the increase in corporate tax and the hit on deposits,” she added.
Marios Skandalis, vice president of the Cyprus Institute of Certified Public Accountants, said: “There is a very high risk that this could be the end of Cyprus as a strong and reliable financial centre.
“The whole banking system is based on trust. If the trust is lost, the whole system is going to collapse,” he said.
At the very least the move will further erode investor confidence and increase the downward pressure on property prices and sales.
President’s promise
In his speech to the nation, President Nicos Anastasiades said: “The state recognises its obligations, and will offer to those who will keep their deposits for two years, the worth of their loss in bonds tied to future state income from natural gas.”
Bailout deal agreed in Brussels
(Reuters) – Cyprus clinched a last-ditch deal with international lenders on Monday for a 10 billion euro ($13 billion) bailout that will shut down its second largest bank and inflict heavy losses on uninsured depositors.
Following is the detail of the deal in a statement from euro zone finance ministers.
1. Laiki will be resolved immediately – with full contribution of equity shareholders, bond holders and uninsured depositors – based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework.
2. Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time.
3. The good bank will be folded into Bank of Cyprus (BoC), using the Bank Resolution Framework, after having heard the Boards of Directors of BoC and Laiki. It will take 9 billion Euros of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalization has been effected, and may subsequently be subject to appropriate conditions.
4. The Governing Council of the ECB will provide liquidity to the BoC in line with applicable rules.
5. BoC will be recapitalized through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders.
6. The conversion will be such that a capital ratio of 9 % is secured by the end of the program.
7. All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation.
8. The program money (up to 10 billion Euros) will not be used to recapitalize Laiki and Bank of Cyprus.
If, according to a piece in CM BOC was in serious trouble a year ago and Laiki was bust three months ago, and as we all know Cyprus law is same as British law (mmmmmm), should the Directors and the head of Cyprus Central Bank not be subject to criminal proceedings ?
Anastasiades ‘won’t accept’ Troika demands on bank split
Greek media are reporting tonight that Cyprus’s president, Nicos Anastasiades, is refusing to accept the Troika’s demands over the Cypriot banking sector.
They say he will not agree to the Bank of Cyprus shouldering the burden of the €9bn of liquidity assistance supplied to Laiki Bank’s by the European Central Bank (when Laiki is broken into a ‘good’ bank and a ‘bad’ bank).
There are even unconfirmed reports in Greece that Anastasiades threatened to resign rather than cave in:
That appears to be that then. Am I reading this correctly the president is not accepting troikas demands?
Arriving at the meeting this afternoon, German finance minister Wolfgang Schauble warned reporters:
“We haven’t got much further in the last week. The numbers have not changed, if anything they have worsened.
I hope we will achieve a result today. But that, of course, depends on the people in Cyprus having a somewhat realistic view of the situation.
Realistic view????? Priceless!!!!!!
Just like the Black Knight, in Monty Python and the Holy Grail, the GC’s yell at the Troika, OXI, you shall not pass, but just like the Black Knight they have no arms or legs to stand on, and the usual delusion, self denial and rampant obstinacy do not appear to be working against the Troikladites.
Just in case anyone has forgotten:
Being now a ghost, we are renowned for our lack of social etiquette (unlike the shy, retiring, recently departed OJB), so I’ll tell it straight.
This meeting between the EU, IMF, ECB, Sarris, Anastasiades, his Mum and their neighbour, the ensuing discussions and swiftly changing “agreements†are all so much nonsensical deck-chair re-arranging, it would be funny if the consequences weren’t so tragic.
Everyone KNOWS that the minute the banks open, anyone with any brain will take out as much money as they can get their hands on. The EU will thus have to drastically restrict the amount people can withdraw INDEFINITELY, or be prepared to bankroll Cyprus banks INDEFINITELY (as a bank without any deposits cannot run), plus give a cast-iron guarantee that money in the bank is safe forever more. Which they’ve already said they won’t do (lender of last resort and all that). No-one would believe them anyway, without the only solvent euro-nation, Germany, issuing said guarantee.
So, people will not be allowed free and unfettered access to their accounts, which will have reverberations all throughout Europe. I mean, a week is long enough, but imagine “indefinitely� Cyprus banks won’t be able to pay back other European banks or international investors, people with large deposits all over Europe will look to move their money to safer havens as you can’t trust the EU and the flight of capital out of the Eurozone, certainly for the larger accounts but some of the smaller ones as well, will gather pace, unless people receive A CAST IRON GUARANTEE THAT MONEY IN THE BANK IS SAFE. Which the EU can’t do without the only solvent euro-nation, Germany, issuing said guarantee for all European banks. Which they’ve said they won’t do.
So, will Germany allow ALL European banks to fail? Certainly not theirs!
Expect an announcement over the next few weeks from Germany stating that they WILL act as the lender of last resort for all German banks (now that they can afford to). This, in itself, will precipitate the flight of capital but TOWARDS German banks.
Also expect them to say something like, (but with a German accent): “All Euronotes issued by the Bundesbank (the X-rated ones) will be guaranteed by the Bundesbank. Some may say that the Euro never had an exit strategy? Well, why on earth were country-specific identifiers issued in the first place, if not to be able to distinguish and separate notes according to country of issue? If every euro were equal, surely an unnecessary step?
It’s just a hop and a skip to a full-blown separate currency.
So, if it’s 20% on amounts over €100,000, 4% on anything under, 25% on a monkey’s uncle, the money from Cyprus bank accounts will be gone due to outrage and a lack of confidence and with it the economy. The value of one cubic foot of gas is zero if it can’t be extracted.
Isn’t it a strange coincidence how Israel and Turkey are now recently new best friends?
The beast is dead, the carcass is rotting, the vultures are licking their lips…
There is an article on the Cyprus Mail website about how the restructuring of Laiki Bank would work i.e good bank/bad bank.
The problem I foresee, and what I don’t understand, is that if you have a mortgage holder paying their mortgage (performing loan) then what happens about the non-performing loan tied to it (the numerous non-performing developer loans). When loans and debts are linked in this odd chaotic title deed mess I don’t see how it is easy to separate the good and the bad. Surely, this significant issue (that keeps on being swept under the carpet by the Cypriot authorities) needs to be tackled first before they can even establish what is good debt and what is bad debt.
I presume they would write-down their ‘friends’ debts knowing it is safer to come after the foreign mortgage holders properties/assets in the UK. As oddly enough, we have title deeds and do actually own our houses!
According to a report in the Phileleftheros, it appears that a provisional agreement has been reached between the government and the troika.
President Anastasiades has left for Brussels for the Eurogroup meeting this afternoon.
It looks as if uninsured depositors will lose between 18% and 22% of their deposits. However, if this does not raise the amount of money demanded by the troika the ‘levy’ will be raised to 25%.
It seems that there may be legal issues concerning the imposition of a ceiling on deposit withdrawals.
Reuters – A senior Cypriot official told Reuters that Nicosia had agreed with EU/IMF lenders on a 20 percent levy over and above 100,000 euros at No. 1 lender Bank of Cyprus, and four percent on deposits over the same level at others.
@Janner – I’m trying get hold of the bills that were past last evening.
From the Cyprus News Agency:
Finance Minister Michalis Sarris said today significant progress was achieved during the Cyprus government talks with Cyprus’ lenders and this will help reach an agreement.
Speaking after the talks at the Ministry of Finance between the government and a troika delegation, Sarris said that the progress helps in reaching an agreement, at least on the part of Troika which will make its suggestions to Eurogroup.
Today’s meeting, he added, was to evaluate developments and explained that during the discussion, various points were raised which required further examination. Sarris said for this reason, working groups will examine these points until 1600 local time (1400 GMT) when the two sides will meet again to assess the results of the work carried out.
This work, he added, builds upon the significant progress achieved on the level of framework and principles.
Speaking after the morning talks at the Ministry of Finance between the government and a Troika delegation, Sarris said that the progress helps in reaching an agreement, at least on the part of Troika which will make its suggestions to Eurogroup.
From onthisisland:
The EuroGroup Meeting will take place tomorrow (Sunday 24th 2013) at 17:00 GMT
It’s all gone very quiet on the news front……..
I love the way the press releases use the term ‘negotiate’. Are Cyprus and the TROIKA really only still at the negotiation stage. Surely, Cyprus should be saying to the TROKIA something like;
“Hello TROKIA, president of Cyprus here. We made a real mess of this and clearly do not know what we are doing. Please can you manage our finances for us and save us from disaster”. Or words similar to that.
C’mon Cyprus, throw your hands up to the facts of the debt (NPL’s included), the lack of enforcement of EU law and Cypriot law, the corruption, the nepotism and the general crooked and bad attitude displayed when it comes to money and honest business. Like an addict admitting their problem, just put your hand up and ask for help. But you will not get help until you really admit the problem, warts and all.
To clarify, when I say Cyprus I don’t mean every individual, I mean the crooks. You know who you are, everyone else knows who you are. Do not let them hide amongst you good people. Smoke them out, deal with the criminal acts, civil breaches etc. You will then gain support around the world. You can do it!
It just keeps going………
Will the deadline really be on Monday…..I have my doubts.
I still think cyprus will be saved and that the issue of NPL’s will not be dealt with. We still won’t be able to get title deeds. If they couldn’t manage it when all was well then they sure as hell can’t now!
Surely, the bank does have assets in the form of all the land it has secured against the loans?
I am no bankruptcy expert but I thought you had to sell off your assets to tackle the debt??
Somehow, I think it will all be rolling on for sometime to come!
House votes in favour of nine bills, to reform banking sector
The House of Representatives on Friday voted in favour of nine bills, which aim to reform and restructure Cyprus` banking sector.
Politicians convened and voted on a total of nine bills prepared by the Government to ‘armour’ the banking system and prevent a mass outflow of deposits.
The bills were designed as a ‘Plan B’ by Nicosia, following the rejection by the House last Tuesday of the Eurogroup decision to impose a levy on bank deposits.
The bills provide for capital controls, in case of a capital outflow, the establishment of an ‘Investment Solidarity Fund’ that would incorporate future natural gas proceeds, as well as proceeds from the issue of bonds or any other securities by any other company and any other legal person.
They also grant the Central Bank of Cyprus the authority to proceed with the resolution of a financial institution.
Under this bill, the CBC will act as the Resolution Authority, to safeguard the normal operation of the financial system and to safeguard the national interest.
Eurogroup reached last week an agreement in Brussels which provided for a one-off levy on savings that stung small account holders to the tune of 6.75% in exchange for a €10 billion sovereign bailout deal, whereas deposits over 100.000 euro would be charged with a 9.9% levy. The agreement also included an increase in corporate tax from 10% to 12.5%. A bill, with some modifications, was rejected by the Cyprus House of Representatives on Tuesday evening.
Cyprus News Agency – http://www.cna.org.cy/webnewsEN.asp?a=63bf94f9a5954179a7c8aff9e8751828
Well it has been quite a few days of turmoil and worry for many and the big vote on actually accepting the bailout ,or otherwise, has been delayed for another day.
Cyprus is the talk of the internet and even featured as the lead story on the BBC more than once. Most unusual.
I am probably one of the lucky ones albeit that I bought a house and wanted to retire here but subsequently discovered that I had been screwed by my Lawyer and having spent several years trying to get justice, which I did not, decided Cyprus was not for me.
What I find most disturbing in all of this is that in all the coverage not one single person in Cyprus has blamed Cyprus for the mess. Even 1974 has been mentioned. I am no fan of the EU but if I ask for a loan of £1 but my income can only support repayments of a £0.75 loan then there is a problem.
We had Cypriots on the TV screaming Russia help us. They are not that stupid.
Quite simply this country must stop playing the victim card as nobody cares any more.
The EU nor Germany is not the problem Cyprus is! They in reality do not give a toss for anyone else. In my experience the old Cyprus has long gone and only the greedy, self interested and corrupt remain.
Just a thought or two.
Vote postponed I hear.
President to go to Brussels with party leaders tomorrow.
Does that mean they will have to hire a private plane which is not permitted?
If Laiki is wound down will that mean homes encumbered by developer mortgages will be safe from repossession? If so then maybe winding down all the banks responsible for reckless lending will save 130,000 homes.
So the Cypriot Government, closely following the model made popular by the Cypriot Trade Unions, said to the Troika – no, we’re not playing your game and we’re taking our ball home.
Unfortunately the Troika didn’t follow the model made popular by the Cypriot Government and didn’t collapse in a heap and beg them to bring back their ball, which sort of foxed the Cypriot Government who now don’t know what to do with this new model.
It seems that the Cypriot Government is now planning to return to the game with a slightly differently coloured ball in order to try and claim they still have some sort of a handle on the situation, when in fact they are in total disarray and haven’t got a clue why they tried it on in the first place?
We, who live in Cyprus, are not surprised in the least by this peculiar behaviour, but it seems to be providing the world’s media with some amusement at the amateur and pathetic antics of the elite wassocks who claim to run this banana republic.
How will all this effect the upcoming, imminent Larnaca Golf and country Club?
Sorry, couldn’t resist that one!
Merkel Warns Cyprus “Don’t Try Our Patience!â€Â
Read more at http://investmentwatchblog.com/merkel-warns-cyprus-dont-try-our-patience/#yd7H0aPtvILfURBl.99
No surprise here really – he warned his mates to get their money out!
http://www.dailymail.co.uk/news/article-2297383/Four-days-save-Cyprus-Politicians-vote-new-plan-secure-bailout-Monday-deadline.html
Sorry MarkD my crystal ball is bust, so to speak.
Need to wait on the vote but with the Russians not bailing out the banks for gas rights not many options left.
As Nigel says, at the moment, deposits under 100k are likely to be protected but as we all know anything could happen.
@MarkD – deposits up to €100,000 are insured; those above are not.
It’s been reported that unwinding the Laiki Bank could save €3.6 billion – with their uninsured depositors losing up to 40%
BTW – the vote on the ‘old plan’ was 36 against, 19 abstained and one member absent.
@andyp
What back to the old plan that every single MP apart from one voted against. Will this levy effect there personal accounts? If so which way do you think they will vote?
Looks like deal is emerging as:
Laiki break up
Deposit levy on all above 100k -more than 9.9pc
Capital controls -very tough for all banks and deposits
Generic bank resolution laws if other banks in Cyprus get into further trouble
11.49 A new plan, rather resembling the original proposal, could be emerging:
11.36 Foreign correspondent Richard Spencer explains the implications of the official government statement (emphasis ours):
The key thing is that party leaders are consulted so presumably the president thinks the bank legislation will go through – this is itself a major cave-in to Germany, which demanded acceptance both that Cypriots (and Russian) depositors cough up part of the bail-out money and also that Cyprus abandon its banking model – or as Angela Merkel put it, startlingly bluntly for the leader of one EU state to another, “The Cyprus business model is dead”.
The above from Telegraph.
Back to square one, nearly.
Who will be blamed now, the Russians? Probably everyone except Cyprus.
The problem for Cyprus after some sort of deal is cobbled together is that for the foreseeable future no-one will invest in the property market or would want any investments in Cyprus or its banks. also its main economy after banking ( which is now finished)is tourism. I work in tourism in London and most Brits are looking to Spain and Portugal again as both countries are seen as cheaper and providing better holidays.
When the deal is done Germany will insist on severe austerity which will lead to large unemployment and repossessions. Before the current problems the image of the Cyprus property market was of corruption and taking advantage of innocent people. Everyone throughout the world now see what a basket case it is.
Angela Merkel is using Cyprus to show to her voters that she is not soft with their money and this will ensure that she is re-elected later on this year.
All the chickens are coming home to roost .
I still think cyprus will be saved at the 11th hour and life will go on virtually unchanged.
Cyprus House convenes Friday to vote on nine bills.
CNA – NICOSIA 22/3/2013 08:02 – See more at: http://www.cna.org.cy/webnewsEN.asp?a=4275096a1530457b8056fce0a42e3743#sthash.lvgRC3Ue.dpuf
House of Representatives convenes this morning to discuss and vote on a total of nine bills prepared by the Government to armor the banking system and prevent a mass outflow of deposits.
The House delayed its extraordinary Plenary session for today at 10.00 local time (08.00 GMT), asking for more time to study the lengthy bills.
The bills were designed as a Plan B’ by Nicosia, following the rejection by the House last Tuesday of the Eurogroup decision to impose a levy on bank deposits.
Yesterday the Eurogroup ministers discussed via a teleconference the developments in Cyprus and reaffirmed their readiness to discuss with the Cypriot authorities a draft new proposal to be presented “as rapidly as possibleâ€Â.
Immortal words ring true, courtesy Private James Frazer
We’re doomed, I say. Doomed’
What a sorry sad state the good people of Cyprus find themselves in. How easily greed corrupts!
As usual the architects of this mess will walk away rich and free and the innocent will suffer for years to come.
Sadly as the say “this is Cyprus”
Let me guess. A solution will be found at the last minute which will mean the issue regarding NPL’s will roll on, no title deeds, no change. Corruption is the norm and I see no reason why it will change.
A few days ago the intention was to clip everyones account and they seemed to think there was about 26 Bn in accounts with less than 100K and maybe 35Bn in those with over 100K.
That’s a hell of a lot of lucre for a place with maybe 300,000 households and less than 50K SME’s. It looks like people with less than 100K in an account must have other accounts too!
The people here must have been mega rich; what happened?
It was sprayed all over the Balkans by (censored)
(1) Welcome back SoOJB. Superbly entertaining, if at times quite fantastical!
(2) SoOJB doubts the Cyp govt could/ever intended to honour the E100k depositor guarantee. I agree. We’ll see moufflons flying over the Troodos first!
(3) Solidarity Fund? Good-hearted investors sought to help save Cyprus? Last gasp desperation has set in. Sounds a bit like those ‘strategic investors’ that the last (AKEL) mob were convinced would come forward to buy ailing Cyprus Airways. Anyone seen any? Has Cy Airways been saved from its dripfeed syndrome of the living dead?
10.30 Our foreign correspondent Richard Spencer is in Nicosia. He, along with Bruno Waterfield, Tom Parfitt and Alex Spillius, explain the implications of the ECB’s liquidity cut off. They write:
The European Central Bank will switch off the cash life support taps for banks in Cyprus wiping out £1.7 billion in British savings after next Monday unless the island signs off on a radical debt-cutting programme with the eurozone and International Monetary Fund.
Unless a deal is in place the euro’s central bank will withdraw “emergency liquidity assistance” leading to the immediate collapse of the two largest Cypriot banks and a financial crash in Cyprus.
Cypriot banks are totally reliant on the ECB for funding and have taken over €9.1 billion in an emergency programme to ensure cash does not run out.
Some more background info from Telegraph
Remember Mark it is only a maybe if deal not done.
Guarantee schemes remain in place HOWEVER it is for Cyprus to pay out in this case and as we all know they have no money.
We will need to wait and see.
Dear Mark,
As I am only the SPIRIT of Odd Job Bob, I cannot take credit for the post he wrote on this very forum on May 8, 2011 at 7:53 am
“With regards to depositors’ protection, Cyprus is a member nation of the European Forum of Deposit Insurers and the Central Bank of Cyprus operates its Deposit Protection Scheme in accordance with EFDI guidelines. From the website http://www.efdi.net/, the most interesting line is: “EFDI does not have the power to make binding pronouncements….on behalf of its members….. The performance by EFDI….on any particular issue, is without prejudice to the sovereignty of its membersâ€Â. To my mind, this means EFDI won’t do anything in the event of any bank default – it’s up to the individual member to take action.
Fair enough.
From the CBC’s website: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=2794&lang=en, “The maximum level of compensation, per depositor and per bank, under the DPS is €100.000″ which is great.
It also states, “the amounts of deposits will be set-off against any loans or other credit facilities granted by the depositor’s bank as well as ANY OTHER COUNTERCLAIM (my capitals) that the bank concerned may have against the depositor in respect of which a right of set-off existsâ€Â.
This appears to be not so great.
Maybe it’s just my suspicious mind, but the MOST telling part of the website is the end bit in red: “This unofficial English text is for information only and neither the Central Bank of Cyprus nor the Management Committee of the DPF shall be responsible for its content. The official legally binding copy is the Greek textâ€Â.
So, if we have money on a Cyprus bank account, we may have a mortgage on our property, the developer DOES have a mortgage on our property, the European governing body says they’re not going to do anything, the Cyprus protection scheme says it’ll deduct any money owing by us from our deposits, including ANY OTHER COUNTERCLAIM, before it pays us anything back AND that there is no official translation of its rules as they are all in Greek and will remain that way, how many of us are confident that our deposits will be protected in the (increasingly more likely given the Greece situation) event that our bank defaults? SQP. Do it now. Do it quickly. Hy Brasil IS sinking…”.
So, in answer to your question:
It never was…
Andyp. What about the 100k euro guarantee is this still valid?
Apparently the Cypriots wouldn’t dial into a conference call with other eu leaders. Apparently this did not go down very well!
Unbelievable!!!!!
From ‘onthisisland‘:
It has just been announced, after the joint meeting of all political leaders and technocrats at the Presidential Palace, that the following will be proposed:
NO HAIRCUT ON DEPOSITS – But the funds will be made available through a SOLIDARITY FUND that will receive investments linked to Oil & Gas, Gold Reserves, Church Properties, etc.
Funds going into this Solidarity Fund will be voluntary and open to all who want to help save the country.
Official announcement by the Government spokesman:
Unanimous decision from all parties to create the SOLIDARITY FUND.
09.10 Earlier (08.24) we mentioned the ECB announcement that it will cut-off emergency liquidity assistance to Cypriot banks on Monday if no EU-IMF bailout deal is reached.
If this happens, and Cyprus has secured no other source of funds, deposit holders its banks could lose everything as the island cannot afford deposit guarantees. Our man in Brussels Bruno Waterfield pointed this out yesterday, when the ECB first threatened to put a cut-off on its ELA programme.
The above was lifted from Telegragh Live Feed.
It would seem ECB believe banks will be bust by Monday if no acceptable bailout agreed as they can only assist solvent members.
Does anyone know what measures Cyprus will have to put in place to prevent this mess ever happening again should a bailout be agreed. They’ve already gone back to Russia to renegotiate the terms of there loan, ironic considering the attitude the banks show towards us mortals when trying to renegotiate our loans! I’m pretty sure I couldn’t get a payday loan if I acted like this :)
Banks to remain closed for the rest of the week. More delays. No worries Cyprus, just take your time!
Nice one spirit of Odd Job, right on!!
Wow OJB. You ever thought of running for chancellor! We could do with someone who can look further than the spots on their nose.
@SoOJB – Welcome back and thanks for your input.
@MarkD – Kathimerini Cyprus has reported that an agreement has been reached in principle for Russian investors to buy Cyprus Popular Bank (Laiki) in a deal that would reduce Cyprus’ funding needs by 4 billion euros.
The deal was verbal and has yet to be signed, sources told Kathimerini.
Questioned about the report, a Cyprus government spokesman denied that such a deal had been reached.
Laiki bank and popular bank sold to Russian Investors according to twittermania. Things do move fast when they are to the governments advantage. Mañana indeed!!!!!
Mavros Mavrides is being optimistic if he thinks they have ‘a few days’ left!
The name of Odd Job Bob has been bandied about recently, after a long absence from these pages as people, in shock, are struggling to find out what will happen next in this terrible tragedy (if you want an exercise in scary prescience, type Odd Job Bob into the search engine and prepare to be amazed! He called it absolutely SPOT ON re: EVERYTHING!) Naturally, people now seek his counsel.
Unfortunately though, OJB is no longer with us on this mortal coil, having demised in mysterious circumstances while following a line of enquiry re: why the British government have done nothing to help their stricken citizens in Cyprus.
However, the SPIRIT of Odd Job Bob has been summoned from the great beyond by Andyp and is willing to enlighten all those who wish to know how this will all play out!
It’s all very simple really (scary “wooooh†for added ghostly effect. Apologies for the length of the post as well, but ghosts have a different concept of time. You know how it is):
We MUST remember that if you and I (plus a whole load others) know that the first thing people will do on Thursday morning, or whenever it is they can, is run to the bank and withdraw EVERYTHING, then do you not think that our dear Mr Wolfgang Schäuble knew this as well? Investment tip: go LONG on mattresses!
A run on Cyprus banks was THE POINT of this exercise, if the Cypriots accepted this “bail-in†package or not. The German intentions for a policy of “no more bailouts†were clearly set out last week here: http://money.msn.com/investing/has-germany-killed-the-eurozone. C’mon, it was only a matter of time guys before they bailed on this project as no-one wants to write blank cheques to people who don’t deserve it for God knows how long! Jeez.
There will quite rightly be a flight of cash from the Eurozone, but with German short term Bunds trading at NEGATIVE yields (i.e. can we lend you money, we’ll PAY YOU for the privilege!), and being snapped up, the biggest winner in this scramble for safe havens is Germany.
Over the duration of this Eurozone crisis, Germany has been able to slash its budget deficits as its borrowing costs have been way lower than forecast. It is now in a position to shore up its banks which were heavily exposed to Greece and others and so, can now leave the Eurozone and set up its own currency (OJB posted this almost 2 years ago: http://marginalevolution.com/blog/archives/1760/).
As stated quite some time ago, the first country to do a runner from the Eurozone will be Germany, and imminently. The groundwork has been laid, they’ve done the maths and taken the only sensible option.
The contagion is bound to spread to the rest of the Eurozone, the Euro will be a second class currency and the countries which still own them (for quite some time now, Germans have been getting rid of euronotes produced elsewhere and printing more of their X rated ones: http://hat4uk.wordpress.com/2012/05/18/exlusive-euro-banknotes-update-berlin-printing-new-euronotes-x-en-masse-ecb-withdrawing-greek-notes-y-20-2/) will obviously default on their loans, their banks will crash and their populations will be consigned to tremendous poverty for a very long time.
With so many of the UK’s trading partners bankrupt, the UK will suffer as well, but will still be solvent and be viewed, certainly among Cypriots who’ve got any money, as a safe haven, so pushing up the £. As described in the link above, Switzerland has already taken action to stop an influx of capital there (as many here know, to their peril, that the CHF is TOO HIGH!).
What now for Cyprus? Someone will be willing to bankroll them, so they can have dibs on any natural resource wealth that the future may bring, but with the estimated gas total at anywhere between 8 and 40(!) trillion cubic feet of the stuff, at current prices of $4 per thousand cubic feet, the revenue can be anywhere between $32bn and $160bn (minus the cost of extraction of course, which is incalculable at time of writing). The last figures I had for the total loan book for Cyprus were $150bn, so for someone to take this up, they will have to have some incredibly large ‘nads.
If that someone is Russia and they exert too much of an influence on the running of the place, threatening the SBAs (or it looks as if even one single Russian soldier will set foot on Nato’s “Unsinkable aircraft carrier†(“Cyprus: A Troubled Islandâ€Â, Andrew Borowiec), an excuse will be found by Nato to re-invade Cyprus (probably using Turkish troops as the boots on the ground, as they have in Syria and probably will in Iran). Sound familiar?
In summary, this is a deliberate play by the Germans to crash the Eurozone and get out now. I’m 100% convinced it will be successful.
If anyone didn’t heed the warnings to exit Cyprus PDQ, don’t worry, it’s not too late.
Actually, I lied. It is.
Woooh…
SoOJB
Marios Mavrides MP speaking on BBC Newsnight said: “If we cannot come up the €5.8bn in a few days then I think we will go to the Cyprus pound. That will be the end of Cyprus in the Eurozone.”
GazProm will buy Cyprus. Open Russian Naval base, all UK forces will leave. Everyone lives happily ever after except………
As no one really knows the ultimate consequences I will bet the money I have in my Cyprus bank account on option 2 Nigel. Oops I still can’t transfer anything.
At the end of the day I can understand why EU taxpayers like me, who are ultimately being asked to foot yet another bill, have had enough.
Not being anti Cypriot, well maybe a bit, but they seem to expect everything in return for nothing in order that they can carry on as usual while everyone else covers their expenses.
Iceland survived. Jailed the bankers who broke the law and started again. Oops again. The AG does not sanction many professionals being jailed for criminal offences in Cyprus.
@MarkD and @andyp – Economics editor of the Guardian, Larry Elliott, says:
“there are really only two plausible scenarios: somebody – be it Europe or the IMF – gives Cyprus more money, in which case there is a chance that the crisis can be contained.
“Or Germany and the other hardline euro zone countries can insist that the deal is non-negotiable. In which case, the banks in Cyprus will go bust, risking widespread turmoil.”
He doesn’t believe that Vladimir Putin will come to the rescue with some cash from the Kremlin.
@nigel. What happens now the vote is in? The alternatives aren’t great….
And so the poker begins for very high stakes.
Where else can they raise 5.8 billion in a few days?
A post by Odd Job Bob some years ago may come true-Hi Brazil.
@Costas Apacket – Reuters reports via Twitter that Michalis Sarris resignation reports are not true.
But according to Kathimerini – Cypriot Finance Minister Michalis Sarris is about to be replaced upon his return from his current trip to Moscow as he no longer enjoys the support of President Nicos Anastasiades following his handling of the crisis, although the minister denied there was any truth in that.
It seems that Mr Sarris may have tendered his resignation, and the UK Government is flying one Million Euros out to our troops to keep them in Keo in case the guano hits the fan any more than it already is doing.
Cypriot MPs this evening voted comprehensively to REJECT a levy on bank depositors.
Voting as follows:
Those in favour: 0 (nil)
Those against: 36 (thirty six)
Abstentions: 19 (nineteen)
(One MP was absent from the chamber).
Further discussions will take place on Wednesday.
@denton. The question is “who needs who more ?” Watch this space.
Forgive my ignorance but why did Cyprus join the Euro?
Picked up the following article in the UK business press…
Cyprus Rape Bank Accounts
Chris Towner, director of FX advisory services at foreign currency specialists HiFX, comments on the Cyprus bailout decision:
“Whatever the details of this tax levy on cash deposits, what has been announced over the weekend from Cyprus is shocking. No wonder the Germans including Finance Minister Shaeuble have been quick to point out that they had nothing to do with this decision.
“It sets a worrying precedent for any country that is in any way unstable and has a deposit protection scheme. Your money is safe until the very people that have allowed your money to be safe, take that safety net away. Cyprus has a deposit protection scheme that guarantees the safety of your cash in the bank up to 100k Euros. For the Government then to supersede this safety net by dipping freely into people’s hard-earned savings is verging on criminal.
“No wonder we have seen the Euro drop in value. Cyprus makes up a tiny percentage of the EU’s GDP; however this is a worrying precedent that is sending shockwaves through the whole global financial markets. The fears of the sovereign debt crisis have re-surfaced to shake the calm that we have seen so far this year.
“Here at HiFX we have already seen enquiries from Cyprus of people looking to sell Euros; however there are restrictions currently in place in Cyprus to prevent people from doing this. However, we have already had enquiries from Spain and other countries of people concerned that this type of levy too may impact them.
As I have commented before, it is quite staggering that most of the Cypriots I speak to are blissfully unaware that unless Cyprus pulls together the €5.8bn by end of Wednesday, then come Thurs morning it will be too late – complete bankruptcy and down the toilet. My understanding is that midnight Wednesday is the crunch point. If anyone knows different, please advise.
The Cypriot voices I hear seem to be in denial and quite a few believe that the Troika/EuroGroup are bluffing and that Cyprus should keep on ‘negotiating’, prevaricating and stubbornly rejecting the fact that we don’t have a leg to stand on.
Economically and financially, this ‘no compromise’ bravado seems suicidal.
It seems that this evenings vote may be delayed as President Anastasiades is planning to meet party leaders on Wednesday morning to discuss the levy.
Earlier today Fitch Ratings placed the ratings of Bank of Cyprus (BOC), Cyprus Popular Bank (CPB) and Hellenic Bank (HB) on Rating Watch Negative to reflect downside rating risks arising from the deliberations to impose losses onto the banks’ depositors.
@MarkD – IMHO this is a political battle between the EU (Germany) and Russia.
There was not a peep out of the EU when the HSBC was fined $1.92 billion by the U.S. authorities for money laundering. (It’s facing fresh accusations of illegal activity in Argentina.)
And not a peep when Barclays rigged LIBOR.
As they say MardD “The show ain’t over until the fat lady sings” (the fat lady here being Angela Merkel – aided and abetted by her Finance Minister Wolfgang Schaeuble).
@mouflon – Assuming that parliament votes through the levy this evening, I believe the levy will apply to all bank depositors – including client accounts.
Revised proposals for the bank levy have been put forward:
Depositors with less than €20,000 will pay no levy.
Those with €20,000 – €100,000 will pay 6.7%.
Those with more that €100,000 will pay 9.9%.
This leaves a shortfall of around €400 million in the amount demanded by Europe.
A vote on the levy should be taken by parliament this evening at around 18:00 local time.
@Nigel. Did the EU really think that the Russians wouldn’t react????? Please!!!!!
I cannot believe these highly educated people did not see this coming? Aren’t they acting outside there jurisdiction?
It’s not there money to take, is it?
Also. Not sure how I’d react if I had a Russian directing the word “dangerous” at me :)
With Cyprus hitting the news, for all the wrong reasons, the majority of channels broadcast interviews with “your average” Cypriot on the street.
All blamed the EU or Germany for this haircut. In my view the blame lies fairly and squarely on Cyprus.
They asked to borrow money to bail out the country but quite simply without the haircut they could not afford the payments to maintain never mind clear the debt.
Would anyone of sound mind lend money to someone who could not meet the payments? No.
It would be nice to think that once the current crisis is over, when ever that will be, the government will look to the future and get the financial sector in some sort of order.
Making everyone pay what they owe in taxes and fines, give all property owners title deeds at the time of purchase, and ensure that everyone that are still waiting for title deeds get them, make property developers responsible for their debts and not the owners who have paid up in full.
But then I like living on my little white cloud where all is fair and above board!!
Nigel I am in the process of selling my house.
The buyer had just put in the final payment last week into the lawyers “client account”.
I am due to leave my house next Tuesday.
Any chance of the client account not being touched as the money is in transit?
What a mess.
Is the situation really that urgent? Didn’t the Cypriot government say recently that they had enough money to pay their way until the end of April or May?
Did something unforeseen happen or did someone get their sums wrong!
Is this more lies. Have they ever though of just operating a normal banking system, such as dealing with NPL’s and issuing title deeds at point of sale. These appear to be key problems for them but all is quiet on that front. I suppose the last thing the government would want to do is upset their developer mates!
C’mon EU. Force Cyprus to shape up or we’ll be here again in the not too distant future.
According to a report in The Times newspaper, the Cyprus parliament is unlikely to approve a controversial levy on savings when it goes to the vote today, a government spokesman said this morning.
The decision comes after Nicos Anastasiades, the Cyprus President held talks over-night with Angela Merkel, the German Chancellor and Russian president Vladimir Putin over the proposed raid on bank accounts which would see up to 10 percent of savings of over € 100,000 confiscated.
Moscow had threatened to pull financial aid to Cyprus in retaliation for the levy which Mr Putin attacked as “unfair, unprofessional and dangerousâ€Â. His Finance Minister warned that Russia could terminate a €2.5 billion loan to Cyprus.
We have received unconfirmed reports that depositors with less than €100,000 could be exempted from the tax levy.
Eurogroup president Jeroen Dijsselbloem has issued a statement saying the group: “Continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below €100,000.”
If correct, this would mean that more of the burden will be placed on those with more money – and it seems that Russian depositors may be the hardest bit.
Estimates by Moody’s at the end of 2012 reported that Russian banks had placed $12bn in Cypriot banks, with corporate deposits at $19bn.
(I can’t see the AKEL representatives agreeing to that – but it may enable the government to garner enough support from the other opposition parties to get the levy approved by parliament).
Video from Euronews – Interview one minute into the video below talks about the need to protect investors with less than €100,000 from bank deposit levy and the need to make Cyprus responsible and clean up its banking system. (Please refresh your screen if all you see is a black rectangle).
Theft ….. out and out Theft !!!
The country would not have been in such a bad state if the government had NOT been so grossly negligent and irresponsible.
So why are All the ordinary citizens and Ex pats paying for their incompetence and greed… ???
As for Europe, Well lets all be careful we could all end up with a haircut if the situation requires it.
Buy a safe and a bigger mattress I say…..
It is still theft in my eyes.
Extra days to give the public to demonstrate and if the ATM’s aren’t filled we will be trying to pass cheques to buy food.Not everybody has plastic.
It appears that those who are rushing to ATMs and are trying to transfer funds out of Cypriot banks are already too late.
The Financial Times reports: “Cypriot Finance Minister Michalis Sarris said his government had already moved to ensure deposit holders could not make large withdrawals electronically before Tuesday’s open [after Green Monday holiday]; Jörg Asmussen, a member of the European Central Bank executive board, said a portion of deposits equivalent to the levies would likely be frozen immediately.”
So, it looks as though many who have already been cheated in Cyprus are to be cheated yet again.
It seems grossly unfair that Portugal, Ireland, Spain and (of course) Greece received their rescues without stealing from people’s bank accounts. Also, it is manifestly unfair that Cypriot bank account holders living in Greece will be protected (by creating a separate company within the bank) but not British account holders (unless the account is held at a UK branch of Bank of Cyprus (which is already a separate entity).
This is reported by the Financial Times: “The two largest Cypriot banks – Bank of Cyprus and Laiki Bank – also have considerable operations in Greece, but Mr Asmussen said Greek depositors would not be hit. Instead, those branches would be “ring fenced†and sold off to a Greek bank at a later date.” Nice of Mr Asmussen to look after Greek depositors!
Does that seem fair? After all, Cyprus claims that it was investments in Greece which wrecked the Cypriot economy.
The Banks are on another win win deal .They get their bail out. Everyone will pay a percentage and many will lose their homes because of Developer mortgages. The Euro ministers are simply tryng to keep their well paid easy jobs and dont give a damn about the ordinary citizens.
Compendium of video clips from Euronews on the impact of the bank levy demanded by Europe as part of the Cyprus Bailout – including stock market reaction, reactions of Cypriots, Brits living in Cyprus and the Russian Government.
Local news in English anticipated in an hour or two (view in right-hand column).
Hi Nigel,
Have you seen this!!
British government STOPS pension payments to expats on Cyprus so government won’t seize 10% tax for EU bank bailout
From the Famagusta Gazette:
Banks will stay shut on Tuesday and Wednesday following the parliament’s decision to postpone voting on the deposits levy legislation, reports Cyprus State TV.
A decree by the Ministry of Finance says that Tuesday and Wednesday are declared as bank holidays. Banks today replenished their cash vending machines after they had been drained on Saturday, when depositors rushed to obtain cash when the deposits haircut was announced.
@andyp – I guess we’ll never know who’s been telling ‘porkies’. But discussions are going on to lower the levy on those with ‘smaller’ savings.
My comment at 11:19 has details.
I believe the government needs €5.8 billion from somewhere and it’s up to them to decide how much and from whom is to be collected.
Here’s an Al Jazeera report (I withdrew cash from a machine lunchtime yesterday – no problem – no queue).
Sorry earlier post not clear.
Troika wanted higher percentage of tax raised on deposits exceeding 100,000 and none on those below. Cyprus government offered, allegedly, to include deposits under 100,000 in the tax to avoid a double digit levy on those with 100,000 plus in the banks.
Who do you believe? I have no idea.
@andyp – from the Financial Mirror
The Eurozone, IMF and Germany’s insistence to impose a harsh “bail-in” plan on Cypriot savers has backfired with “iron fist” Finance Minister Wolfgang Schaeuble not realising that he may have cast the first stone in the downfall of the euro simply to satisfy a personal ambition to punish Russian depositors.
The deal, that has shed serious doubts on the EU’s pledge to safeguard savings of up to 100,000 euros after the Lehman collapse in 2008, sent the euro, stock markets and the bonds of southern euro zone members sharply lower on Monday morning. Amid the backlash, Cypriot authorities were considering changes to reduce the burden on smaller savers.
According to numerous reports now surfacing on the internet it was Cyprus government who wanted to levy tax from all and not the Troika. But who knows.
I agree with Denton in that the consequences of not contributing will be far worse for all
Regarding the ‘guaranteed’ EU protection of E100,000 per customer per bank, I think this only applies at the instant the particular bank goes bust. In Cyprus, this has not yet happened. Rather, the govt has imposed an ‘account balance’ tax. Of course, it would be interesting to see what would happen if, having taken the tax, the bank(s) still goes bust!
Looking at the two stark options (get €5bn+ cash double quick and get the bailout; or refuse to and go bust), the lesser of the two evils is obvious by a long chalk. Talking to Cypriots, I am amazed how few of them realize that come Thursday morning (as I understand it) if the bailout has not been accepted then immediately the govt will be bankrupt as well as Laiki/Popular Bank. BoC will follow in short order, followed by all the other banks owing to financial inter-dependency. Instant unemployment not just for bank employees but for many thousands more, as all employers come under liquidity pressure. Perhaps within the first 24 hours, Cyprus will be forced to exit the Euro and switch to a new currency; but the value will probably be only 50-60% of the Euro i.e. instantly everyone’s remaining Euro holdings in Cyprus will take a huge hit.
A ‘no bailout’ vote in parliament will be catastrophic for Cyprus and all of us who live here.
This picture sums up the mood of many people I have been speaking with:
Financial Mirror – The Eurozone, IMF and Germany’s insistence to impose a harsh “bail-in” plan on Cypriot savers has backfired with “iron fist” Finance Minister Wolfgang Schaeuble not realising that he may have cast the first stone in the downfall of the euro simply to satisfy a personal ambition to punish Russian depositors.
CyBC has reported that the vote on the bank deposit levy has been put back until tomorrow (Tuesday 19th) – and there are rumours swirling around Twitter that the vote on the bailout could be delayed until as late as Friday.
The raid on bank accounts without discussion is a raid on our civil liberties and human rights. I was under the impression that the EU is supposed to look after the rights of EU citizens and not abuse their trust.
@Pippa – the full bailout conditions have yet to be made public.
I think the major issue will be the handling of the non-performing loans. Last November’s draft MoA included the establishment of a ‘Bad Bank’ – similar to the one in Ireland.
New proposal rumours:
Those with less than €100,000 in the bank will lose 3% of their deposits.
Those with €100,000 – €500,000 would lose 10%.
Those with more than €500,000 would lose 15%.
Does any one know what other conditions have to be implemented to get the bailout from the EU? The raid on the bank accounts cannot be the only condition?
@Nigel – probably no smoke without fire. I’m perfectly prepared to believe there were better solutions than thieving ordinary people’s money – but we’ve come to expect little else from most of the scum running their rackets on the island.
I’m amazed there are voices on this forum defending this action. As for “think about the alternative”. How about this for an alternative?
The Republic of Cyprus should not have systematically created a toxic soup of deception, corruption and glaring injustice that would probably offend the sensibilities of ‘Attilla the Hun’ were he still around.
The only good things to come out of this are:
1) The world’s banking system is now beyond any doubt geared towards supporting the madness we’ve all been brainwashed from birth to believe is ‘natural boom and bust’. It doesn’t, shouldn’t and needn’t be this way.
2) European Union has finally been exposed to be what we’ve all suspected it to be for a very long time. It needs a huge re-tune and strip-out and re-fit. There are souls in it who are trying to make stuff work properly – but unfortunately – there aren’t enough of them and the machinery they are working in is inherently flawed.
Hopefully it can be sorted out peacefully in some way before we see civil unrest. Best we all check the stocks of the arms manufacturer’s – be interesting to see how well they are doing right now.
Rumours abound that Gazprom have delivered a written proposal to the Cyprus government to buy one or two of the banks in exchange for a share in the gas – and building the gas plant at Mari.
(This would avoid bailout)
If they had also included a solution to the Title deeds fiasco and also promised to decrease the amount of civil servants, then this may have been a bit more palatable.
In effect; one’s 100,000 Euro deposit is NOT guaranteed by the EU!!! EU have stated it is protected; but this tax levy makes it a lie!!
Think about the alternative – the 2 major banks have to close their doors – permanently. All those with deposits will lose everything they have not just a %. The UK banks did the same but took it from peoples salaries in other ways – a stealth tax you couldn’t see at least this one is visible.
We have gained from high interest rates on our savings in Cyprus for decades, sometime that bubble had to burst.
If the Cyprus Government have the legal right to raid bank accounts they could avoid borrowing the money from Troika by just upping the percentage taken from each bank account to achieve the 10m euros including the added bonus of not having to pay interest on it.
The EU has just shown Cyprus its place and standing in this “union” 8-)
Heil Troika!
“The whole banking system is based on trust. If the trust is lost, the whole system is going to collapse,†he said.
IF?
That’s almost funny.
This is THEFT – pure and simple. If I went into the Government buildings in Nicosia – and helped myself to 10% of what’s inside in order to settle my loans – I’d be slung in the slammer.
What’s the difference?