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Sunday, March 24, 2013 1:19 PM

New Demands Every Half-Hour From IMF; Can Cyprus Be Saved? Impossible Math

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Cypriot President Nicos Anastasiades was picked up by private Jet and is now meeting with the cardinals in Brussels (IMF, EU finance ministers, ECB, Various Government leaders) according to Cyprus Mail.

Quoting an unnamed senior government official, Reuters said Nicosia had agreed with EU/IMF lenders on a 20 per cent levy over and above €100,000 at No. 1 lender Bank of Cyprus, and four per cent on deposits over the same level at other banks.

However, an hour or so later, the Cyprus News Agency, also quoting an unnamed Cypriot official, said the two sides were not even close due to the stance of the IMF, which tabled new demands “every half an hour”.

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

They also gave the government powers to impose capital controls, anticipating a run on banks when they reopen on Tuesday. A plan to nationalise semi-state pension funds has met with resistance, particularly from Germany which made clear that tapping pensions could be even more painful for ordinary Cypriots than a deposit levy.

The senior official who told Reuters of the levy agreement said the pension funds would not be part of the package to seal the bailout.
In an Cprus Mail Update, Anastasiades seeking last-minute Cyprus reprieve in Brussels.
Cypriot President Nicos Anastasiades, seeking a last-minute reprieve from financial meltdown at talks in Brussels on Sunday, has a "very difficult task" ahead of him if he is to save the island's economy, a government spokesman said.

Anastasiades then headed to Brussels in a private jet sent by the European Commission to hold talks with EU, European Central Bank and IMF leaders ahead of a crunch meeting of euro zone finance ministers at 6 p.m. (1700 GMT).

Underlining the gravity of Cyprus' position, the EU's economic affairs chief Olli Rehn said there were now "only hard choices left" for the latest casualty of the euro zone crisis.

French Finance Minister Pierre Moscovici put it more bluntly: "To all those who say that we are strangling an entire people ... Cyprus is a casino economy that was on the brink of bankruptcy," he told Canal Plus television.

Without a deal by the end of Monday, the ECB says it will cut off emergency funds to Cypriot banks, spelling certain collapse and potentially pushing the country out of the euro zone.

The tottering banks hold 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros - enormous sums for an island of 1.1 million people which could never sustain such a big financial system on its own.
Impossible Demands

Every time Cyprus agrees to something the Troika increases its demands. Some of those demands are mathematically impossible.

For example, the Troika wants Cyprus to wind down its deposits, especially from Russia. Yet it is impossible to wind down assets when there are capital controls preventing just that!

Nor can deposits be would down without capital controls because the money is not there. For further discussion, please see Reader Asks "Where's the Money?".

Too Late to Save Cyprus

With €68 billion in deposits, all of it wanting out, the one thing certain to be true is that any agreement reached will not be the final one. Demands will increase, and the troika will withhold bailout money time and time again, just as happened in Greece.

It's too late to save Cyprus. The euro helped ruin it.

Although the initial pain may be higher if Cyprus exits, Cyprus may recover faster outside the eurozone where it will not have to suffer from still additional demand of the nannycrats in Brussels, and the parasites at the IMF.

Cyprus should tell the EU to go to hell and get it over with. The alternative is 10 more years of pain and suffering at the hands of the Troika.

Mike "Mish" Shedlock

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