Cyprus would seek EU bailout money 'if necessary

[lord_vader]

do u think they are rubbing their hands with glee? , who has that on their signature?

[Vaert]

As Erik Nielsen of UniCredit argues, depositors in Cyprus have benefited from higher rates of interest than elsewhere in the eurozone:
“A Cypriot (or foreigner) who placed €100,000 in deposit in Cyprus in 2008 would by now have earned just around €15,000 more than if he had placed that money in Italy or Spain (and some €23,000 more than if he had placed it in Germany). Why does the Cypriot parliament (and many commentators) seem to suggest that a 15 per cent tax on such deposits (which would cover the bill also for the sub-€100,000 deposits) would be unreasonable now the banks are in trouble, but that German, Italian and other eurozone taxpayers should rather foot the bill? To me, the Cypriot position is simply unsellable in the rest of the eurozone.”

https://www.ft.com/cms/s/0/aebf3e16-913b-11e2-b4c9-00144feabdc0.htmlSimilar piece in Bloomberg: bloomberg.com/news/2013-03-1 … -2008.html

But borrowing rates have been far higher too. Which cost the same “man on the street” money.

Anyway, latest rumour is a bad bank that all uninsured deposits (i.e. >€100k) go into and take a 40% haircut.

So €1MM on deposit last week will now be … €640k … .

They’re completely finished as a financial centre now however they cut it. Totally annihilated.

If true will they still need to recapitalize their banks?

[Carrot_and_stick]

As expected the Germans ramped up the pressure on the Cypriots. The pressure must be telling at this stage. I can’t see any deposits under 100k being touched in plan B. Its all a bit academic as the bailout will be insufficient and the economy will be a wasteland by the next bailout. This episode will knock at least 20% of GDP.

[Daniel_Plainview]

do u think they are rubbing their hands with glee? , who has that on their signature?

Interestingly I think some people are looking at Switzerland now … and the size of UBS and CS. Combined I think they’re about fifteen times the size of Swiss GDP… So that Swiss deposit account now looks a little bit less safe than it did two weeks ago!

[BoyRacer]

Plan C for Cyprus - -> namawinelake.wordpress.com/2013/ … or-cyprus/

So what will Plan B for Cyprus be? Politicians are amongst the last people to face reality, so you can expect the Plan B – cobbled together under the oversight of the Cypriot president which is right now being presented to parliamentarians – to include temporary expropriation of private pension funds, a deposit levy on deposits over €100,000 and perhaps a loan from the Russians secured on the Cypriot gas fields. It won’t be enough to save the Cypriot banking system – the genie has been let out of the bottle: Cypriot politicians backed by the EuroZone of France and Germany have accepted as feasible expropriating deposits. Not until there is a new Cypriot pound and an independent central bank in Cyprus, will confidence return

there is more

[BoyRacer]

Turkey may challenge Cypriot use of gas reserves in bailout - -> reuters.com/article/2013/03/ … AI20130321

(Reuters) - Turkey could challenge any move by Cyprus to speed up offshore natural gas exploration as a way of attracting desperately needed investment to save its teetering economy, senior Turkish officials said on Thursday.
The European Union has given the island until Monday to raise the billions of euros it needs to clinch an international bailout or face the collapse of its financial system and likely exit from the euro currency zone.

there is more

Could gas save Cyprus? If only it were so simple - -> economist.com/news/finance-a … le-hot-air

https://media.economist.com/sites/default/files/imagecache/290-width/images/print-edition/20130323_FNM909.png

Bringing the gas to market is likely to be difficult. A pipeline to Turkey, which is desperate for more gas, is out of the question. One to distant Greece to connect with Europe’s gas network would be fearsomely expensive. Cyprus doesn’t have enough gas (or cash) to justify building a liquefied natural gas (LNG) plant, which would cost $20 billion or so. Israeli gas from the same offshore basin could be landed on Cyprus for liquefaction. A lack of security and space make building an export terminal in Israel itself unlikely, but hardliners there seem to be winning the argument that the country should keep its gas for domestic consumption. Such doubts lead Morgan Stanley to give a wide estimate of what Cyprus’s gas is worth: anywhere between €5 billion ($6.5 billion) and €32 billion.

there is more

[Blindjustice]

rte.ie/news/2013/0322/377848-cyprus-bailout/

Meanwhile, former Cypriot finance minister Marios Mavrides said if a bailout package was not secured by Monday, he was afraid the country would go back to printing the Cypriot pound.

Speaking on RTÉ’s Late Debate last night, Mr Mavrides, said going back to the Cypriot pound would lead to deflation and a lowering of living standards.

He also said he thought the Cypriot Central Bank would have considered the move by now.

[Open_Window]

https://www.rte.ie/news/2013/0322/377848-cyprus-bailout/

Meanwhile, former Cypriot finance minister Marios Mavrides said if a bailout package was not secured by Monday, he was afraid the country would go back to printing the Cypriot pound.

Speaking on RTÉ’s Late Debate last night, Mr Mavrides, said going back to the Cypriot pound would lead to deflation and a lowering of living standards.

He also said he thought the Cypriot Central Bank would have considered the move by now.

Since they only joined in 2008 they probably didn’t decommission all the printing gear. There was an article maybe linked to here from about two years ago the angle being the Bank of england was concerned at the rise in orders for Currency grade printing presses by other central banks.

If they do resort to their own currency next week I wish the people of Cyprus all the luck and providence in the world.

[everybody_knows]

https://www.rte.ie/news/2013/0322/377848-cyprus-bailout/

Meanwhile, former Cypriot finance minister Marios Mavrides said if a bailout package was not secured by Monday, he was afraid the country would go back to printing the Cypriot pound.

Speaking on RTÉ’s Late Debate last night, Mr Mavrides, said going back to the Cypriot pound would lead to deflation and a lowering of living standards.

He also said he thought the Cypriot Central Bank would have considered the move by now.

Since they only joined in 2008 they probably didn’t decommission all the printing gear. There was an article maybe linked to here from about two years ago the angle being the Bank of england was concerned at the rise in orders for Currency grade printing presses by other central banks.

If they do resort to their own currency next week I wish the people of Cyprus all the luck and providence in the world.

There really is no such thing as a ’ currency grade printing press ’ currency can be printed on any large format printing press . Cyprus could print up a new currency in a couple of days .

[Open_Window]

Shhhh…

Currency Grade / Class / Large format… ya knew what I meant!

Industry standard machines that not too many people order… we’re not talking about your average desktop inkjet . Commercial customers, industry … There would have bee a rise in the ordering of supplies.

There is a pin user who knew someone who worked in I think it was a London ro UK based supplier of currency printing materials and said there was a spike in supplies ordered form Ireland round the time they where panicked into making a contingency plan for exiting the euro down central bank way. So there is more than simple printing press required. Though I imagine you could fire out what you needed and then upgrade some time later the quality of the notes issued with said security features. Course most of this money is electronic.

[jacobmarley]

The Guardian’s Liveblog has details on some of the capital controls included in the bill to be voted on today:

We now have details of the ‘capital controls’ which Cyprus intends to vote into law (sometime) today, thanks to star blogger @YiannisMouzakis:

It’s a remarkable set of restrictions on the usual nuts and bolts of the financial system - particularly given the final point:

•Restrictions in daily withdrawals
•Ban on premature termination of time savings deposits
•Compulsory renewal of all time savings deposits upon maturity
•Conversion of current accounts to time deposits
•Ban or restrictions on non cash transactions
•Restrictions on use of debit, credit or prepaid debit cards
•Ban or restriction on cashing in checks
•Restrictions on domestic interbank transfers or transfers within the same bank
•Restrictions on the interactions/transactions of the public with credit institutions
•Restrictions on movements of capital, payments, transfers
•Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safetyThe full bill is online here (in Greek)

guardian.co.uk/business/2013 … ussia-vote

[Open_Window]

Tell me when the waters break!

[Carrot_and_stick]

https://www.rte.ie/news/2013/0322/377848-cyprus-bailout/

Meanwhile, former Cypriot finance minister Marios Mavrides said if a bailout package was not secured by Monday, he was afraid the country would go back to printing the Cypriot pound.

Speaking on RTÉ’s Late Debate last night, Mr Mavrides, said going back to the Cypriot pound would lead to deflation and a lowering of living standards.

He also said he thought the Cypriot Central Bank would have considered the move by now.

Since they only joined in 2008 they probably didn’t decommission all the printing gear. There was an article maybe linked to here from about two years ago the angle being the Bank of england was concerned at the rise in orders for Currency grade printing presses by other central banks.

If they do resort to their own currency next week I wish the people of Cyprus all the luck and providence in the world.

There really is no such thing as a ’ currency grade printing press ’ currency can be printed on any large format printing press . Cyprus could print up a new currency in a couple of days .

Cyprus doesnt even print its own euros. It gets the Dutch to do it.

[Open_Window]

Uh oh…

[Tyler]

"The general principle about free movement of capital is defined in Art. 63 TFEU. This Article stipulates that “…all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.”

Surely all a person has to do is open a bank account in a country outside Cyprus and transfer their money out

IF not then the founding tenet of the EU - free movement of capital is now gone and EU legitimacy is gone too.

[yoganmahew]

"The general principle about free movement of capital is defined in Art. 63 TFEU. This Article stipulates that “…all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.”

Surely all a person has to do is open a bank account in a country outside Cyprus and transfer their money out

IF not then the founding tenet of the EU - free movement of capital is now gone and EU legitimacy is gone too.

Well, yeah, but what I don’t understand was that it was obvious that capital controls would have to be introduced with haircutting all depositors in the banking system (instead of just those in the failing banks). Surely if it was obvious to a troll in a cave in Tullamore, it would be obvious to the ECB, the Commission, the FinMins and all their assorted highly paid lackeys?

[Tyler]

In many ways similar to wind up of Anglo here governments and regulatory authorities and now the EU adopt a “needs must approach” to law - effectively there is no law where it is an inconvenience to the powers that be and they can suspend it or set it aside completely

consequences of that are quite frightening

[yoganmahew]

In many ways similar to wind up of Anglo here governments and regulatory authorities and now the EU adopt a “needs must approach” to law - effectively there is no law where it is an inconvenience to the powers that be and they can suspend it or set it aside completely

consequences of that are quite frightening

No, a similar thing here would be that depositors in all banks and credit unions took a haircut when Anglo was wound up. It is not just the setting aside of law; it is the setting aside of, eh, natural law if you like and all common sense. That is what is scary.

[macannrb]

"The general principle about free movement of capital is defined in Art. 63 TFEU. This Article stipulates that “…all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.”

Surely all a person has to do is open a bank account in a country outside Cyprus and transfer their money out

IF not then the founding tenet of the EU - free movement of capital is now gone and EU legitimacy is gone too.

Well, yeah, but what I don’t understand was that it was obvious that capital controls would have to be introduced with haircutting all depositors in the banking system (instead of just those in the failing banks). Surely if it was obvious to a troll in a cave in Tullamore, it would be obvious to the ECB, the Commission, the FinMins and all their assorted highly paid lackeys?

Is it really member state capital controls, if a bank decides that it can’t meet the obligation of its withdrawals, and stops outgoing payments? Like I get that member states can’t impose capital controls, but is Cypress really imposing this? Surely its the banks themselves no? Admittedly with the help of Government, but they are stopping outgoing payments to anywhere, not just other member states. Edit - isn’t the problem that there isn’t anything to control?

Although there’s an interesting Der Spiegel article which mentions this

According to the report, the ECB also wants to regulate capital flows even if Cyprus comes to an agreement with the troika over the terms of a bailout early next week. “The is a great danger there will be a run on the banks when they reopen next week,” an ECB source told the newspaper. The paper said the ECB plans to implement the controls in a way that will ensure that all citizens of Cyprus are given access to the money they need to live and that payments of pensions and other social services will continue.

Handelsblatt notes that the Lisbon Treaty governing the EU includes provisions allowing limits on the free flow of capital across the bloc. Limits in the interest of “public security” are permitted, it notes, and a country doesn’t even require permission from Brussels to implement them.

spiegel.de/international/eur … 90394.html

The same article also has a quote from Merkel, which is at odds to what we were allowed do with our pension reserve fund.

For her part, Merkel opposes any plan that would tap Cypriot pension funds in order to fix the country’s banking problems. Participants in the meeting quoted Merkel as saying that EU social principles could not be abandoned.

[tulip]

In many ways similar to wind up of Anglo here governments and regulatory authorities and now the EU adopt a “needs must approach” to law - effectively there is no law where it is an inconvenience to the powers that be and they can suspend it or set it aside completely

consequences of that are quite frightening

No, a similar thing here would be that depositors in all banks and credit unions took a haircut when Anglo was wound up. It is not just the setting aside of law; it is the setting aside of, eh, natural law if you like and all common sense. That is what is scary.

All those Civics lessons aren’t worth a flyin’ fiddlers now or maybe this is the new civics lesson of the Euro

I was re-reading the Automatics Earth 40 ways to lose your future last night it’s all starting to look rather prescient. When I read it initially a few years ago I dismissed it as doomer porn but now …

Stoneleigh: People have been asking how we see the future unfold. In case you wonder what we stand for, much of our view of what's to come can be found in the primers on the right-hand side bar. Here is an additional brief summary (in no particular order and not meant to be exhaustive) of the ground we have consistently covered here at TAE over the last year and a half, and before that elsewhere.

1. Deflation is inevitable due to Ponzi dynamics (see From the Top of the Great Pyramid)
2. The collapse of credit will crash the money supply as credit is the vast majority of the effective money supply
3. **Cash will be king for a long time**
4. Printing one's way out of deflation is impossible as printing cannot keep pace with credit destruction (the net effect is contraction)
5. Debt will become a millstone around people's necks and bankruptcy will no longer be possible at some point
6. In the future the consequences of unpayable debt could include indentured servitude, debtor's prison or being drummed into the military
7. **Early withdrawls from pension plans will be prevented and almost all pension plans will eventually default**
8. **We will see a systemic banking crisis that will result in bank runs and the loss of savings**
9. Prices will fall across the board as purchasing power collapses
10. Real estate prices are likely to fall by at least 90% on average (with local variation)
11. The essentials will see relative price support as a much larger percentage of a much smaller money supply chases them
12. **We are headed eventually for a bond market dislocation where nominal interest rates will shoot up into the double digits**
13. Real interest rates will be even higher (the nominal rate minus negative inflation)
14. This will cause a tsunami of debt default which is highly deflationary
15. **Government spending (all levels) will be slashed, with loss of entitlements and inability to maintain infrastructure**
16. **Finance rules will be changed at will and changes applied retroactively (eg short selling will be banned, loans will be called in at some point)**
17. Centralized services (water, electricity, gas, education, garbage pick-up, snow-removal etc) will become unreliable and of much lower quality, or may be eliminated entirely
18. Suburbia is a trap due to its dependence on these services and cheap energy for transport
19. People with essentially no purchasing power will be living in a pay-as-you-go world
20. Modern healthcare will be largely unavailable and informal care will generally be very basic
21. Universities will go out of business as no one will be able to afford to attend
22. **Cash hoarding will continue to reduce the velocity of money, amplifying the effect of deflation**
23. The US dollar will continue to rise for quite a while on a flight to safety and as dollar-denominated debt deflates
24. Eventually the dollar will collapse, but that time is not now (and a falling dollar does not mean an expanding money supply, ie inflation)
25. Deflation and depression are mutually reinforcing in a positive feedback spiral, so both are likely to be protracted
26. There should be no lasting market bottom until at least the middle of the next decade, and even then the depression won't be over
27. Much capital will be revealed as having been converted to waste during the cheap energy/cheap credit years
28. Export markets will collapse with global trade and exporting countries will be hit very hard
29. Herding behaviour is the foundation of markets
30. The flip side of the manic optimism we saw in the bubble years will be persistent pessimism, risk aversion, anger, scapegoating, recrimination, violence and the election of dangerous populist extremists
31. **A sense of common humanity will be lost as foreigners and those who are different are demonized**
32. There will be war in the labour markets as unempoyment skyrockets and wages and benefits are slashed
33. We are headed for resource wars, which will result in much resource and infrastructure destruction
34. Energy prices are first affected by demand collapse, then supply collapse, so that prices first fall and then rise enormously
35. Ordinary people are unlikely to be able to afford oil products AT ALL within 5 years
36. Hard limits to capital and energy will greatly reduce socioeconomic complexity (see Tainter)
37. Political structures exist to concentrate wealth at the centre at the expense of the periphery, and this happens at all scales simultaneously
38. **Taxation will rise substantially as the domestic population is squeezed in order for the elite to partially make up for the loss of the ability to pick the pockets of the whole world through globalization**
39. Repressive political structures will arise, with much greater use of police state methods and a drastic reduction of freedom
40. The rule of law will replaced by the politics of the personal and an economy of favours (ie endemic corruption)