понедельник, 18 марта 2013 г.

18 March 2013: Vote on controversial Deposit haircut today

 The Cypriot Parliament is later today going to vote on EU finance ministers unprecedented decision  to impose an all-out haircut on Cypriot deposits. The newly elected President Nikos Anastasiades was in Brussels with his  finance minister Friday night and returned back to a uproar among Cypriot and foreigners who had entrusted their savings to the island’s banks and now found them in risk of being confiscated.


The bail-out was cut from Euro 17 to 10 Billion and implies that savers have been forced to bear the cut. Banks are by Tuesday 19th automatically going to withdraw 9,9 % on deposits above Euro 100 000 and 6,75 % on all smaller amounts. It is unclear whether this implies both private and corporate accounts.  But most likely both.  It also seems that the decision applies to accounts in all Cyprus based banks regardless of their origin country.  All accounts seem to be hit in an action that best can be described as pure confiscation or theft of private savings and funds.

 The unilateral action of the European Union and the Cypriot government have instituted a new practice never earlier seen in financial markets. The confiscation or “levy” which they call it, is estimated to contribute Euro 5,5 billion towards the recapitalization of the Cypriot banks. This counts for more than 50 % of the bail out from the richest countries in Europe.  In a televised speech on Sunday  President Anastasiades defended his decision and stated that Cyprus was faced with the gravest situation since the Turkish invasion in 1974. The Cypriot government has “sugared”  its measures by stressing that the confiscated funds are compensated by shares in the island’s   bankrupt banks, the Bank of Cyprus and Popular Bank.

Supporters of the new president have lately stressed his good and friendly relations with Angela Merkel and other European center right leaders.  “Lazy” Greeks and “irresponsible” Cypriots have for long time leading up to the German elections in September,   been negative headlines in the German press. Nikos Anastasiades got his chance to prove he is Germany’s devoted  friend.  He might have helped Merkel’s election campaign, but does this decision serve ambitions of making Cyprus a financial center?

This is also a question of negotiating tactics. In its dealings with EURO zone finance ministers and the “troika” of representatives from the International Monetary Fund, IMF, the European Central Bank, ECB, and EU, Cyprus demonstrated that they were overeager to strike a deal. This never pays off in  a Brussels nourished by confrontations and last minute’s deals.  The late hours exercise in Brussels have given both Cyprus and the Euro zone members a hard  lesson.  It is time for blue Monday blues.

 The new Cyprus government  has experienced – if they believed it in before - that there are no solidarity or true friends in Europe.  It does not matter  whether you are  a goodwill pro-European   or a former communist. European relations are built on interest politics.  Cyprus has less than a million people and institutes 0,2 % of the Gross Domestic product inside the Euro zone. But exactly the size is why European leaders could have afforded to be a little generous.  Instead  EU once again demonstrated  an attitude which lately has brought the Southern periphery of Europe to despair.

Today the Euro is falling 100 points close to 1,29.  The message is clear.  Neither  markets nor Cypriots any longer trust the Eurozone reliability.  Why should other Western European depositors do when their banks are bankrupt.   Today Cypriot bank customers are  treated dis respectfully. Their deposits are stolen  and  they are offered valueless shares.  Next time the same medicine might be ordained to Italy, Spain, Greece, Portugal or  for that sake Netherlands.

 It has been sent a clear message to whole Europe. When governments are reluctant to pay for their banks speculations and excesses private property rights do not apply. Then it is up to the man in the street to pay the bill by having their accounts confiscated.

Luckily enough Mayzus Investment has been wisely enough to keep our client funds in banks outside Cyprus.

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