Cyprus 'Bail-out'

[snapper]

For some time it has been known that Cyprus would need a bail-out. Now that the banks are safely closed until Tuesday (Monday is a holiday in Cyprus) they are being robbed. Electronic withdrawals are not being accepted.

So the deal is this: Cyprus get 10 billion euros of bail out money (for it's banks), the Cypriot Government raises corporation tax 2.5% (to 12.5%) to raise some money and those who have deposits in Cypriot banks get hit for 9.9% if you have savings above 100,000 euros 6.75% for those who have less than 100,000 euros. This is expected to raise 5.8bn euros. The IMF may contribute and 'Michael Sarris, the Cypriot finance minister, is due to fly to Moscow to negotiate an extension to an existing €2.5 billion loan from the Russian government.' Cypriot savers hit as eurozone agrees €10 billion bail-out - Telegraph

So there you go... if you've run a decent a prudent business in Cyprus and saved over 100,000 euros you are now 10% poorer - you have payed your bank a 'tithe' so that it can honour the other 90% of your savings.

One reaction to this, mentioned by Alberto Gallo (head of European macro credit research at Royal Bank of Scotland Group Plc) is that Cyprus is a 'special case' as it's bank assets of EU125b are over 7x the size of the economy (Cyprus "Uncharted Territory" Sets Sell-Side Scrambling | Zero Hedge). This is not the case!. In Germany the assets of banks are over 300% that of German GDP. The simple fact is that eurozone banks have not been 'restructured' (a technical word for bailed out) as the US and British banks (rightly or wrongly) were. Many of them are insolvent in real terms so tax payers and now depositors, as well as those who held bonds in the Greek case, are being forced to pay more taxes and take 'haircuts' to keep the banks solvent. Of course if the banks fail the euro distopia dies. We have seen that bankers can now be imposed on countries as Prime Ministers without any form of public vote. Now looks like your bank accounts aren't safe.

One reaction is this

Lars Seier Christensen, CEO Saxo Bank says:

"This is a breach of fundamental property rights, dictated to a small country by foreign powers and it must make every bank depositor in Europe shiver. Although the representatives at the bailout press conference tried to present this as a one-off, they were not willing to rule out similar measures elsewhere - not that it would have mattered much as the trust is gone anyway. It is now difficult to expect any kind of limitation to what measures the Troika and EU might take when the crisis really starts to bite." http://www.tradingfloor.com/posts/cy...ger-1728597128

[chakos]

My family is fucking fuming over this. A lot of Cypriots came to Australia as refugees and returned back to the home country once they retired and put their savings into Cypriot banks, they are now getting hit with a net loss of 10% and that really hurts when that money is all you have to live off and your past working age.

[snapper]

Well your parents, it seems, should consider themselves lucky! According to "Cyprus state broadcaster CyBC reported on Saturday that German Finance Minister actually entered the Eurogroup meeting on Friday proposing a 40 percent haircut on Cypriot bank accounts. Sarris stated on Saturday that this had also been the proposal of the International Monetary Fund." ekathimerini.com | Shock in Cyprus as bailout brings bank account haircut [update] It seems that account holders will be compensated with shares in the banks. This begs an interesting question... how much are the shares worth? A bankrupt bank forces it's depositors to bail it out for shares that without the enforced bailout would be worthless.

There is a fundamental breach of trust here about what is mine. From the time that we first start school when we are told to study hard and then start work and are told to save so that we can buy a house etc.. work harder and you can accumulate more is the fundamental assumption; what I earn is mine. I may have to pay some tax on that but I can vote out people who want to tax me too much etc... This assumption is now proved to be false. What is 'yours' is not really yours... You have no absolute right to it. Should some German Finance Minister decide so in Brussels 10%, 40%... maybe 100% of what you mistakenly believed be to 'yours' can cease to be so over night. You do not work for yourself any longer as the proceeds of your labour can be taken from you when it is deemed 'necessary' by people you never elected and cannot 'unelect'. You are no longer a sovereign individual with rights; you and the fruits of your labour, your money, are assets of the EU banks. Of course the real question is; if you can be robbed by banks and state over night for 10% or any arbitrary percentage of your wealth, why bother working harder to accumulate more? If your bank or the controllers of this false euro currency make a mistake your money will cease to be yours. Doesn't matter that the EU 'guarantees' all deposits up to 100,000 euros... Your money is fundamentally theirs should they say so. Perhaps you should go on strike? This is already illegal in Greece where “civil mobilization” orders have been issued to force striking workers to return to work (http://www.bloomberg.com/news/2013-0...t-workers.html). Doesn't matter that the EU 'guarantees' the right to strike. "You must work and we can take your wages should we deem it 'necessary' - for your own good!"

Even Sharon Bowles, head of the European Parliament’s Economic and Monetary Affairs Committee, said; “The lesson here is that the EU’s single market rules will be flouted when the Eurozone, ECB and IMF say so,” Cyprus "Uncharted Territory" Sets Sell-Side Scrambling | Zero Hedge

Sadly those running this new tyranny will NEVER accept a democratic rejection of their agenda and those at the very heart of the system cannot be voted out of power since they were never elected. The storm in Europe has now entered a new and very dangerous phase. There is a revolution needed in Europe, people have already started self immolating themselves (President Hollande fiddles as desperate French workers self-immolate - European News | Latest News from Across Europe | The Irish Times - Sat, Mar 16, 2013) Every 'right' and assumption that the people of Europe were told that EU assured is false. It is lies. They will continue to say that it is necessary to 'preserve the peace' but we do NOT need to be robbed of our money, liberty and democracy to stop Germany invading Poland. This is no longer acceptable in any shape or form. Sic Semper Tyrannis!

[Parihaka]

Can there now be any doubt that the EU is nothing more than a bunch of thieving pirates. They have returned to the level of royal aristocracy, helping themselves to others wealth through force and destroying the only thing that has ever enabled banks and the banking system to survive, trust.

[cyppok]

Cyprus parliament delays vote on bank deposits tax - Yahoo! News

The absurd part of rationalizing that this was hot money from Russia and thus it is OK to de-facto confiscate some of it to pump equity into the banks is really insane.

What is kindly ignored here is that the junior bondholders and others are not asked to take a hit and yet they should be the ones to be wiped out after bank equity before any depositor has to loose a cent. But nope those bondholders are simply being kept whole at the expense of depositors (this is the mind boggling part). It is so decidedly absurd because they were the ones compensated for the risk and de-facto are there to take the hit if the bank fails...

There is already expectations that there will be some sort of retaliation from Russia for this but I don't see how it comes about, Yet...

Snapper the problem with breaching the 100K Euro zone deposit guarantee is very bad. Cyprus no matter how small is part of the euro-zone dividing it into those where deposits are confiscated and those that aren't to recap banks essentially defeats the purpose of having the guarantee through out the euro-zone in the first place. My guess is it will be bailed out eventually and depositors take no hit. If they force the hit the next expectation is for same thing to happen in Greece, Spain, Italy, etc...

[snapper]

Cyprus parliament delays vote on bank deposits tax - Yahoo! News

You think democracy will stop them? Seriously?

The absurd part of rationalizing that this was hot money from Russia and thus it is OK to de-facto confiscate some of it to pump equity into the banks is really insane.

What is kindly ignored here is that the junior bondholders and others are not asked to take a hit and yet they should be the ones to be wiped out after bank equity before any depositor has to loose a cent. But nope those bondholders are simply being kept whole at the expense of depositors (this is the mind boggling part). It is so decidedly absurd because they were the ones compensated for the risk and de-facto are there to take the hit if the bank fails...

There is already expectations that there will be some sort of retaliation from Russia for this but I don't see how it comes about, Yet...

Gas.

Snapper the problem with breaching the 100K Euro zone deposit guarantee is very bad. Cyprus no matter how small is part of the euro-zone dividing it into those where deposits are confiscated and those that aren't to recap banks essentially defeats the purpose of having the guarantee through out the euro-zone in the first place. My guess is it will be bailed out eventually and depositors take no hit. If they force the hit the next expectation is for same thing to happen in Greece, Spain, Italy, etc...

France... Belgium, Holland? As Pari says the trust is broken and the fact that 10% and 6.75% rates were used appear to be completely arbitrary. Why were the Germans and IMF asking for 40% - why not 50%? The veneer is gone.

[tankie]

If this theft doesnt open eyes to what is going on and get the fuck out of the corruption cooperation called the EU , nothing will , fuckin rip off bastards .Nigel Farage said it all and still does UKIP , just fucked camorons tories in a by election , and tories are defecting to UKIP .....GOOD



http://www.dailymail.co.uk/news/arti...ting-UKIP.html

[snapper]

Latest news is that they may have another 'Bank Holiday' on Tuesday to stop a run on the banks. Cyprus Bank Holiday Extended Through Tuesday As Confusion Spreads | Zero Hedge

[Bigfella]

So what would have happened to the banks without the bailout?

[Parihaka]

So what would have happened to the banks without the bailout?

Firstly it's not a bailout, it's a direct theft of depositors assets but in answer to your question the same as happened in the US, Sweden, the UK, Ireland etc where the loss was spread across the tax base with the govt(s) getting stockholder options for later realisation.

Here's the general rationalisation and incentives for those bailouts

Bailout - Wikipedia, the free encyclopedia

[citanon]

Europe is so f**ked.

Two questions on my mind right now: 1. what's going to happen to the markets on monday?

If passed on Monday, this stupidity, from what I can gather, will essentially destroy confidence in the banks of distressed Euro Zone countries, ie Spain, Greece, Portugal, Italy, maybe France. We will probably begin seeing massive and growing capital outflows immediately building into a possible run on a number of banks by the end of next week.

If it doesn't pass, at least confidence in the Euro will be destabilized.

This brings the second questions: FFS why? Why risk depression in the Euro zone over just $15 billion?

BTW, it seems that the markets have already started moving against Europe.

I hope I'm wrong.

[citanon]

The Botching of the Cyprus Bailout: Worse Than Lehman Brothers - Forbes

The Cyprus Bank Bailout Could Be A Disastrous Precedent: They're Reneging On Government Deposit Insurance

[citanon]

Cyprus Bailout 'Disaster' Risks New Euro Crisis

Markets have started to move.

That warning appeared to be coming true as the euro edged lower at 1.2934 against the dollar, in early trade on Monday morning local time in New Zealand, the first global market to start trading.

Doug Kass of Seabreeze Partners on Twitter predicted European stock markets could fall 3 to 4 percent on Monday, while the S&P 500 could fall 1.5 to 2 percent and Spanish and Italian 10-year yields could jump 15 basis points.

"The news is a wake-up call to investors that the European sovereign debt issue is far from being resolved," Kass said in a note.

Viewpoint from a guy who probably has Euros to sell:

But Marshall Gittler, head of global forex strategy at IronFX, an online trading platform, took the opposite view, arguing the bailout could be positive for the single currency.

(Read More: Cyprus Parliament Postpones Key Session)

"This settlement—assuming it passes—removes that tail risk from the market. It also puts Cyprus on a healthy footing, with a debt/GDP ratio estimated at 93 [percent]—not far off the EU average of 90. The economy here can start growing again. So it's a win-win for the EU and Cyprus and should be well received by the markets," he said.

People are trying to run the banks in Cyprus... but can't:

Meanwhile, The New York Times reported on Saturday that savers had already been trying to withdraw money from banks via ATMs and that many machines had run out of cash. But it might be too late already. Cyprus has declared a bank holiday on Monday to prevent such a run on the banks and banned electronic transfers.

The structure of the bailout shocked many, including Sharon Bowles, chair of the European parliament's economic and monetary affairs committee, who called it a "disaster" for European Union rules and the single market.

"When the dust has settled on this deal, which I hope it never does, we will see that the single market has been sold down the river for a shoddy price," said the EU parliament's Bowles.

Indeed, and inexplicably so.

[citanon]

Pre-market data shaping up:

Pre-Market Data, Stock Market Quotes, Fair Value, Futures, Volatility Index, World Markets Information - CNBC

[cyppok]

Mish's Global Economic Trend Analysis

Like I said bondholders and whatnot. 17.7 billion before depositors need to be touched.
But alas they won't go that route they want to give bondholders , central bank a free ride at the expense of depositors.

Mish's Global Economic Trend Analysis: Cyprus Bailout Math; Can Depositors Be Left Whole?

Snapper it isn't Gas actually from what I read the retaliation is actually not gas. It would be spiking gold futures to break through stops to liquidate western hedge fund and central bank positions. Western Central bank and bullion vault naked short open interest on gold contracts would be margin forced essentially. I don't see it happening yet though. This would be very very painful instantly (more or less).

The guarantee blow-back is the bigger question though. If the guarantee is present in some and not other countries it is worthless, and so is the ECB because thus far it applied universally. If that is no longer the case the Euro is irrelevant.

P.S. the complete idiocy of removing the guarantee of depositors in this case is very foolish. The spiral of enterprises either removing their working capital in weak countries (Portugal, Ireland, etc) to make sure they are solvent if there is a "levy" (theft) of capital is becoming more and more real. Essentially the real holders of capital may form new banks that are non-systemically integrative simply for clearance this would essentially bifurcate the system into solvent and insolvent institutions with payability suspended by the later. The problem then becomes in them passing their costs onto the system via central banks and other ways and essentially being a layer of cost without utility (settlement and saving allocation activity). Problems that arise further is partial insolvency of companies that would be left in that wreckage of insolvent institutions but were actually functional before the liquidity tide moved out. Sad, stupid, sanguine and yet it continues. In the end all of this is highly deflationary because asset prices are propped up against a lower and lower amount of *real* cash(liquidity) that is available to bid on them. Essentially the more it goes on the lower asset prices have to fall and render the insolvent even more insolvent. I can totally see commercial real estate not just imploding but being worthless for all but the user base.