Crunch time in Cyprus

posted at 7:01 pm on March 23, 2013 by Erika Johnsen

Cyprus has until Monday to figure out a way to raise the $5.8 billion they’ll need in exchange for the $10 billion bailout package the EU and IMF has put on the table to save their flailing banks and guard against a sudden exit from the eurozone — and although the legislature rejected the idea of imposing a one-off ‘tax’ on deposits earlier this week because of the vociferous public outcry, the bottom fell out of their Russian Plan B and they’re getting seriously desperate. Via Reuters:

Cyprus said on Saturday it would tax big savers at its largest bank in a dramatic U-turn as it raced to satisfy European partners and seal an 11th-hour bailout deal to avert financial collapse. …

His counterparts in Europe’s 17-nation currency union scheduled talks in Brussels for Sunday evening to see if the numbers add up, taking the crisis down to the wire. …

Government officials held talks through the day at the finance ministry with Cyprus’s ‘troika’ of lenders – the EU, ECB and IMF. Angry demonstrators outside chanted “resign, resign!” …

Rebuffed by the Kremlin, Sarris said on Saturday talks with the troika were centered on a possibly levy of around 25 percent on savings over and above 100,000 euros at failing No. 1 lender Bank of Cyprus. …

Racing to placate its European partners, Cypriot lawmakers voted in late-night session on Friday to nationalize state pensions and split failing lenders into good and bad banks – a measure likely to be applied to No.2 lender Cyprus Popular Bank, also known as Laiki.

Oof. Germany probably isn’t going to go for that nationalizing-pensions plan, and I’d wager that Cypriots probably have something to say about it, too. That’s the pesky thing about debt crises, though: They reliably do not end well, for anybody. They’re going to have to pay for this somehow, and one way or another, it’s going to hurt. Take heed, planet Earth.


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Before this ends, the Germans will be insisting that Cyprus be sold to the Turks to pay Cyprus’ debts.

Realist on March 23, 2013 at 7:04 PM

Our American Democrats are watching this closely, paying heed to how the Euros screw this up. Later, sure and certain they can do it better, the Dems and RINOs will be proposing a plan to do the same to us.

Count on it.

Liam on March 23, 2013 at 7:07 PM

This shit ain’t good. Pardon the rough talk but never doubt that dems have their stink eye on savings here.

Oh and I liked the 25% figure—-sweet.

arnold ziffel on March 23, 2013 at 7:07 PM

Count on it.

Liam on March 23, 2013 at 7:07 PM

Hopefully people will get informed but I kind of doubt it.

arnold ziffel on March 23, 2013 at 7:09 PM

This shit ain’t good. Pardon the rough talk but never doubt that dems have their stink eye on savings here.

Oh and I liked the 25% figure—-sweet.

arnold ziffel on March 23, 2013 at 7:07 PM

Talk in the think tanks for years has been about how Washington can and should take over ‘management’ of all retirement and pension plans.

Liam on March 23, 2013 at 7:10 PM

Cyprus has until Monday to figure out a way to raise the $5.8 billion they’ll need in exchange for the $10 billion bailout package

Steal..

That’s the answer all good libs have..

Tax the rich, don’t touch my benefits..

Electrongod on March 23, 2013 at 7:12 PM

Hopefully people will get informed but I kind of doubt it.

arnold ziffel on March 23, 2013 at 7:09 PM

They’ll never believe it can happen until it happens. Then, they’ll say it’s maybe not a bad idea. Government ‘guarantees’ 3% growth, which many will think is better than letting the free market run increase between that and better.

A fool and his money are soon parted.

Liam on March 23, 2013 at 7:13 PM

Cyprus has until Monday to figure out a way to raise the $5.8 billion they’ll need in exchange for the $10 billion bailout package

If only they were Jordan..
They would be 200 mil closer..

Thanks Obama…

Electrongod on March 23, 2013 at 7:16 PM

A mere $5.8 billion? Have they asked Obama for it? The Fed can print that up in a few minutes … problem solved. Next!

/Democrat voter

ShainS on March 23, 2013 at 7:16 PM

I don’t feel sorry for the Cypriots at all. My concern is that Obama and his other Democrats are going to try the same thing here.

Liam on March 23, 2013 at 7:23 PM

Hey, I know! Government can get some extra cash by raiding Christmas Club accounts!

Liam on March 23, 2013 at 7:24 PM

there’s much to be learned from this.

1. collectivization has a long history, and is still with us. It is irresistible to many power centers

2. You can not collectivize everything all at once. Farm collectivization was an easy matter…few farmers/owners, many peasants. the euros made the mistake of 6.75 percent on deposits less than 100K

3. To be successful, start by nationalizing rich people’s money/property and work your way down. Progressivity is important in collectivization efforts (i know, ha, ha)

4. Time is your friend. Deadlines are your friend. Crises are your friend

5. The EU is being highly criticized…but i’m not so sure. A good negotiator starts BIG, then ‘settles’ for less. They started BIG…everyone gets big haircut. If there’s a settlement where ‘the little people’ get a small haircut, most people will be happy to have escaped the wrath and the damage done to the big guys. Pols will be heroes…it could have been worse

r keller on March 23, 2013 at 7:37 PM

Our American Democrats are watching this closely…

Liam on March 23, 2013 at 7:07 PM

Yep, and of course they arrive with ideas of their own.

They are looking to Cyprus and the Euros to shift the Overton Window on the USA. Your money is not your own. It belongs to the collective.

Already IMF, largely taxpayer-funded, is going for Euro bailouts. Obama will press for more, in an effort to save his beloved socialism, at the expense of those who depend on the purchasing power of US dollars. Hardest hit: The poor, the savers, and the seniors on fixed incomes.

petefrt on March 23, 2013 at 8:37 PM

By this point, every depositor in a Cypriot bank with more than two drachma (rubles, francs, whatever) to rub together has moved their accounts elsewhere. The banks may have closed their front desks to keep the “nickel accounts” from being run, but with the nature of international finance being what it is with EFT (24/7/365 and fully automated), the high rollers have already transferred most of their funds not just out of Cyprus, but out of the EU’s reach.

Best guess is that they are doing it through the MITI currency exchange in Tokyo, with destination accounts in places that not only are out of EU jurisdiction, but probably don’t like the EU on principle. Examples include the Seychelles, South Africa, and about half of Latin America, to say nothing of the Far East.

It wouldn’t surprise me a bit to see that when the EU’s chosen “tax assessors” open up some of these accounts sometime in the next week to ten days, they find exactly enough in each one to keep it open, say about $5 or so. And all links to where the money was transferred to deleted by hackers in the pay of the account holders.

The EU don’t seem to “get” that they are playing games with people who define “playing hardball” as using a 9×18 Makarov loaded with full-metal-jacket ammo. Literally.

clear ether

eon

eon on March 23, 2013 at 8:48 PM

DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!! DIE!!!

williamg on March 23, 2013 at 9:06 PM

This kinda reminds me of the weekend just before Katrina hit N.O. Everyone was looking at the storm track and saying “hmmmm, this looks kinda bad” while they did nothing. And I (and a whole lot of other people) were saying “WTF? A hurricane is fixing to give a dead center hit to a major city, and everyone’s just standing around like there’s no reason to worry?”

Not too long from now and whenever people look back at this, they’re going to wonder “how could they just all stand around and let the collapse happen like it was nothing?”

Cyprus doesn’t seem big – but it’s the Jenga block at the bottom that starts all the other blocks falling once it’s gone.

Tom Servo on March 23, 2013 at 9:26 PM

It wouldn’t surprise me a bit to see that when the EU’s chosen “tax assessors” open up some of these accounts sometime in the next week to ten days, they find exactly enough in each one to keep it open, say about $5 or so. And all links to where the money was transferred to deleted by hackers in the pay of the account holders.

The EU don’t seem to “get” that they are playing games with people who define “playing hardball” as using a 9×18 Makarov loaded with full-metal-jacket ammo. Literally.

eon on March 23, 2013 at 8:48 PM

When you have two wars in the last century alone on one continent that affect basically the entire planet and literally hundreds of lesser wars before them…the idea of said continent joining hands around the campfire without anyone in charge is just ludicrous.

IIRC, my very first thought about the EU was “What? Did Germany beat everybody this time and I nobody here was talking about it?”

MelonCollie on March 23, 2013 at 9:26 PM

Our American Democrats are watching this closely, paying heed to how the Euros screw this up. Later, sure and certain they can do it better, the Dems and RINOs will be proposing a plan to do the same to us.

Count on it.

Liam on March 23, 2013 at 7:07 PM

Bingo. And right up until it happens to us our LIVs will be singing, “It Can’t Happen Here”.

ghostwalker1 on March 23, 2013 at 9:49 PM

Talk in the think tanks for years has been about how Washington can and should take over ‘management’ of all retirement and pension plans.

Liam on March 23, 2013 at 7:10 PM

…oh yes!…their track record for return on the dollar is totally terrific!

KOOLAID2 on March 23, 2013 at 9:55 PM

Why isn’t anyone talking about the liberal ideology of the Left that caused this and our own economic crisis…?

… Until we properly assign blame, and mark those responsible and hold them accountable, including the “press” that enables them, this sh%t will continue over and over and over again until the whole world economy collapses.

Then we will find out why the DHS purchased 1.6 BILLION bullets…

Seven Percent Solution on March 23, 2013 at 10:00 PM

Cyprus has until Monday to figure out a way to raise the $5.8 billion they’ll need in exchange for the $10 billion bailout package the EU and IMF has put on the table to save their flailing banks and guard against a sudden exit from the eurozone

That’s going to be one heck of a bake sale.

Happy Nomad on March 23, 2013 at 10:12 PM

Why isn’t anyone talking about the liberal ideology of the Left that caused this and our own economic crisis…?

… Until we properly assign blame, and mark those responsible and hold them accountable, including the “press” that enables them, this sh%t will continue over and over and over again until the whole world economy collapses.

Then we will find out why the DHS purchased 1.6 BILLION bullets…

Seven Percent Solution on March 23, 2013 at 10:00 PM

Probably because Ayn Rand covered it all pretty thoroughly 56 years ago, in Atlas Shrugged. Look under “looters”.

Like the looters in the book, this bunch does not believe that the economy can fail. As the professor in the book told Hank Rearden when asked how he was supposed to produce steel without anything to work with,

You will produce. It’s a conditioned reflex. You can’t help yourself.

People who think banks and car companies are “too big to fail” aren’t about to believe that the cash cows they’ve been milking for their entire lives are going to dry up just because of an irrelevant detail like… not enough fodder.

As for the ammo, as Al Capone said,


You can get more with a smile, and a gun, than you can get with just a smile.

The present bunch of “Snorkys” is operating on the principle defined by Otto Harkaman in Space Viking by H. Beam Piper. Regarding the mess Boake Valkanhayn and Garvan Spasso had made on Tanith by terrorizing the locals when they failed to produce enough goods to suit the two chicken-thieves, Harkaman (an amateur historian) said

That’s the stuff. If the cow doesn’t want to be milked, just shoot her. Of course, you don’t get much milk out of her again, but…

These people are not capable of relating cause and effect even to that degree. On that count, they make Spasso and Valkahayn look like Adam Smith and Milton Friedman.

BTW, Space Viking is as much a political and economic text as it is an SF novel. You might like it, and it’s free;

http://www.gutenberg.org/files/20728/20728-h/20728-h.htm

clear ether

eon

eon on March 23, 2013 at 11:12 PM

there’s much to be learned from this.

1. collectivization has a long history, and is still with us. It is irresistible to many power centers

2. You can not collectivize everything all at once. Farm collectivization was an easy matter…few farmers/owners, many peasants. the euros made the mistake of 6.75 percent on deposits less than 100K

3. To be successful, start by nationalizing rich people’s money/property and work your way down. Progressivity is important in collectivization efforts (i know, ha, ha)

4. Time is your friend. Deadlines are your friend. Crises are your friend

5. The EU is being highly criticized…but i’m not so sure. A good negotiator starts BIG, then ‘settles’ for less. They started BIG…everyone gets big haircut. If there’s a settlement where ‘the little people’ get a small haircut, most people will be happy to have escaped the wrath and the damage done to the big guys. Pols will be heroes…it could have been worse

r keller on March 23, 2013 at 7:37 PM

Yes. There is MUCH to be learned. But you missed all of it.

WryTrvllr on March 23, 2013 at 11:22 PM

Only Jesus can save the eurozone: Deutsche Bank

Deutsche Bank‘s global head of FX strategy, Bilal Hafeez, recently gave a speech at the annual Deutsche Bank Mittelstand (small and medium-sized enterprises) FX conference in Hamburg, Germany.

The bank’s research department transcribed Hafeez’s speech and sent it out to clients in a note.

The speech focuses on the euro area’s economic woes and the need for the currency bloc to move forward with further integration in order to be economically successful.

Hafeez opens the speech with a reflection on parenting and a child’s years as a “terrible teen.”

Then, he makes an interesting comparison to the euro area, complete with a religious allegory.

Speakup on March 24, 2013 at 12:44 AM

Socialism’s end:

Wwwait! There’s some money! Grab it!!!!

AshleyTKing on March 24, 2013 at 2:33 AM

A one time haircut is not going to resolve this mess and they are not going to be able to dip at this well twice. There WILL be a run on the banks and there is going to be a lot of money stuffed under mattresses over there.

karenhasfreedom on March 24, 2013 at 4:24 AM

Cyprus has until Monday to figure out a way to raise the $5.8 billion they’ll need

All I could think of with that first line is every mobster movie I’ve ever seen. “You got ’till Monday, Joey. If you don’t have my money then… well, Bruno will have to break your kneecaps.”

GWB on March 24, 2013 at 7:30 AM

OK, I’ll take a shot at this. The Cypriots have for decades elected politicians with one thought, spreading around the money to keep getting elected and keep the have nots thinking they are getting something free. The unions get their members to vote the way they want to keep getting their favors. The EU was sold to the member countries and people as a way to be as big as the US. It was also a step toward a one world currency. Our politicians do the same things and have been ruining our currency since removing it from the gold standard. Until people realize that they are the problem when they keep voting in the same crooks every election who do not have their best interests at heart, we’ll continue down this wide road. Unfortunately, the kids coming along now will take too long to get smart about this. We’re all toast.

Kissmygrits on March 24, 2013 at 9:08 AM

If you have a 401(k), liquidate that 401(k) and put the money into something real and solid, like a little duplex you can rent out or a small multi-use building with a storefront downstairs and a couple of apartments upstairs. They will be coming for your 401(k).

And stop listening to people who say, “What about the tax penalty?” Politicians are counting on you to believe their promises about that, right up till they take ALL your money. Take your 30% haircut now or take your 100% haircut later, when you have less time to recover and less time to earn it back.

Zero times anything is always zero. Take your money out NOW.

JoseQuinones on March 24, 2013 at 11:25 AM

When this bit of government greed began there was between 60-80 Billion Euro’s in those banks. I would bet within 2 weeks of the banks opening there will not be 10% of that money there.

What sort of an idiot would keep money in a bank that gives no interest and is subject to government thieving?

JIMV on March 24, 2013 at 12:14 PM

An awful lot of the money on deposit in Cyprus is Russian mob money. So they’re essentially robbing a bunch of robbers. So much for honor among thieves.

MJBrutus on March 24, 2013 at 1:44 PM