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

pmbug

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pmbug

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Cyprus' capital controls illegal?
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In spite of the fact the Maastricht Treaty under which the eurozone was formed mandates a free flow of capital, Cyprus unveils severe capital controls.
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But What about those advertised losses of 30% on large Cyprus depositors?

Glad you asked. "Laiki depositors holding more than €100,000 may lose up to 80 per cent of their funds, and only get the remaining 20 per cent back over a period of years, Cyprus’s finance minister said on Tuesday."
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http://globaleconomicanalysis.blogspot.com/2013/03/you-have-to-destroy-maastricht-treaty.html
 

pmbug

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When the world's leading expert on Sovereign debt restructurings believes that the endgame for Cyprus might be another round of restructuring, adding that "I'm not sure this is over," it is important to listen. With the calmness in Cyprus today more reflective of paralysis than confidence, Lee Buchheit senses that the parameters of how much money will be needed to recapitalize the banks have changed. He tells Bloomberg TV's Lee Pacchia in this brief clip, "the situation is spiraling down... they'll need more money because the economy is worse, tax collections less, deposits will flow out when they can flow out." As for which European nation will be next in need of assistance with its sovereign debt burdens? Buchheit agrees with us that while many are looking to Slovenia, he sees real economic and political problems in both Italy and Spain remaining especially since the EU "have certainly changed the rules of the game."
Video: http://www.zerohedge.com/news/2013-03-28/buchheit-cyprus-situation-spiralling-down

So, Medvedev was right?

Also, it appears that Cypriot banks had record outflows all through January and February before this confiscation deal penetrated the news media here in the USA. Comment in ZH discussion shows British media were warning about it in February:

http://www.zerohedge.com/news/2013-...tflows-soared-three-year-high#comment-3384807

I have to think that the simple math from ThompsonReuters' calculator may have been very optimistic on how much money Cypriot banks had when the original deal was being debated in Cyprus' parliament.
 

ancona

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PMBug,
The truth of it is that the whole thing is so fluid right now that they can never really know where exactly these banks stand. At this point, I suspect that the quantity of money coming in as deposits approaches zero, while the amounts being withdrawn are shooting skyward. I further suspect that ALL monies above the 100k threshold will be taken, but it remains to be seen. It's going to be a while before the smoke clears on this one.
 

mmerlinn

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So, Medvedev was right?

Also, it appears that Cypriot banks had record outflows all through January and February before this confiscation deal penetrated the news media here in the USA.
What I see here is a deal behind the curtains between Russia and Germany. Germany wants control of Cyprus, just as she wanted and got control of the Balkans and Greece. However, with Cyprus there was a minor problem - Russia.

Germany cannot hit Russia headon because Russia controls Germany via the Baltic pipeline. So, it appears that with major Russian money in Cyprus, the only option was for a new Molotov-Ribbentrop agreement between the two. With the massive withdrawal of Russian funds from Cyprus, it sure appears that the two had an agreement beforehand. More confirmation is that Russia did NOTHING except put on a show when they could have and would have shut down the Baltic pipeline if Russian funds were really at risk just like they shut down the Ukrainian pipelines several years ago to squash Western leaning of Ukraine.

So, it appears to me that

1) Germany wanted control of Cyprus for whatever reason, probably because of its strategic value.
2) Russian money was a major obstacle.
3) So the two made a deal.
4) Russia backs out with little or no loss of either money or face.
5) Germany gets to tighten the screws with no backlash from a major player.
6) Russia may get access to a naval port on Cyprus to replace Russia's Syrian port presence in the Mediterranean.

If this is true, get prepared. This is the same kind of deal the two did immediately before both World Wars.
 

pmbug

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... Yiannakis Omirou, Cypriot House of Representatives President, ... today, as Cyprus' Famagusta reports, he believes the 'Troika-imposed' responsibility will, "turn Cyprus into a colony of the worst possible type." His 'Icelandic' solution is to "leave the Troika and EMS behind," to ensure "national independence, national sovereignty, moral integrity, and economic independence." He may have a point; judging from the chart below of the Troika's poster-child Greece, relative to Iceland, things are not going so well. As Omirou ominously concludes, "if we remain bound by the Troika and the memorandum Cyprus’ destiny is already foretold and there will be no future."
http://www.zerohedge.com/news/2013-...no-future-under-troika-calls-iceland-solution
 

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I been warning about this 18 months ago on RPF ( www.ronpaulforums.com/showthread.ph...old-to-kick-the-can-down-the-road-for-a-while ), now it's beginning. Governments are selling gold to kick the can down the road:
Here We Go: Cyprus To Sell €400 Million In Gold, About 75% Of Its Total Holdings, To Finance Part Of Its Bailout

Curious why every bank and their grandmother, and most recently Goldman today, has been lining up to push the price of gold as low as possible? Here's why:

CYPRUS TO SELL 400 MLN EUROS WORTH OF GOLD RESERVES TO FINANCE PART OF ITS BAILOUT - TROIKA DOCUMENTS - RTRS

Or about 10 tons of gold. But... the bailout was prefunded and there was no need to provide any additional cash? What happened: was the deposit outflow discovered to have been even greater than the worst case scenario and thus Cyprus needed even more cash? As for the buyers? We will venture a guess: central banks buying at the lows.

Finally: congratulations Cypriots. You are now handing over your gold for the one time, unbeatable opportunity to remain a vassal state to the Eurozone. But at least you have your €.

The good news: Cyprus will have at least another 4 or so tons after selling the 10 demanded now, before the Troika kindly requests that Cypriot citizens sell a kidney or two to pay for the ongoing deposit outflow from its insolvent banks, and indirectly, the endless bailout of the Euro.
http://www.zerohedge.com/news/2013-...ll-€400-million-gold-finance-part-its-bailout
 

pmbug

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AEP on the Cyprus gold grab:
First they purloin the savings and bank deposits in Laiki and the Bank of Cyprus, including the working funds of the University of Cyprus, and thousands of small firms hanging on by their fingertips.

Then they seize three quarters of the country’s gold reserves, making it ever harder for Cyprus to extricate itself from EMU at a later date.

The people of Cyprus first learned about this from a Reuters leak of the working documents for the Eurogroup meeting on Friday.

It is tucked away in clause 29. "Sale of excess gold reserves: The Cypriot authorities have committed to sell the excess amount of gold reserves owned by the Republic. This is estimated to generate one-off revenues to the state of €400m via an extraordinary payout of central bank profits."

This seemed to catch the central bank by surprise. Officials said they knew nothing about it. So who in fact made this decision?
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Cyprus may not be a “template” but it is clearly a warning to any other EMU country that needs help from now on. The creditor powers will go to extraordinary lengths to avoid sharing the costs.

We now learn that one of those lengths is to seize gold reserves. So what will happen as Portugal’s economy slides deeper into its contractionary vortex, and its deficits remain stubbornly stuck near 6pc of GDP despite the fiscal cuts, and its public debt hits 124pc of GDP this year?

Portugal holds 382 tonnes of gold, the 14th largest holding in the world, and more than either Britain or Spain. For the sake of delicacy, I will skip over the methods by which Salazar acquired that gold.

So will the Troika order Portugal to hand over these reserves if the country requires a second bail-out, as deemed likely by a great number of analysts in the City?
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Yet this escalating assault on bank savings and on the state assets of victim nations is gradually taking its toll. Throw gold into the mix and you touch an atavistic nerve. The Cypriot gold confiscation of April 2013 may matter more than first meets the eye.
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More: http://blogs.telegraph.co.uk/financ...dles-as-creditors-seize-cyprus-gold-reserves/
 

pmbug

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So we have a standoff yet again. Cypriot president Nicos Anastasiades says the country needs "extra assistance", and indeed it does since the extra demands on Cyprus are a further 28 percent of GDP.

If the eurozone refuses to offer any further help, there must surely be a greater temptation to withdraw from the euro and default on sovereign debt in a classic restructuring deal with the IMF.

That is what the IMF is there to do. Such restructurings have been done countless times across the world over the last 50 years. It is traumatic, but countries usually recover after a couple of years.

The crucial point for the Cypriot people is that the cost-benefit calculus is moving in that direction. Whether they have understood this is another matter. They may in due course as the ghastly reality of Troika policy hits them.

And just to clarify, the reason why the rescue costs are shooting up is because the Troika has finally recognised that its treatment of Cyprus is pushing the economy over a cliff. The depressionary spiral itself is causing the numbers to spike.

So Cyprus is very far from being solved, and so is Portugal. A fresh Troika leak, this time to the Pink Sheet, has confirmed what anybody following Portugal already suspected. The country is stuck in a debt-compound trap. The economic slump is proving much deeper than forecast. The deficit has been rising not falling, in spite of austerity cuts.
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http://blogs.telegraph.co.uk/financ...rom-bad-to-worse-by-the-day-so-does-portugal/

Anyone think Cyprus or Portugal will have any gold left after all is said and done?
 

mmerlinn

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http://blogs.telegraph.co.uk/financ...rom-bad-to-worse-by-the-day-so-does-portugal/

Anyone think Cyprus or Portugal will have any gold left after all is said and done?
If there are smart they will dump the Euro TODAY and bite the bullet while there is still a chance to remain a sovereign country. However, that won't happen. Why? Because if they were smart, they would have NEVER jettisoned their old currencies in favor of a currency (The Euro) that from its inception was DESIGNED TO LOOT THE TREASURIES of the weaker nations in the Euro world.

Where is this gold going? To Germany. They are financing the debt. Once the debt becomes impossible to repay, then they are demanding the gold as "collateral" for the debt knowing that the debtor cannot ever redeem that collateral.

Once the Euro has served its purpose (to LOOT the treasuries of Europe), the Euro will be abandoned and a new currency (a gold-backed Mark?) will be established by Germany and all of Europe will be forced to use it since no one else will have any gold to re-establish their own currencies. Until all of the treasuries of the Euro nations have been looted, Germany cannot re-establish a new "Mark" because of potential competition by other members of the Euro community.

Britain is not a member of this Euro community which means that Britain's treasury cannot be looted in this manner. It also means that sooner or later Britain must leave the EU because they will be the only other major EU nation besides Germany with gold to fund a currency, putting them at loggerheads with each other.
 

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Oops, possible game changer:
Cyprus parliament will have to vote on bailout deal

Full article (translation):

- The memorandum and the loan agreement will be submitted for approval and before the Cypriot Parliament, according to a letter from the Attorney General Petros Clerides to the President of the College Giannakis Homer.

- In the letter, the Attorney General shall attach the opinion according to which no power can not have any agreement that binds the Republic without first approved by the House of Representatives.
http://ransquawk.com/headlines/cyprus-parliament-will-have-to-vote-on-bailout-deal-16-04-2013
 

pmbug

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The market (and financial media) appear to ignore a lot of important stories.
 
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