Cyprus: The Template

It’s not easy to get a clear picture of what’s going on in Europe, under the mis-management of the European Union (EU) and its European Central Bank (ECB) in what looks like a deliberately induced collapse of Cyprus’ banking system and economy. The EU’s news-fog-machine was running at 120%, spinning stories of Russian mafia, etc. using Cyprus as a safe haven for ill-gotten gains.

Cyprus’ banks offered good interest on investments in a country with low taxes. Which is why their banking sector was large. Cyprus had significant exposure to Greek debt..

When the ECB’s Jeroen Dijsselbloem affirmed that what was going to happen to Cyprus was a template for future actions, he unleashed a torrent of abuse and fury against the EU and the ECB. He made it even worse by denying, just hours later, that he’d said any such thing.

Lawful protesters against EU “austerity” policies were arrested in Brussels; allegedly without having broken any laws. Arbitrary arrests are unlawful in Belgium and the EU.

Some commentators have described the “rescue” as The Morgenthau Plan for Cyprus.


Although there was clearly Russian money in Cyprus’ banks, it wasn’t necessarily ill-gotten gains. Nor does it appear, was very much of that money left in Cypriot banks by the time that those banks were closed … in Cyprus.

(DWN – German Economic News) reported that insider knowledge was probably behind Greek shipowners moving their money from Cyprus to Norway. Collateral damage of Cyprus’ knee-capping (euphemistically referred to as a “haircut” by the EU colleagues) is exposing the German banking sector to an increased risk of 6 billion Euros.

Meanwhile the German savings bank association has issued a statement that all deposits are safe; and invited the Russians to put their money in Sparkasse accounts. I find their naïvety disturbing. German finance minister Schäuble’s statement is flabbergasting:

Savings in Germany and all European countries are safe as the idea, that any European country can become insolvent, is unrealistic.

On the 13th of March, just days before Cypriot banks were shuttered, Schäuble had said:

Cyprus doesn’t have any acute liquidity problems.

The Bank of Cyrus refused to accept the resignation of its director who spat the dummy after the “negotiations” and “agreements” were made without consulting him or the board. Banks in Cyprus remained closed until Thursday. Their branches in London and Russia may have been open for unlimited transfers, as they were in the week before the barber (or is that barbarian) showed up with the shotgun.

Germany’s Spiegel: Suspicious Transactions: Cypriot Parliament Investigating Capital Flight

Cypriot banks were de-boned while the EU stalled. That is way beyond being attributable to incompetence.

DWN also reports that foreign banks are advising against investments in European banks as a result of Dijsselbloem’s “template” declaration.

Damage and Reactions

From the SMH:

‘I went to sleep Friday as a rich man. I woke up a poor man’
“Very bad, very, very bad,” says 65-year-old John Demetriou, rubbing tears from his lined face with thick fingers. “I lost all my money.” …
He had left Cyprus in the early 1970s at the height of its war with Turkey, taking his wife and young children to safety in Australia. He built a life from nothing and, gradually, a substantial nest egg. He retired to Cyprus in 2007 with about $1 million, his life savings. …

From DWN:

Ruined: When the EU Loots Company Accounts Overnight
An example of the impact of the bailout can be seen in the fate of a Cypriot IT company. The company account was plundered. The company is in financial ruin. Employees will lose their jobs.
My bank account’s got robbed by European Commission. Over 700k is lost.

Outlook

ECB confirms: Bank Deposits are Not Secure in Europe
Dutch ECB representative Klaas Knot confirm: The expropriation of private bank deposits will continue to be part of “European liquidity policy”. The ECB wants the banks to get their balance sheets in order. Ordinary savers should consider carefully, how much money will be left with which bank.

The Next Haircuts Threaten Luxembourg and Malta
Luxembourg’s bloated financial sector is increasingly in the sights on European Interests. Last Wednesday, the government announced … Effective supervision and application of international standards make those banks special. … Malta made similar statements. Their banks, unlike Cyprus’, had limited exposure to bailout countries….

Luxembourg’s and Malta’s Banks Too Large
But both countries have bloated finance sectors. Whereas Cypriot banks were 7 times larger than the national economy, Malta’s banks are 8 times larger and Luxembourg’s 22 times larger than their respective economies. “Banks can get into trouble, even under the best supervision” said Thomas Meyer of Deutschen Bank Research.

The shotgun was being lined up a week ago:

Luxembourg is the Next Candidate for Crisis
At a meeting of foreign ministers in Dublin on Friday (22nd) Luxembourg’s Foreign Minister Asselborn raged: “I’m from a very small country which has not only a over-proportioned banking sector but also satellite industries.” Adding: “Countries, such as mine and Cyprus, have legitimately built up these sectors over recent decades … and one should not, in principle, disparage that now.”

The ECB’s push is aimed at the knee-caps.

A chronology of the Cyprus crisis can be found in e.g. the German-language Handelsblatt article discussing the possibility of infection.


Added: 2013-03-30 08:45 (UTC)
ZeroHedge has a copy of a letter that many will find very unfunny:

CCB letter

Your deposits are absolutely safe. Trust us.


Subject continues …

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2 Responses to Cyprus: The Template

  1. Dioclese says:

    [moved from other post by Bernd Felsche]

    An excellent analysis if I may say so – tho’ I could read the German articles. I have a friend who lives in Paphos. Thankfully, as he puts it, he was a company pension and a house in the mountains he can’t sell tying up his money – so his attitude is very much I’m safe, but I feel for my friends!

    Who’s next. Well, the certain thing seems to be that there will be someone and my money is on the Greeks.

    And if there is no prospect of an European country going broke, why did they need a bailout in the first place?

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