So here's a wrap-up of what appears to be the shape of tonight's last-ditch deal between Cyprus and international lenders:
• A €10 billion euro bailout that will shut down Cyprus' second largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians.
• The deal will spare the country a financial meltdown by winding down Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a "good bank".
• Deposits above €100,000, which under EU law are not guaranteed, will be frozen and used to resolve debts, and Laiki will effectively be shuttered, with thousands of job losses.
"In The Best Interests Of The People..."
Submitted by Tyler Durden on 03/24/2013 21:09 -0400
The European Union finance ministers have just agreed to the terms of the Cyprus-Troika deal (which we fear could mean 100% haircts for the uninsured Laiki depositors as unsecured claims in a Chapter-7-style liquidation). With democracy now a complete farce since not even Parliament will be allowed to vote on deposit confiscation as part of a financial sector bankruptcy deal, here is the island nation's president explaining what just happened:
*ANASTASIADES SAYS AID DEAL IN BEST INTEREST OF CYPRIOT PEOPLE
Three months ago, Yanis Varoufakis explained Europe's bogus growth pact and the papering over the cracks that was being done by the IMF and ECB, "The idea here is that, yet again, the Eurogroup-ECB-IMF alliance is not ready, politically, to reveal the truth to its various constituencies." He was, obviously, correct. This weekend, in a brief BBC Radio interview (below), as Cyprus erupts and brings the European circus back into town, Varoufakis exclaims, "every bailout agreement, beginning with Greece’s in May 2010, seems less logical and more toxic than the previous one." In three minutes, the Greek economist illustrates how the leaders are laying waste to the supposed pillars upon which the European Union was founded.
Here are some unedited thoughts I just shared with the BBC’s Radio 4 on Cyprus while we are all waiting for the new deal to shape up:
Cyprus’ banking sector must shrink. As did Ireland’s, the hard way. What is essential, as every Irishman and woman will tell you, is that the politicians do not load up the weaker citizen’s/taxpayers’ shoulders with enormous debts on behalf of bankers that refuse to wither.
Every bailout agreement, beginning with Greece’s in May 2010, seems less logical and more toxic than the previous one. The culmination was of course Cyprus this past week. Think about it: In one short week, Europe has managed to put in jeopardy:
The hitherto sacrosanct concept of state guaranteed deposit insurance
The monetary integrity of the Eurozone
The European Union’s single market principle according to which capital controls are a no-no.
If only the agreement reached at last June’s EU Summit to de-couple the banking crisis from the public debt crisis had been implemented, we would not be having this conversation now.
The Cyprus debacle is the homage that denial of the systematic nature of the euro crisis pays to a systemic crisis.
Cyprus parliamentarians offered the Eurozone a reprieve from the stupidest and most potentially destructive Eurogroup decision since this Crisis began three years ago. It now remains to be seen whether, scared by the sound of their own NO, they will now succumb to an even less rational deal.
UPDATE: It appears the 'deal' to default/restructure the banks has been designed to bypass the need for parliamentary votes, since it is theoreticallynot a tax.
While we have little color on what kind of carnage the President of Cyprus had to accept to his fellow countrymen, the news is that :
CYPRUS, TROIKA REACH AGREEMENT IN PRINCIPLE, EU OFFICIAL SAYS
DEAL MADE AT DINNER WITH DRAGHI, LAGARDE, VAN ROMPUY, BARROSO
The terms, unsurprisingly what zee Germans wanted, are:
i) Laiki to be wound down;
ii) Bank of Cyprus to survive but with deposit haircuts of up to 40% for the uninsureds, and
iii) deal would see secured deposits in Laiki moved to Bank of Cyprus.
In other words, a deal far worse then the original on proposed by the Eurogroup last week - when the banks still existed. The key appears to be the 'saving' of the insured depositors (crucial to avoid a pan-European bank run) and the crushing of the 'whale' depositors.
A more granular breakdown of the deal's "accomplishments", but with the same result for large depositors, via Reuters:
Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework.
Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time.
The good bank will be folded into Bank of Cyprus (BoC), using the Bank Resolution Framework, after having heard the Boards of Directors of BoC and Laiki. It will take 9 billion Euros of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalization has been effected, and may subsequently be subject to appropriate conditions.
The Governing Council of the ECB will provide liquidity to the BoC in line with applicable rules.
BoC will be recapitalized through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders.
The conversion will be such that a capital ratio of 9 % is secured by the end of the program.
All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation.
The program money (up to 10 billion Euros) will not be used to recapitalize Laiki and Bank of Cyprus.
As Bloomberg further clarifies, uninsured depositors, or those with over EUR100,000 in savings may be completely wiped out: "Deposits below the EU deposit-guarantee ceiling of 100,000 euros will be protected, and a loss of no more than 40 percent will be imposed on uninsured depositors at theBank of Cyprus, two EU officials said.Uninsured depositors at Cyprus Popular would largely be wiped out, two other officials said."
Farewell Russian oligarch money. We hardly knew ye.
S&P 500 futures and EUR are surging, Gold is dropping modestly.
The Cypriot Parliament still has to vote for this - and not one of them voted for it last week.
Filling the 'Cyprus' Gap
Treasuries sold off- 10Y back to 1.945% (+2bps) and 30Y 3.17% (+3bps)
This is far from over...
So let us get this straight, we have no further information on the actual terms of the deal than we did on Friday afternoon; the government (who rejected the deal last week) has no details of the deal yet; and the actual impairment for the depositors is far worse than last week's rejected deal; and the market is rallying...
It would appear the week was spent sorting through the names of bank accounts in each bank and the one with the most ending in '-ov' is to be wound down...Laiki
Step 1 appears to be 0500GMT Eurogroup Meeting (as per Holland's Diesel-Boom) agreement...
UPDATE:There is talk that there may be no need for the government to vote for this - since it is not a 'tax' but a bank restructuring. It seems they have kept it in the bankers... the ECB (in its independent way) tells the Cypriot NCB what it should do, the Cypriot central bank then restructures its bank how it sees fit - good/bad bank and haircuts where it sees fit - this then gets around need for vote from government AND any possibility of a European Union law (on taxation) being broken...
Capital controls and a good-bank, bad-bank structure is what is now on the table. In spite of what may be agreed upon, I stated earlier today the losses will be bigger than currently perceived.
Despite the closed banks and capital controls in the past week, more money flowed out from Cyprus than in previous weeks, according to payment transfers. Prior to the escalation of the crisis in Cyprus accruing on the payment system "Target liabilities of Cypriot central bank to the European Central Bank (ECB) had increased to a rate of approximately 100 to 200 million euros per day. In the past week, billions of dollars flew in spite of controls.
Withdrawals at ATMs have been limited to €260 per day but on Sunday the value was further reduced to €100 per day.
Cyprus lists accounts amounting to €30 billion in foreign currency, mainly dollars (86 percent) and pounds (6 percent). The investment bank Goldman Sachs estimated that this money belongs to foreigners, mainly Russians, Britons and Russians living in Latvia.
These holders of often very ample bank accounts now have a particular interest in getting money out of the country.
All accounts with less than 100,000 euros will land in the "good bank". Other accounts will land in the "bad bank". In the "bad bank" loss estimates range from 30 to 90 percent, depending on how quickly depositors try to withdraw money.
Supermarket Food Supplies Down to Two Days
In Cyprus, merchants demand cash, but suppliers demand cash only as well. With a shortage of cash, results are as expected: Cash Demands Impact Supermarket Shelves
SUPERMARKET shelves are in danger of emptying according to head of the supermarket union Andreas Hadjiadamou.
Supplies will only last two or three more days according to Hadjiadamou and there will be severe problems if a solution is not found and if banks remain closed.
According to deputy of the supermarket union, Nicos Athanasiou, problems had already started being noticed at certain supermarkets in Larnaca. “Most people are making purchases with a certain amount of care and caution, buying the basics,” he said. “Most consumers have been purchasing dry and canned food the last couple of days in case things get worse,” he added.
Athanasiou said there had not been a large fall in sales although in almost all of the supermarkets there were shortages of goods from suppliers who only accept cash payments.
SOME petrol stations may have to close down as they do not have enough cash to pay for fuel shipments, the head of the stations’ owners said yesterday.
“We may have to temporarily close some petrol stations because they have run out of cash. This creates great concerns to those in this profession,” said the head of the petrol station owners' association, Stefanos Stefanou.
“Petrol stations pay for their fuel shipment only with cash and cash is running out,” Stefanou added.
“There are some petrol stations that are still accepting credit cards today, but tomorrow no petrol station will do so,” he said, asking consumers to take cash with them to carry out transactions.
Welcome to Insanity
Welcome to the insane world of fiat currencies and fractional reserve lending. If you are looking to assign blame, that's where the blame belongs.
TIMELINE :Eurogroup postponed until Monday evening
UPDATED 00.45
President Nicos Anastasiades, European Council President Herman van Rompuy and European Commission President Jose Manuel Barroso have met over a working dinner following a failed series of meetings between the Cypriot side and Nicosia’s international lenders earlier on Sunday.
Finance Minister Michalis Sarris and Government Spokesman Christos Stylianides also attended the working dinner.
Eurozone sources say that “deliberations with the Cypriot side continue”, adding that the Finance Ministers of the remaining Euro area member states were being briefed on developments by Eurogroup President Jeroen Dijsselbloem.
The Eurogroup, originally scheduled for 7pm Cyprus time on Sunday has been rescheduled for 7pm Monday.
When Cyprus put its banks into lockdown last weekend until... well indefinitely, now that capital controls are established, the main reason was to halt all capital outflows from the henceforth liquidity starved island whose banks will only exist as long as the ECB provides an ever greater dose of liquidity to account for the collapse in deposit funding. Which is why it is surprising, make that shocking, that as Germany FAZ reports, in the past week there has been a surge in cash outflows from Cyprus, even as its financial system has been supposedly ring fenced from the world, which by the way is the only thing preventing the EUR17 billion bailout from soaring by orders of magnitude because should a liquidity leak be discovered, it is all over for the country's financial system.
Despite the closed banks and a lock for payments in the past week, more money flowed out of Cyprus than in previous weeks, Frankfurter experts report for payments. Prior to the escalation of the crisis in Cyprus accruing on the payment system Target liabilities of Cypriot central bank to the European Central Bank (ECB) had increased daily at approximately 100 to 200 million euros. In recent days was after Parliament the stabilization program initially had to fail, the daily has risen to more than double. Just in the last week so could cash assets have been withdrawn from Cyprus in the billions, although the Cypriot central bank has actually issued a lock.
How is it possible that cash is leaving the country even with a bank halt? It isn't, unless of course, the banks aren't really halted, and some outbound wire transfers, which are permitted, are more equal than other wire transfers which are stuck on the island. Of course, that would imply an "Europe Farm" type of arrangement, which in the bastion of fairness, equality and honesty which is Europe, would be absolutely impossible.
On the other hand, if indeed the drain of the Cypriot banking system has continued despite all the enacted halts during the past week, then it's game over for Cyprus, which will soon have only the ECB to thank for providing liquidity, an arrangement that may not be the best long-term outcome for a nation whose economy has basically been gutted in the span of one week.
It also means game over for the bailout as envisioned, as the EUR17 billion is history, and much more cash will have to be injected to cover for the stealth outflows.
Of course, in what is now a Pandora's Box experiment in kicking the box, nothing could possibly surprise us. After all, even in a worst case scenario, there are GETCO algos doing the bidding of the BIS and literally bidding up the EURUSD to such levels as allow everyone to ignore the absolute terminal disaster that has happened in Europe in the past week.
Cyprus continues talks with troika in Brussels as Eurogroup remains on stand-by
The Eurogroup meeting in Brussels had still not begun at about 11 p.m. Greek time on Sunday after almost four hours of delay and following long and tense discussions between Cypriot President Nicos Anastasiades and European Union and International Monetary Fund chiefs.
Kathimerini understands that the hold-up is being caused by differences between Nicosia and the IMF over the potential merger of Cyprus Popular Bank (Laiki) and Bank of Cyprus following a resolution process. There was a possibility the meeting of eurozone finance ministers would be delayed until Monday morning.
The IMF and Germany insist that after being split into a good and bad bank, “good” Laiki should be merged with Bank of Cyprus and the new lender should then assume liability for the 9 billion euros that Laiki received as Emergency Liquidity Assistance (ELA) from the European Central Bank.
Anastasiades reportedly rejected this proposal and warned Lagarde that he would be forced to resign if the IMF insisted on it.
This extra burden would essentially force a resolution on Bank of Cyprus as well. Nobel Prize winning economist Christopher Pissarides told Cypriot state broadcaster RIK on Sunday that the one thing Nicosia should avoid at all costs was accepting the resolution of the Bank of Cyprus as this would amount to a bankruptcy.
Eurogroup chief Jeroen Dijsselbloem called the other eurozone finance ministers in for a briefing at about 11 p.m. but Cypriot representatives remained locked in talks with the troika.
Eurozone ministers had arrived in Brussels for the talks, which were due to begin at 7 p.m. Greek time but the start was put back several times.
German Finance Minister Wolfgang Schaeuble called for Anastasiades and Cypriot officials to view the challenges facing them “realistically”. “We had an agreement following our negotiations last Saturday but we start again today,” he said.
“There were talks during the week but I am not aware of their outcome. I hope we will be able to reach an agreement, however this demands that Cyprus must see the situation realistically. We are ready for a solution, we want to do everything and not spend every weekend here. It does not depend on us, but Cyprus.”
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_24/03/2013_489666 Sunday March 24, 2013 (15:27)
Turkey warns Cyprus of 'new crisis' if gas revenues included in solidarity fund
Turkey has warned of a “new crisis” in the eastern Mediterranean if Cyprus proceeds with plans to collateralize future gas revenues as part of a national investment fund aimed at staving off a disorderly default.
Ankara warned that the island’s natural resources also belong to Turkish Cypriots and as such could not be included in the package being put together by Nicosia.
“The idea of the Greek Cypriot Administration of Southern Cyprus (GCASC) to offer the natural resources of the island as collateral for a solidarity investment fund or any other borrowing scheme to be established due to its current economic crisis, ignoring the inherent rights of the Turkish Cypriots who are co-owners of the Island, is a dangerous manifestation of the illusion of being the sole owner of the Island, which may lead to a new crisis in the region,” the Foreign Ministry said in a statement on Saturday.
“The Turkish Cypriot side has made two calls of cooperation to the Greek Cypriot side for an equitable sharing of the natural resources, on 24 September 2011 and 29 September 2012. The Greek Cypriot side, however, has not responded positively to these calls up to date. It is not acceptable that the Greek Cypriot side uses the economic crisis it is facing as an opportunity to create new fait accomplish,” added the ministry.
Nicosia’s official position is that natural gas revenues will be shared by all Cypriots but Ankara called for talks on this issue and the matter of reunification to speed up.
“It is not our preference that the problem we are facing should lead to a crisis. We sincerely believe that it should constitute an opportunity and a new beginning for peace and a lasting settlement,” the Turkish Foreign Ministry said.
“The Turkish Cypriots will never become a minority in a Greek Cypriot state. Turkey will not allow this in any way. However, Turkey will respect the preferences of the two peoples on the Island. As this preference could be for establishing a new partnership – of which the parameters are well known – if the Greek Cypriots are to act unilaterally regarding the natural resources in the south of the Island and if they do not desire a partnership with the Turkish Cypriots, it could also be for the negotiation of a two state solution,” Ankara added.
So, on the basis of what is filtering through tonight, it's good news for smaller deposit holders in Cyprus, or at least anyone with less than €100,000.
It looks like they won't be subject to a levy. Large deposit holders appear to be looking at a 40% hit however, according to the BBC's Christian Fraser.
Effectively, it's a return to the deal that Germany and the IMF were advocating last week.
What will the Russians make of this on Monday morning?
Another round of Cyprus-EU talks begins
Confusingly, there has been some talk that the eurogroup meeting might be delayed until Monday morning.
Our understanding was that it has just got underway.
However, Cypriot spokesman Nikos Christodoulides just tweeted that ANOTHER round of talks has begun between the Cypriot president and the heads of the European Commission and the European Council
....... ......... .......
The speaker of Cyprus's parliament says that the politicians waiting back in Nicosia have been told of several 'proposals' on the table tonight.....
* * *
Today's delays and deadlock ahead of Monday's crunch deadline is no way to manage a crisis, some are arguing tonight.
Waiting for Godot is a play about the meaninglessness of life, which is how this evening feels (in markets, not Famille Juckes, I hasten to add before Mrs J interjects).
As the attached story indicates, there has been no progress on Cyprus yet. The danger is that just as Cyprus rushes to agree a tax-take of the originally-agreed Eur 5.8bn, so the stakes go up and they need more. I'm still betting we get a standard last-minute 'kick-the-can' Euro-deal that pushes Armageddon back a few months. But I don't know...
Either way, Cyprus is heading for a zombie banking system, capital controls and austerity, so that'll be fun (not).
* * *
Finally, there are signs in Brussels that the eurogroup are ready to begin today's much-delayed meeting.
The second face-to-face meeting between Cyprus and the EU has just finished too.
Eurogroup suffers repeated delays as Anastasiades balks at troika demands
The start of the Eurogroup meeting was delayed by at least three hours on Sunday night amid tense negotiations about a possible bailout for Cyprus.
Eurozone ministers had arrived in Brussels for the talks, which were due to begin at 7 p.m. Greek time but the start was put back several times. It is thought that talks could begin at around 10 p.m. Greek time.
Ahead of the Eurogroup Anastasiades had been meeting with European Commission President Jose Manuel Barroso, European Council chief Herman Van Rompuy, European Central Bank head Mario Draghi, European Economic and Monetary Affairs Commissioner Olli Rehn and International Monetary Fund managing director Christine Lagarde.
It is though that the main sticking point in negotiations was the IMF’s insistence that Bank of Cyprus, the island’s largest lender, merge with Cyprus Popular Bank (Laiki) after its resolution and take on responsibility for the 9 billion euros in Emergency Liquidity Assistance (ELA) it had received from the European Central Bank.
Anastasiades reportedly rejected this proposal and warned Lagarde that he would be forced to resign if the IMF insisted on it.
Earlier, German Finance Minister Wolfgang Schaeuble called for Anastasiades and Cypriot officials to view the challenges facing them “realistically”. “We had an agreement following our negotiations last Saturday but we start again today,” he said.
“There were talks during the week but I am not aware of their outcome. I hope we will be able to reach an agreement, however this demands that Cyprus must see the situation realistically. We are ready for a solution, we want to do everything and not spend every weekend here. It does not depend on us, but Cyprus.”
Ahead of the meeting an EU official with direct involvement in the talks told Kathimerini that there has been progress on details of a bailout agreement between Cyprus and the troika but some major obstacles remained.
The main question surrounds the future of the island’s largest lender, Bank of Cyprus. If unsecured deposits (above 100,000 euros) at all Cypriot banks are taxed then large savings at Bank of Cyprus are likely to be taxed between 20 and 25 percent. If the levy is not imposed on deposits at other lenders, the haircut for Bank of Cyprus customers will be much larger.
The option of a full bail in of Bank of Cyprus depositors is still on the table. As with Laiki, which is to go through a resolution process, the full bail in option could lead to deposits above 100,000 euros being lost. The only compensation for unsecured depositors will be shares in the “good” bank that will be created by a possible merger between the «healthy» Laiki and Bank of Cyprus entities.
Anastasiades 'won't accept' Troika demands on bank split
Greek media are reporting tonight that Cyprus's president, Nicos Anastasiades, is refusing to accept the Troika's demands over the Cypriot banking sector.
They say he will not agree to the Bank of Cyprus shouldering the burden of the €9bn of liquidity assistance supplied to Laiki Bank's by the European Central Bank (when Laiki is broken into a 'good' bank and a 'bad' bank).
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.
UPDATED 20:22 Talks on the transfer of Cypriot banks’ Greek units to Greece have been frozen on the instructions of President Nicos Anastasiades, the Cyprus News Agency (CNA) reported.
The matter of transferring the operations to Greece’s Piraeus Bank will be part of a comprehensive deal for Cyprus’ bailout tonight at the Eurogroup, the report said.
Observers suggest that Cyprus wants to use this as a bargaining chip during the negotiations.
With the operations still in Cypriot hands, a potential collapse of the island’s economy could spread to crisis-stricken Greece.
Earlier today, an unnamed government source quoted by CAN said there were complications involving the deal.
The source would not say what complications had arisen, adding that negotiations were continuing to overcome hurdles and come to an agreement, CNA said.
In addition to Popular Bank and the Bank of Cyprus there are also negotiations to include Hellenic Bank’s Greek branches, CNA said.
On Friday, Greece’s Piraeus Bank was chosen to take over the Greek branches of Cypriot lenders.
The deal is subject to approval by European competition authorities, a statement from the Hellenic Financial Stability Fund said. It did not provide terms of the deal.
Eurogroup delayed as Anastasiades locked in Brussels talks, Schaeuble calls on Cyprus to be 'realistic'
The meeting of eurozone finance ministers in Brussels on Sunday has been delayed by two hours as President Nicos Anastasiades continued talks with European officials.
Ahead of the Eurogroup, which is due to start at 9 p.m. Greek time, German Finance Minister Wolfgang Schaeuble called for Anastasiades and Cypriot officials to view the challenges facing them “realistically”.
“We had an agreement following our negotiations last Saturday but we start again today,” he said. “There were talks during the week but I am not aware of their outcome. I hope we will be able to reach an agreement, however this demands that Cyprus must see the situation realistically. We are ready for a solution, we want to do everything and not spend every weekend here. It does not depend on us, but Cyprus.”
Earlier, Anastasiades had been meeting with Manuel Barroso, European Council chief Herman Van Rompuy, European Central Bank head Mario Draghi, European Economic and Monetary Affairs Commissioner Olli Rehn and International Monetary Fund managing director Christine Lagarde.
“We are continuing negotiations,” tweeted Anastasiades at about 7.30 p.m. Greek time. “We are doing our utmost for Cyprus.”
Tonight is a crucial night for Cyprus, as it attempts to cobble together a deal that can rescue its banks via a combination of outside aid and domestic taxation, pleasing both European partners and the Cypriot parliament that must vote on the law.
A meeting of the Eurogroup -- which would have to agree to any plan -- is currently scheduled for 8 PM ET in Brussels. That in itself is a delay from the original scheduled start.
It's going to be a long night in Brussels.
And now another dramatic report.
Faisal Islam -- the economics editor at UK's Channel 4 -- reports on what's being said in local media in Cyprus.
Greek press reporting Cypriot president told Lagarde "you're putting me in a position where I'll have to resign... You'll regret this."
What's becoming clear is that it's the IMF, more than any other entity in this drama, that's playing hardball.
Peter Spiegel at the FT has a fantastic report about how the Troika (the ECB, IMF, and EU) is seeing tension within for the first time since the crisis began.
According to Spiegel, IMF chief Christine Lagarde has taken a hard line on not agreeing to deals that don't involve real restructuring.
But since Mr Strauss-Kahn’s exit and his replacement by Christine Lagarde, another former French finance minister, EU officials say the IMF has relied more heavily on what one eurozone official termed “the ayatollahs on the fund’s staff”. They have insisted on more credible debt projections before committing IMF lending.
“Lagarde lets the bureaucrats say the way it is and then she can make the political judgment,” said one official involved in multiple bailouts. “[Strauss-Kahn] didn’t want to massage it, but he was a deal maker. Lagarde wants to have an unbiased view of the situation and most of the time she takes that.”
In other words, no doing deals just for the sake of getting a deal done and moving on. It's more painful in the short-term, but it may be better than the long-slow bleed of unrealistically high debt levels and a neverending austerity morass.
... And Tonight's Meeting About Rescuing Cyprus Just Got Delayed Due To Lack Of Progress
A week of closed banks, depositor angst, and economic malaise is creating an increasingly vicious circle for Cyprus (and implicitly the European Union). As Die Welt notes, because the economic data of the tiny 'irrelevant' island could be considerably worse than previously thought (or forecast by Troika) thanks to the distortions created this week by bank closings, several people around the Troika said the exact amount of the bailout remains uncertain and could amount to EUR2bn more than expected. With the Troika capping their handout at EUR10bn of the current EUR17bn needed (and the deposit levy reportedly filling EUR6bn of that EUR7bn hole), the need for a bigger bailout - which seems increasingly likely - will fall on Cyprus banks' depositors (or taxpayers) leading to a hard-to-beat downward spiral. Simply put,the more deposits are pulled, the more deposits need to be confiscated; and with retailer stocks running low ("will last another 2-3 days") and cash-on-delivery demanded, the real economy will "have a problem if this is not resolved by next week."
Retailers, facing cash-on-delivery demands from suppliers, warned stocks were running low. "At the moment, supplies will last another two or three days," said Adamos Hadijadamou, head of Cyprus's Association of Supermarkets. "We'll have a problem if this is not resolved by next week."
A few hours before the emergency meeting of the situation seems to capture from bankruptcy Cyprus to deteriorate: From Troika says that money could not exceed the estimated range.
Cyprus needs for information of the "world" more money to bail out its banks and the stabilization of its national budget. Not initially agreed 17 billion euros were enough states in the field of negotiations. The exact amount is not certain. Several people around the troika said the "world" that the increased demand would amount to around two billion euros.
Because the economic data of the island nation could be worse than previously thought, additional billions are needed.One reason for the expansion of the bailout, the distortions caused by the closing of the banks, which has been going on for a week. The financial institutions will not open until next week again.
The troika of EU, European Central Bank (ECB) and International Monetary Fund (IMF) had agreed originally with Cyprus on a rescue package amounting to 17 billion euros. Ten billion would provide the troika, the remaining seven will apply even Cyprus.
Almost six billion would achieve the Cypriot government by the proposed compulsory levy on savings. More money to flush tax increases, such as the increase of the corporate tax in the state coffers.
Bank employees demonstrating in Nicosia on Saturday
President Nicos Anastasiades was expected in Brussels on Sunday to seek an 11th-hour reprieve from financial meltdown, with a bailout from the European Union and the island's place in Europe's single currency bloc hanging in the balance.
Underlining the gravity of Cyprus' position, the EU's economic affairs chief said there were now "only hard choices left" for the latest casualty of the euro zone crisis.
Facing a Monday deadline to avert a collapse of the Cypriot banking system, talks in Nicosia to seal a bailout from the EU and International Monetary Fund broke up late on Saturday without result.
"Negotiations are at a very delicate phase," the Cypriot government said in a statement.
"The situation is very difficult and the deadlines are very tight," it said. Anastasiades was due to arrive in Brussels in mid-morning to continue the talks, it said.
The tone of the statement differed sharply from earlier expressions of cautious optimism during days of intense negotiations between Cypriot leaders and officials from the island's "troika" of international lenders, the EU, IMF and European Central Bank.
Cyprus' overgrown banking sector has been crippled by exposure to crisis-hit Greece, and the EU says the east Mediterranean island must raise €5.8 billion on its own before it can receive a €10 billion bailout.
Without a deal on 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.
Finance Ministers of the 17-nation euro zone will meet at 1700 GMT Sunday.
Scrambling to find the funds, officials said Cyprus had conceded to a one-time levy on bank deposits over €100,000, a dramatic U-turn from five days ago when lawmakers angrily threw out a similar proposal as "bank robbery."
A senior Cypriot official said Nicosia had agreed with its lenders on a 20 per cent levy over and above €100,000 at the island's largest lender, Bank of Cyprus, and four per cent on deposits above the same level at other banks.
Media reports suggested talks were stuck on a demand by the IMF that Bank of Cyprus absorb the good assets of competitor Popular Bank and take on its nine billion euro debt to the central bank as well.
The reports said the Cypriot government was resisting.
Approach to Cyprus crisis causes divisions in eurozone
Ahead of a decisive Eurogroup meeting on Sunday evening, when it will be decided whether Cyprus can receive an EU-IMF bailout, eurozone members have given an indication of how split they are over how to deal with the island’s economic problem.
Cyprus has been told that it must reduce its banking sector to the EU average of 3.5 times the country’s GDP and many within the eurozone have blamed the current crisis on the island’s overblown financial sector.
"To all those who say that we are strangling an entire people ... Cyprus is a casino economy that was on the brink of bankruptcy,» French Finance Minister Pierre Moscovici told Canal Plus television.
However, Luxembourg, whose banking sector is more than 20 times the country’s GDP, is critical of the way the eurozone has dealt with the Cypriot crisis.
“Some countries, such as my country and Cyprus also, have legally built something up over the past decades and you should not disparage that on principle,” Luxembourg's Foreign Minister Jean Asselborn said at a meeting of EU foreign ministers in Dublin on Friday, according to German press agency DPA.
“There is no one who says that the automobile industry or the weapons industry are over-proportional in Germany,” he added, saying that Berlin should watch out not to speak in a “hurtful” tone to fellow EU members.
Submitted by Tyler Durden on 03/24/2013 21:09 -0400
Well I hope that they are doing the best thing to do to solve economic crisis in their country. Or else, their people will suffer with this.
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