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 19
th
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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