Bank runs, bank holiday & 10pct bailout tax on deposits in Cyprus

pmbug

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... Handelsblatt reports that the ECB has decided that, due to the "great danger" of a bank run once they reopen next week, it will enforce capital controls independently of Cypriot (elected) officials. ... the rather stunning restrictions on people's private property include:

•Freezing Savings - no time-frame (it's not your money anymore)
•Make bank transfers dependent on Central Bank approval (a money tzar?)
•Lower ATM withdrawal limits (spend it how we say?)

The capital controls will be designed "so that citizens have access to sufficient cash to go about their lives." So, there it is, a European Union imposed decision on just how much money each Cypriot can spend per day. ...
http://www.zerohedge.com/news/2013-03-22/ecb-set-fair-cypriot-standard-living-capital-controls
 

pmbug

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Overseas Greeks are undertaking an intensive effort to inform the US administration as well as parliamentarians how to better understand the economic crisis in Cyprus and America’s obligation to assist.

In a statement, the President of the Coordinated Effort of Hellenes, Andy Manatos, announced on Thursday their group undertook an intensive effort to help top American officials at the White House, State Department, US Senate and House of Representatives better understand the economic crisis of our ally Cyprus and America’s obligation to assist.

“The fact that our group has worked closely with these officials for many years, leads us to believe that they will intervene and help ameliorate this Cyprus crisis”, Manatos pointed out.
...
More: http://famagusta-gazette.com/coordi...tion-to-inform-us-on-cyprus-eco-p18654-69.htm

lol. They know the US Congress just can't resist spending money they don't have on a bailout.
 

rblong2us

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If Cyprus leaves the Euro, that still leaves the annoying little problem of re-denomination back to the Cypriot Pound. does this trigger CDS? My guess is that if "they" don't trigger CDS on a Cyprus exit and repudiation, then nothing will and the whole swap complex collapses in the heap it rightfully deserves to be in
This has been my view for a long time.

They simply cannot allow any CDS claim without destabilising everything everywhere.
So who wins or looses when this reality finally becomes accepted ?
 

ancona

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Rblong,
We ALL lose! If CDS are triggered, then the contagion trips in to high gear. Italy, Spain, Portugal and Ireland fall right behind Cyprus since confidence in their debt instruments will collapse and the bank runs begin in earnest. If Cyprus follows through on some inane plan to steal cash from Russian accounts, IBID.

If the IMF hammers them in to submission, forces a good bank bad bank scenario, some will get wiped out and some will be saved. this scenario is no better than the previous two. If Cyprus walks and fires up the printing press, it won't matter if CDS are triggered because the re-denominated debt will be worthless on its face as a result of hyperinflation.

They're damned if they do and damned if they don't. And to think, just four short weeks ago the bank stress tests showed them to be healthy as an ox.
 

ancona

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It now appears that the Troika has increased their demands on Cyprus. somehow in the last few hours, the "situation has worsened" and they now need to fleece another billion dollars from depositors to meet their needs. What a crock of shit. I say go Iceland and tell them all to go pound sand.

Fuck 'em and feed 'em fish heads I say.
 

pmbug

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Russia also has supposedly toughened up their stance. The original bail-in plan originally had them agreeing to renegotiate the terms of an existing load - extending it's term. Now Russia says no deal.

Sounds like Russia and the Troika are both playing a game of chicken and seeing who will blink first. I have no idea why though. The amount of money involved is peanuts in the grand scheme of things.
 

swissaustrian

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I call BS on everything that has been announced today. The real deal is gonna be published at 5:01 pm, after all markets are closed for the weekend. It might even take another night session and the news might not be out until tomorrow. They can't wait until Monday, even though the banking holiday extends through Tuesday, because markets are open arround the clock on Monday.
 

swissaustrian

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Russia also has supposedly toughened up their stance. The original bail-in plan originally had them agreeing to renegotiate the terms of an existing load - extending it's term. Now Russia says no deal.

Sounds like Russia and the Troika are both playing a game of chicken and seeing who will blink first. I have no idea why though. The amount of money involved is peanuts in the grand scheme of things.
As Jim Sinclair said, this is about future bail-ins/outs (Spain, Italy etc.). If the troika loses this battle, the Russians and other BRICS will gain huge leverage. It's also detrimental for the Europroject. Should Cyprus really leave, all hell will break loose next weak, just because it would be the first dominoe.
 

pmbug

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Yes, sa - I understand that. From where I sit, the Troika has no choice but to find a solution. In light of that, their current hard line stance is puzzling. What are they hoping to achieve?
 

swissaustrian

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It's either electoral politics, ie Germany's election in autumn prevents a full bailout or it's war on semi-official (ex-KGB) Russian black accounts.
My girlfriend is from Russia and she thinks that the Russians are playing poker here, trying to figure out whether the troika will really go after their money via deposit taxes. The retaliation could be very "Russian", ie sudden "operational problems" with gas pipelines into the EU and some mystery accidents and illenesses...

 

ancona

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It's either electoral politics, ie Germany's election in autumn prevents a full bailout or it's war on semi-official (ex-KGB) Russian black accounts.
My girlfriend is from Russia and she thinks that the Russians are playing poker here, trying to figure out whether the troika will really go after their money via deposit taxes. The retaliation could be very "Russian", ie sudden "operational problems" with gas pipelines into the EU and some mystery accidents and illenesses...
...
If this goes through, expect IMF officials to come down with mysterious cases of polonium poisoning. :flushed:
 

Unbeatable

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swissaustrian

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According to media reports, the deposit tax is now gonna be 22-25% on deposits > EUR 100k. The parliament is scheduled to vote on them either today or tomorrow.
That's just insane.
It's gonna hit local depositors, too, not just Russian black money. Even medium sized businesses easily have > 100k in the bank. There are also quite a lot of British retirees on the island. Why should they pay?
Another issue is, that it is a tax on deposits, ie bank accounts. If you have invested this money into stocks, bonds, or even fx, you'll probably not be taxed. So it's totally random taxation, because it depends on whether you're in cash or not.

Additionally, the Greek subdivisions of the Cypriot banks are gonna be taken over by Greek banks to stop contagion. I'm not sure if that will work. There are so many interconnections in the over the counter derivatives market, just splitting the Greek part off might not work.

Capital controls were already passed by the Cypriot parliament yesterday right after the US market closed. They're gonna have to keep them in place for a long time. As soon as they get rid of them, an epic run on the banks will occur.

In essence, the troika has destroyed the Cypriot economy regardless of the outcome of the upcoming votes in the Cypriot parliament.
 

ancona

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Once again, the arrogance of a few has destroyed what little remains of the possessions of the many. Fuck the "troika". Run them out of town on a rail.
 

swissaustrian

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Very interesting article that was published on January 14, 2013, 2 months before the current mess in Cyprus started.
Cyprus: Russia's Next Lunch?
by Peter Martino
January 14, 2013 at 3:00 am

Cyprus's banks are on the brink of collapse. As a result of a crisis that began in Greece, and as one of the 17 European countries that use the euro as their currency, Cyprus, a victim of the euro's domino effect, is being dragged down by the eurocrisis, along with the entire southern rim of the eurozone. Since last spring, Cyprus, a small country with barely one million inhabitants, has been negotiating with the other members of the eurozone about a financial bailout. When Greece was given an 85% haircut on its debts, the Cypriot banks suffered heavy losses on top of the huge losses already incurred as a result of a domestic real estate bubble. To stay afloat, Cyprus's banks currently need some €17 bn ($23 bn) -- an immense sum for a country with a 2011 GDP of only €19 bn ($25 bn) and a contracting economy.

Cyprus's fortune, however, is its location. It is the easternmost island in the Mediterranean and of considerable strategic importance. Cyprus is like a huge aircraft carrier situated in front of Turkey, Syria, Lebanon, Israel and Egypt. In addition, huge offshore fields of gas and perhaps oil have recently been discovered in Cypriot territorial waters.

Cyprus is also the place where the Arab Spring meets the Eurocrisis. The Syrian port of Tartus hosts Russia's only naval base in the Mediterranean. The impending fall of the Assad regime in Syria is forcing Russian President Vladimir Putin to look for an alternative to Tartus -- leaving him with only one option: Cyprus.

Politically and economically, Russia and Cyprus are already tied closely together. Cyprus's President. Demetris Christofias, is the leader of the Cypriot Communist Party. He met his wife during his studies at the Russian Academy of Sciences in Moscow in the 1960s. When Russia became "capitalist," the ties between the two countries became even closer. Thousands of wealthy Russians have put their "black money" in Cypriot banks. Although Cyprus joined the eurozone in 2008, its banks have almost no clients from other EU countries. With the exception of Greece, with which the Greek-speaking Cypriots share close cultural and historic ties, Cypriot banks cater almost exclusively to Russian oligarchs; as a consequence, tiny Cyprus is Russia's largest foreign investor.

In November 2011, Cyprus was bailed out by a €2.5 bn loan from Russia. The eurocrisis has since deepened and more money is now urgently needed. Last June, Cyprus turned to the European Union (EU), the eurozone's European Central Bank (ECB) and the IMF, asking for emergency aid of at least €10 bn. In return, however, the EU, ECB and IMF – the so-called Troika – have asked Cyprus to reform its economy. Negotiations over these "structural reforms," such as privatization of state-owned enterprises and reduction of wages, have been dragging on for almost eight months.

No agreement could be reached between the ruling Cypriot Communists, who refused to implement the reforms demanded by the Troika, and Germany, the euro's major paymaster. Next fall, general elections will be held in Germany. With an electorate that is tired of bailing out banks and governments in Greece, Ireland, Portugal and Spain in order to save the euro – a currency which many Germans feel was forced upon them – Chancellor Angela Merkel is reluctant to come to Cyprus's aid.

Last November, a leaked intelligence report of the Bundesnachrichtendienst (BND), the German equivalent of the CIA, made matters even more difficult for Merkel
. The report asserted that a bailout of Cyprus would boil down to using German taxpayers' money to save the funds of rich Russians, who deposited up to €26 bn in "black money" in Cypriot banks, which are now on the brink of bankruptcy. The BND accuses Cyprus of creating a fertile ground for Russian money laundering, a charge further exacerbated by the ease with which Russian oligarchs can obtain Cypriot nationality and thus gain automatic access to all the EU member states. The BND said 80 oligarchs have managed to gain access this way to the entire EU.

As the financial blog Testosterone Pit writes: "Taxpayers in other countries, including those in the US – via the US contribution to the IMF – will be asked to [bail out] tiny Cyprus." However, given that Chancellor Merkel has already decided that the euro must be saved at all costs, she has no other option but to bail out Cyprus, including the investments of Russian oligarchs.

In all likelihood, the Cypriot bailout is to be agreed on in principle at a meeting in Brussels next week, and formally approved on February 10. Meanwhile, Cypriot Finance Minister Vassos Shiarly has indicated that Russia might be asked to join the efforts to save Cyprus if the EU approves the bailout. "First there must be an EU agreement, then we might ask them [Russia] to join," Shiarly said.

Some think that it is in Putin's interest to do so, to avoid investigations into the role of Cypriot banks in Russian money laundering. However, Russia's strategic geopolitical interests are a much more important reason for Russia to gain a foothold in Cyprus.

The same applies to Israel. The Jewish state and Cyprus are also currently strengthening their ties. Israel is seeking to work with Cyprus on national gas exploration and extraction. The Cypriot-Israeli rapprochement has already angered Turkey, which is bullying both Nicosia and Jerusalem.

Israel is also collaborating with Cyprus in the EurAsia Interconnector project. This is a undersea cable which will link Israel with Cyprus. The 286-kilometer link will be the world's longest undersea power cable in the world.

If Europe fails to bail Cyprus out, there are at least two countries, Russia and Israel, for whom it makes political, economic and strategic sense to step in
. Indeed, while a monetary union between different nations makes little sense, a monetary union between the Cypriot currency and the Israeli shekel would make more sense than the current conflictious monetary marriage between the Cypriots and the Europeans.
http://www.gatestoneinstitute.org/3539/cyprus-russia

Now we see another reason why Obama spent so much time in Isreal.
 

Unbeatable

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...following reports by major newswires that the vote on the deposit levy will only take place (if at all) on Sunday night, after the Eurozone finance ministers' meeting on Sunday.The reason for the delay? Deciding how to best bring the news to Russian, and other wealthy depositors, that not only will they not have access to their funds for a long, long time, the ultimate haircut on what they thought was safe, easily accessible cash as recently as a week ago, may be a stunning 70%!
Cyprus' second largest bank, Cyprus Popular Bank, aka Laiki bank, where it appears the bulk of Russian cash is stored, will fare far, far worse with deposit haircuts up to a stunning 70% on the table, and that is after capital controls ease enough to allow for the deposit withdrawals!

Cyprus Popular Bank depositors with more than 100,000 euros will face losses, said Averof Neofytou, deputy president of Anastasiades’s ruling Disy party.

“They will wait for many years before they see what percentage they will get back from their savings -- 30 percent, 40 percent, 50 percent, 60 percent, it will be seen,” Neofytou said during the debate in parliament.

http://www.zerohedge.com/news/2013-...ed-will-down-wire-70-deposit-tax-contemplated
 

swissaustrian

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Another aspect of the story: capital controls are generally prohibited by the EU rules on the common market. They can only be implemented in times of emergency. In this case, the ECB has to agree to them (which they already have). However, even under these conditions, they may only be implemented for 6 months. This means that by October, any capital controls are illegal.
 

swissaustrian

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It's all over German news sources, but only PressTV (Iranian mouthpiece) and a Nigerian website are reporting it in English right now:

Head of Orthodox Church in Cyprus favors leaving eurozone

The head of the powerful Orthodox Church in Cyprus says he prefers the debt-stricken nation to leave the euro as Nicosia is striving to avoid bankruptcy.

“The euro cannot last,” said Archbishop Chrysostomos II in an interview with the Greek daily Realnews published on Saturday.

I'm not saying that it will crumble tomorrow, but with the brains that they have in Brussels, it is certain that it will not last in the long term, and the best is to think about how to escape it,” he said.

Chrysostomos’ remarks come as Cyprus is scrambling to raise 5.8 billion euros (7.5 billion US dollars) to qualify for a bailout loan from the troika of international creditors in an effort to rescue the country from a financial breakdown.

According to a source from the European Union, the bloc is prepared to eject Cyprus from the eurozone in case Nicosia fails to reach an agreement with its international lenders.

Chrysostomos further said, “It's not easy, but we should devote to this [quitting the euro] as much time as was spent on entering the eurozone.”

The Orthodox Church is the largest landowner in Cyprus and has stakes in a wide range of businesses, including in the country's Hellenic Bank, with total assets estimated to run into tens of millions of euros.

Chrysostomos offered Cypriot President Nicos Anastasiades to mortgage the church's large assets to get Cyprus out of its financial hole on March 20.

On Friday, the Cypriots staged a protest in front of the parliament to call for a solution to the financial crisis as law makers were holding an emergency session to debate rescue measures hammered out by the government to secure the urgently-needed bailout loan.

“People don't know if they will have money tomorrow or the day after. We'll try to live with what we have got now and we'll see what happens next,” said Yiorgos Andoniou, a jobless citizen.
http://www.presstv.ir/detail/2013/03/23/294906/cyprus-mighty-church-favors-leaving-euro/
 
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