Cyprus Details: Blackmail, Bulldozer Threats, Bank Holiday to Tuesday; Calls to Exit Eurozone; Reflections on Arrogance and Idiocy

As details of the EU's heavy handed blackmail of Cyprus come pouring in, the volatile reactions mount as expected.

Cyprus President Statement on Confiscation of Accounts

Here is the Statement by the President of the Republic Mr Nicos Anastasiades. Points five and six are interesting:

5. It saves provident and pension funds and avoids taking other tough measures such as wage and pension cuts that were put on the negotiations table.

6. It avoids further recession and the risk of the vicious circle of a second memorandum.

Care to bet?

Man Threatens Bank with Bulldozer

The BBC reports Man threatens bank with bulldozer



Threats to Vote Against Action

The Financial Times reports

"President Nicos Anastasiades faces an uphill task to persuade reluctant lawmakers, after pledging that he would “never” accept a haircut of deposits as a condition for a bailout by international lenders. His governing coalition controls 28 seats in the 56-member parliament but several members of the Democratic party, the junior partner, have threatened to vote against the bill."

Cyprus Parliament Delays Vote

What follows threats of a "no" vote should be easy to predict: Cyprus parliament delays vote on bank deposits tax.

"Cyprus' parliament on Sunday postponed a debate and vote on a controversial levy on all bank deposits that the cash-strapped country's creditors had demanded in exchange for €10 billion ($13 billion Cdn) in rescue money. The vote, which had been expected later Sunday, has been pushed back to Monday afternoon, parliamentary official Antonis Koutalianos said. The announcement set off an immediate scramble among top European officials, with reports that the European Central Bank was pressuring Cypriot authorities to hold the vote without delay."

UK to Compensate Troops and Government Workers

Chancellor George Osborne says the UK will compensate any British troops in Cyprus hit by plans to introduce a bank levy as part of a £9bn EU bailout.

Greece Exempt From Haircuts

Ekathimerini reports "the account haircut does not affect bank accounts in Cypriot bank branches based in Greece, according to sources from the Greek Finance Ministry."

German Finance Minister Wanted 40% Haircuts

Also from Ekathimerini: "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."

Communist Party Proposes Eurozone Referendum

The Financial Times notes "The Akel communist party denounced the deal, proposing a referendum on whether Cyprus should remain a member of the eurozone. The Democratic party (Diko), which supported Mr Anastasiades in last month’s presidential election, urged Cypriots to remain calm, while claiming Cyprus had been “blackmailed” at the eurogroup meeting."

Also from the above link "Yannis Stournaras, Greek finance minister, said depositors holding funds in Greek branches of Cypriot bank would not be affected. The Greek networks of Bank of Cyprus and Laiki (Popular) Bank, the largest Cypriot banks, would be split off from the parent banks and transferred to a Greek state bank, perhaps as early as Tuesday"

Bank Holiday to Tuesday

Ekathimerini reports Nicosia declares Tuesday a bank holiday, but ECB urges for action

The Cypriot cabinet has declared Tuesday a bank holiday, for fear of capital flight, and this may even be stretched to Wednesday, as depositors are certain to withdraw huge sums from the Cypriot banks after the haircut imposed.

Nicosia postponed from Sunday to Monday the tabling in Parliament of the bill including the measures for the Cypriot bailout – including a bank account haircut and a tax hike on interest and corporate earnings – but the European Central Bank insists on a rapid voting because there are already signs a domino effect will follow across European lenders and markets from Monday.

There is genuine fear of market unrest on Monday morning when stocks may crumble in the eurozone and bank accounts in other southern European bank may suffer.

Skai radio reported on Sunday that the Bank of Greece has sent between 4 and 5 billion euros to Cyprus in order to help Cypriot banks respond to cash requirements by their clients.

Reflections on Arrogance and Idiocy

Note the ridiculousness of the situation: Greece is sending cash to Cyprus.

Every step of the way, the nannycrat idiots in Brussels have underestimated the seriousness of every situation, the amount of money involved to fix them, and the public blowback in response to their policy decisions.

Cyprus is tiny. But the ramifications of this move will not be. The taxation of all deposit accounts in Cyprus was a huge mistake. It is only going to net the EU 5.8 billion Euros.

Many people have emailed that much of the money in Cyrus accounts was via illegal inflows from Russia. OK, is that a reason to screw every Cyprus depositor, even the small accounts below the €100,000 deposit guarantee?

I suggest not. I object to the entire scheme. First the bondholders should have been wiped out. If that was not enough then the deposits above the €100,000 deposit guarantee should have been hit. Then and only then should the average citizen been hit.

And guess what. The average Cyprus citizen would likely not have been hit. Instead, the EU mandated a "screw every citizen" policy to protect the senior bondholders.

This is not going to sit well in Cyprus or anywhere else, and all for a mere EU 5.8 billion Euros.

The stupidity and arrogance of these nannycrats is staggering. The nannycrats think this will stop "contagion". They are nuts.

By my accounting, the need to stop contagion has spread to Greece, Portugal, Spain, Ireland, Italy, and Cyprus. France is soon on the way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com