Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Friday, March 22, 2013
ECB decides to enforce dictatorship on Cyprus - imposing capital controls independent of the Cyprus elected Government ( guess that vote earlier this week rankled them a tad ) , trial balloon being floated includes frozen savings with no time frame , central bank now will approve bank transfers ( not your money folks - not anymore ) , lower ATM withdrawals limits ( die serfs ) ....
Europe, Russia Reject Latest Cyprus Bailout Plan Before It Is Even Voted By Parliament
Submitted by Tyler Durden on 03/22/2013 06:49 -0400
Yesterday, when we described the latest Cyprus bailout proposal being (belatedly) debated by the Cyprus parliament and soon to be voted, we wondered how long before the Troika rejects it outright. After all the "Solidarity Bailout" Plan C (or whatever it is) did not do what Germany more than anything wanted to accomplish - punish Russian depositors as this entire farce has been nothing but a political gambit dictated by Germany from the onset. And so while GETCO's entire army of algos awaits the flashing red headline with a touch of optimism to unleash robotic buying of ES and EURUSD, we fast forward to the inevitable denouement, which is, not surprisingly, bad news for Cyprus, because as the FT reports, confirming our initial skepticism, "European officials rejected Cyprus’ plans for an alternative package to save its banking sector and remain in the euro, starting a fresh round of talks with the island nation’s government on Friday."
The latest plan involved winding up Laiki, the island’s second-largest lender, and split it into a “good” and “bad” bank, with larger deposits over €100,000 folded into the latter. Deposits up to €100,000 would be guaranteed and bank jobs were to be safeguarded.
But several of its elements – such as raising €2bn by nationalising the state pension fund and issuing bonds based on future revenues from offshore gas deposits – continued to be seen as non-starters by Brussels and Berlin.
“There was some discussion of going back to the original plan of a bank levy, but there are objections from the central bank,” said one person with knowledge of the talks.
The dismissal of the plan comes as time is running out for the island nation to agree on a plan to raise €5.8bn and avert financial collapse before the European Central Bank suspends funding on Monday.
There were already long lines at cash machines in Nicosia on Friday morning and one Cypriot official summed up the sense of desperation saying: “We are waiting for a messiah to come and save us, and of course, there is none”.
Indeed, Angela Merkel, German Chancellor, on Friday told lawmakers that the nationalisation of Cyprus’ pension funds was not acceptable.
Elsewhere, pouring gas on the non-bailout fire, was Russia which Bloomberg reported has crushed all hopes it would swoop in as an alternative white knight, and bailout Cyprus. After all why would it: the worse the situation on the ground, already blamed on Merkel and the Troika, the greater its leverage, and the more power it has to acquire any and all Cypriot assets for free if and when Cyprus is "spun off" from Europe. From Bloomberg:
Russia spurned Cyprus’s offers of assets for a bailout as the island nation’s lawmakers debate legislation to avert a financial collapse.
“I think we are not able to get the support that we wanted to get,” Cypriot Finance Minister Michael Sarris said in an interview after checking out of the Lotte Hotel in downtown Moscow. “But we must go back home because things are getting serious.”
Russia has ended talks with Cyprus and will decide on participating in restructuring debt after the so-called troika overseeing euro-area bailouts, makes its decision, Finance Minister Anton Siluanov told reporters today in Moscow. The troika comprises the EU, ECB and International Monetary Fund.
Bottom line: Europe will not agree to any plan that does not promote "debt sustainability", i.e., impairment of Russian oligarch savings, which in turn is a non-started in Cyprus, and would lead to an immediate trade war with European energy supplier Russia.
That is, in a nutshell, the stalemate as we head into the weekend, and a Monday Cyprus bank holiday, during which the ECB has issued the supreme bluff, and said it would cut off all the funding to the small island.
Protesters demonstrate at the House on March 21, 2012 (Photo: Christos Theodorides)
Latest Update: 13.16
Government spokesman Christos Stylianides said that negotiations with the troika for a bailout were close to an agreement. He said very important decisions that would shape the future of Cyprus would have to be taken by the legislature in the next few hours. He avoided being specific, but all indications are that the government would submit a new bill for a levy on bank deposits.
Earlier, it was confirmed by the presidential palace that an agreement had been reached for Greek banks to take over the operations of Cypriot banks in Greece at the ‘most favourable terms, under the circumstances’. The deal, on which the governments of Greece and Cyprus had been working for weeks, would reduce the size of Cyprus’ banking sector, a long-standing demand of the EU.
Following the ECB's decision yesterday to cut off the emergency liquidity assistance by Monday the next couple of days will determine the future of this country for the coming years.
It was expected that the House was to convene at 10.00am today to examine and pass nine items of legislation regarding the restructuring of the economy. However it appears that the House Finance Committee is still examining these bills and the House will not convene before this afternoon. Protesters however have already begun gathering at parliament.
Nevertheless a leading ally of Angela Merkel has already said earlier today that 'Cyprus is playing with fire'. The leader of the ruling Christian Democrats in parliament Wolfgang Kauder has already rejected the idea of nationalising pension funds of SGO, a fund that was to be used to part cover the 5.8 billion demanded by troika.
FORGET THE plastic. In Cyprus, cash is king. "I plan to have at least 1,000 euros on me at all times," Constantinos Tsissios, a 34-year-old banker, said at a downtown ATM in the capital, Nicosia. "We've taken as much out as we could," he said yesterday. "You don't know what might happen over the next few days." Five days after Cyprus's panicked leaders ordered banks to close their doors, the fate of the financial system hangs in the balance and credit cards are going out of fashion. Reluctant to accept the promise of payment from customers, shop owners say wholesalers are demanding cash on delivery. Some petrol stations, too, are refusing credit cards. Retailers with only Cypriot bank accounts are struggling to ship supplies in from abroad. Gentlemanly arrangements are bridging the gap. "Because of what's going on the suppliers ask for a small amount, say 50 per cent, in cash, so they can meet their costs," said Federico Basonidis, a 25-year-old worker at a kiosk selling cigarettes, newspapers and sweets. Spooked by an aborted bid to tax their savings, Cypriots are fast losing confidence that their money will still be there when - or if - banks reopen, on Tuesday at the earliest. Rumours on Thursday that one teetering bank would be allowed to fall saw queues grow at ATMs at a downtown branch, as staff behind locked doors replenished cash machines. Marinos Panaretou, a 36-year-old retail manager, said he withdrawn a maximum 500 euros every day since Saturday: "People feel safer if we have cash on us because you don't know what you're going to wake up to," he said. Saturday was the day news broke of a proposed levy on savings to raise the 5.8 billion euros Cyprus's lenders at the EU and International Monetary Fund want in exchange for a 10- billion euro lifeline to keep the island financially afloat. Sixty-three-year-old Christos Phasarias estimated he had lost thousands of euros worth of orders at his car-parts and accessories store: "We need to bring some orders in from abroad and they're all standing by waiting for the transfer to be made so that the goods can leave," he said. "There's no bank to make the transfers, so we can't receive parts on time. It's going to be a disaster." Adamos Hadjiadamou of the Association of Cypriot Supermarkets said that the majority of suppliers had suspended the customary practice of providing goods to stores in return for payments received through credit and cheques. "We see this as unjustified," he told Reuters. "What do we want to do? Destroy the market completely?" At one petrol forecourt, pump attendant Tassos Spingas turned away two motorists who did not have cash: "How will I know if there's money in the account, when the banks are closed?" he asked. Others kept the faith: "We don't have any problems," Stavros Stavrou, chairman of national flag carrier Cyprus Airways, told Reuters. "We've come to an understanding that we'll make payments that should have been made as soon as the banks open."
http://ransquawk.com/headlines/281404
German CDU lawmaker Kauder says can not accept pensions in Cypriot plan and can not budge on our demands on Cyprus's share
08:02 - Economic commentary - Source: Newswires
http://ransquawk.com/headlines/281403
CYBC reports that Cyprus parliament debate may begin later than scheduled
Update details:
- It was reported that Cyprus parliament delayed voting on a new bill yesterday and are to discuss new laws today at 0800GMT according to sources.
08:00 - Economic commentary - Source: CYBC
http://ransquawk.com/headlines/281391
Russia has ended talks with Cyprus and is to wait for Troika before deciding on Cyprus commitment
Russian finance minister says:
- Russia was not interested in Cypriot proposal on gas reserves. - Additional loan not considered because it would have exceeded European debt limits. - Cyprus offered Russia stakes in banks but Russian investors were not interested.
Update details:
- The latest comments are very similar to those reported at 0524GMT today.
07:10 - Economic commentary - Source: Newswires
You know this is going to down right to the wire Sunday night , right ?
And no matter what Cyprus does today , the Troika is going to force the deposit tax on the uninsured deposits over 100, 000 ....... seems like they still have their eye on snatching 40 percent too from the Russians ..... not just Russians seeking financial sanctuary , this also hits Russian Government Agencies that run money through Cyprus banks .....
For now , Russia is going to sit back and see how the game plays out.......
A Russian depositor of Cyprus Popular Bank holds a plackard that reads, "we won't be Germany's slaves", during a rally by employees of Cyprus Popular Bank outside parliament in Nicosia last night. Photograph: YANNIS BEHRAKIS/REUTERS
The vote in Cyprus has been delayed until this afternoon.
There are reports that this is to allow finance minister Michalis Sarris to return to parliament and update MPs on his trip to Russia.
MPs vote on bank restructuring legislation this morning
Good morning and welcome to our rolling coverage of the Cyprus crisis, as it struggles to agree a new bailout deal as the clock ticks towards the Monday deadline set by the European Central Bank.
MPs in Nicosia are preparing to vote on new legislation to restructure its banking sector this morning.
The vote, on nine different bills, will pave the way to restructuring its second largest bank, Laiki, and imposing unprecedented restrictions on financial transactions on the sector.
The session, which begins at 8am GMT, is a crucial step for Cyprus (in its push for Plan B), and should should cut more than €2bn off the €6bn which Cyprus must find.
But Cyprus will still need to reach a deal with the eurozone and the International Monetary Fund before the ECB carries out its threat to withdraw liquidity support on Monday.
And without that plan, Cyprus's position looks pretty shaky this morning.
The vote comes as finance minister Michalis Sarris flies home from Russia, apparently having failed to secure fresh support from Moscow.
"I think we are not able to get the support that we wanted to get,” Sarris said in an interview after checking out of the Lotte Hotel in downtown Moscow. “But we must go back home because things are getting serious.”
We'll be following all the latest developments through the day.
There are signs this morning of rising frustration in Germany.
Volker Kauder, parliamentary leader of Angela Merkel's CDU party, has warned that Cyprus is "playing with fire", and needs to find a workable proposal to find its share of the bailout urgently.
Kauder also told the ARD TV station that Germany would not support the nationalisation of Cyprus's pension funds (one possible way to find the shortfall in the bailout plan).
I don't think this can happen, because this would be huge for pensioners, for the small people. So I don't think this is a proposal that help...
If a proposal comes, I am optimistic. But we aren't there yet.....I still believe we will get a settlement, but Cyprus is playing with fire.
( Looks like Fin Min Sarris comes home empty handed , didn't even manage to get existing loan extended or interest rate lowered.... Rosneft and Gazprom pass on natural gas offer apparently)
Cyprus finance minister Sarris says Cyprus didn't get financial support requested from Russia
Says:
- Russian loan may still be extended, terms revised.
Reaction details:
- EUR/USD immediately moved lower by 17 pips from 1.2920 to 1.2903, trades 1.2905 (+12 pips) last.
http://www.itar-tass.com/c1/683800.html
"Gazprom" and "Rosneft" is not interested in the proposal of Cyprus on deposits
Photo EPA / ITAR-TASS
MOSCOW, March 22. / ITAR-TASS /. "Gazprom" and "Rosneft" is not interested in the offer, which made Russia Cyprus in their fields, informed source in the Russian Ministry of Energy.
"So far no results," - he said after the talks, referring to the issue of the disputed territory with Turkey.
Responding to a question about how the numbers were specific and prepared proposals spokesman said: "They / Cypriot / invited to participate in the tender, it is not over for the field seismic, meaning there is not clear that in the field, it is necessary to study in depth in future ".
"Gazprom" and "Rosneft", these proposals are not interested, "- he concluded.
and withdrawal limit - 40 euros at a time yesterday ..... daily limit went from 800 euros to 260 in a day .....
Photograph: Petros Karadjias/AP
Before we go -- my colleague Helena Smith is in Nicosia, and reports on the sense of anger at the cash machines:
At branches in Nicosia, the divided capital, Cypriots queued for hours in the hope of withdrawing cash with lines frequently moving at a snail’s pace because of the inability of cash machines to dispense more than €40 euro at a time.
“I’ve had to use my card ten times to get 400 euro,” said Maria Gika, stuffing wads of cash into the pockets of her jeans before Laiki announced the €260 euro limit late on Thursday. “I’m entitled to withdraw 800 euros a day. It’s disgusting that I’m unable to access my own money.”
The official sick man list of Europe has long been the PIIGS, or if you prefer, the GIPSI: Greece, Ireland, Spain, Italy, Portugal. As the Cyprus restructuring drama has moved into high gear, it’s obscured news of a serious deterioration in the French economy and the weakened condition of Slovenia, which has a population and GDP roughly 1.5 times as large as that of Cyprus.
The latest Flash PMI data spell further bad news for the French economy, with the downturn in output accelerating to the sharpest in four years. Again it’s difficult to find any crumbs of comfort among the data, with new orders and backlogs both declining at sharper rates and employment cuts continuing. Moreover, future expectations in the service sector slumped to the lowest level since the peak of the financial crisis in late-2008, underlining the extent of companies’ worries over a persistently bleak economic climate.
To frame it in another horrifying perspective, the PMI of the euro zone’s second-largest economy was lower than that of Spain and Italy—and almost down to Greek levels (video), as Reuters’ Jamie McGeever explains.
What’s most worrying is when you look at how France’s data stacked up against the euro zone’s as a whole, which were also published today. While the euro zone’s PMI (blue line) and its GDP growth (orange line) have moved pretty closely in sync, France’s PMI has become unhinged in the last couple of years. And that’s bad because, as PMI reflects business confidence, it’s typically a leading indicator of GDP growth (click to enlarge):
….But even if PMI continues to fall, the chart above shows that France’s GDP has proven fairly resilient—especially compared with the euro zone’s trend. So things should be okay, right?
Probably not. Kennedy chalks this ”puzzling” gap in GDP and PMI up to the difficulty in accurately measuring service-sector output in the official data. The recent blindsiding slump in French industrial production may show official data finally falling back in line with PMI, he says.
That means that the gap you see in the above chart could be about to close. GDP growth for the first quarter of this year could come in surprisingly low. If so the country’s chances for a near-term recovery are receding faster than its leaders may be willing to admit.
And while the cognoscenti were wondering when austerity would hit the core, and expected France to take the hit, I doubt many investors have Slovenia on their watch list. But Reuters argues Slovenia will be next to ask for a rescue:
Slovenia’s mostly state-owned banks are nursing some 7 billion euros of bad loans, equal to about 20 percent of GDP, underpinning persistent speculation that the country might have to follow other vulnerable euro zone countries in seeking a bailout…
Commerzbank says “Slovenia is likely to seek a refuge under the bailout umbrella in the second half of this year”. According to Christoph Weil, senior economist at the German bank:
I think Slovenia will ask only for a banking bailout but I would expect the euro finance ministers would demand a full economic adjustment program and measures to consolidate the budget and to reform the economy, meaning it would end up being a full-blown bailout.
They will need to issue bonds in the primary market if they need to recapitalize their banking sector but recent history does not bode well for this, Weil said:
Since March 2011…Slovenia has not issued any more new bonds in euros. In October 2012, one dollar bond was issued -Slovenia’s first. Only one dollar bond in two years is a bad omen for Slovenia’s ability to tap into the capital market.
Slovenia at least does not have the messy issue of boatloads of foreign depositors. But Slovenia needs to issue bonds before June 6, which means its weak financial condition is likely to command more attention in the coming weeks. Stay tuned.
As Europe wakes up to what could be a tumultuous day, Handelsblatt reports that the ECB has decided that, due to the "great danger" of a bank run once they reopen next week, it will enforce capital controls independently of Cypriot (elected) officials. With perhaps a nod towards negotiating some ELA funding for Cypriot banks next week (if the government accepts this ECB-enforced 'program'), the rather stunning restrictions on people's private property include:
Freezing Savings - no time-frame(it's not your money anymore)
Make bank transfers dependent on Central Bank approval (a money tzar?)
Lower ATM withdrawal limits (spend it how we say?)
The capital controls will be designed "so that citizens have access to sufficient cash to go about their lives." So, there it is, a European Union imposed decision on just how much money each Cypriot can spend per day. Wasn't it just last week, we were told Europe is fixed?
Handelsblatt cites unidentified central bank sources so we wonder whether this is yet another strawman shot across the bow as the Cypriot government heads in for an early start of discussions at 10am (GMT)
The European Union is urging Cyprus to place capital controls on the island's troubled banks to avoid a financial collapse and an exit from the eurozone, an EU source said on Thursday.
"Cypriot authorities have three things to do before Tuesday: Present a credible and viable plan B to replace the rescue rejected by parliament, install long-term controls on capital placed in the banks, and prepare to merge the two main banks in trouble," the senior European Union source said, adding that there was otherwise a risk of Cyprus having to leave the eurozone.
While Cypriot banks are set to remain closed until Tuesday, orders have been placed to withdraw billions of euros as soon as business reopens, the source said.
The EU source said withdrawals of seven billion euros were rumoured with fears the cash bleeding could be even more severe.
The source said the decision to impose capital controls was a political one and up to the Cypriot government.
If a block on capital fleeing the country is not installed urgently, the Cypriot banks will collapse putting the government on the hook to pay out deposit insurance to all clients up to 100,000 euros.
The comment came as anxious Cypriots queued outside ATM machines on Thursday to withdraw cash as fears rose that the country's banking meltdown will mean its largest banks close indefinitely.
Cyprus politicians meanwhile agreed to set up an investment fund as part of a Plan B to secure a bailout deal with eurozone lenders, while ruling out a tax on bank deposits that sank an earlier deal.
Cyprus set to impose its own draconian measures - sure glad Europe is fixed ......
Following a run on the Laiki bank on Thursday, the Cypriot government has submitted a bill to Parliament which would enact strict capital controls for when banks open next Tuesday, restricting the movement of funds for up to 60,000 British expatriates with bank accounts in Cyprus.
Finance ministers for the 17 eurozone countries on Thursday night considered the proposals to restructure and freeze all assets held in the Popular Bank, known in Greek as Laiki, and the Bank of Cyprus.
The EuroGroup backed away from letting Cyrpus collapse and announced that negotiations would begin on the new Cypriot proposals.
"The EuroGroup stands ready to discuss with the Cypriot authorities a draft new proposal, which it expects the Cyprus authorities to present as rapidly as possible," said a statement issued after a telephone conference.
"After the conclusion of such negotiations the Cyprus authorities should begin legislating the elements of such an agreement."
Panicos Demetriades, the governor of the central bank of Cyprus, pressed for “urgent” legislation “relating to the reorganisation and recovery of the Cypriot banking system” in a crisis that threatened to spark a run on banks and to wipe out £1.7bn in savings held by Britons.
“This consolidation process will prevent the risk of bank failures and protect in their entirety all insured deposits up to the amount of €100,000 euros,” he said.
“It also creates conditions for the recovery of the banking system and guarantees jobs.”
Cyprus will divide Laiki into two entities, one will contain all insured deposits of under €100,000 and the other will be a “bad bank” with larger deposits, often Russian, subject to an asset recovery programme and substantial losses.
There were dramatic scenes on Thursday night as Cypriots queued to withdraw cash from the Laiki bank, the country’s second largest, after theEuropean Central Bank warned it would cut off funds on Mondayunless there was agreement on an international bailout.
To prevent the bank’s collapse a cash limit of €260 a day was imposed as panic was fuelled by angry demonstration by Laiki staff - the restructuring means 10,000 jobs are at risk - outside the Cypriot parliament.
Eurozone officials warned Cyprus that unless it agreed to restructure its bank, hitting investors with deposits of more than €100,000 with a substantial haircut, the EU’s central bank would pull the plug by withdrawing “emergency liquidity assistance” to Cypriot banks, forcing it out of the euro.
“If the financial sector collapses, then they simply have to face a very significant devaluation and faced with that situation, they would have no other way but to start having their own currency,” said a senior EU official.
Before clearing a €10bn EU-IMF bailout and continued liquidity support for banks in Cyprus, eurozone finance ministers will seek assurance that the restructuring of Laiki reduces Cypriot bank debt by €5.8bn.
A Cypriot plan for a new state investment fund to recapitalise banks will be backed by nationalised pension funds, church property and, as yet untapped, oil and gas reserves.
It will also be carefully scrutinised by the eurozone ahead of parliamentary votes on nine emergency bills aimed at ending the Cyprus crisis.
The latest installment in the European crisis was triggered at the weekend when the eurozone imposed a levy on all Cypriot bank accounts, including previously guaranteed deposits under €100,000.
The proposal was then rejected on Monday by the Cypriot parliament triggering a new round of turmoil in the eurozone.
John Cridland, the director-general of the CBI, on Thursday night warned that “the ill-thought-out ‘stability levy’ on bank deposits has created a real mess”.
“While technically a tax, it undermined the confidence of ordinary depositors in the safety of their savings - one of the fundamental pillars of stability that the Banking Union was designed to fix,” he said.
“The events are a stark reminder that not only has the eurozone crisis not gone away but also how much Europe and the eurozone countries in particular, are going through a period of rapid transformation.”
Separately on Thursday, Standard & Poor's cut Cyprus' credit rating from
CCC+ to CCC, two notches above default.
Deposit snatching - definitely the new game in town - Italy next ?
In the light of the Cyprus heist, the UK, US, and Spain are considering depositor haircuts too. As The Slog predicted last week, the Germans have this in mind for everyone.
Apologies for this, but WordPress has managed to swallow up an earlier post I made. Instead, it posted something in draft, and trashed the other one.
So herewith a summary plus update.
The Spanish finance Minister has floated the idea of a 0.2% depositor levy there. The Bank of England and the FIDC have issued a joint paper suggesting something similar, only bigger, in the event of an emergency in the UK or US.
Clearly, the idea of embezzling depositor funds is catching on. But Germany – who else? – is taking things a step further by suggesting that somebody else’s depositors be raped. And for this little experiment, the Germans have chosen Italy. Refer if you like to an earlier Slogpost about Frankfurter Allgemeine Zeitung printing bollocks about personal wealth in Italy being higher than that in Germany.
Now Joerg Kraemer, chief economist of the German Commerzbank, has enlarged on this mendacity, and called for private savings accounts in Italy to be levied at 15%. “A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product,” he told Handelsblatt yesterday.
Net financial assets of the Italians amounts to 173% of GDP. This was significantly more than the net financial assets of the Germans, which corresponds to 124% GDP, said Kramer Handelsblatt Online. “So it would make sense, in Italy a one-time property tax levy,” suggested the Bank economist. “A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product.”
Do please read the piece at the link above – it’s repeated again at the link below. It shows how Berlin (aka Schäuble) is systematically building up a body of shibboleth crap in order to support the infinite German capacity for “I am not to blame, oh woe is poor me”.
Slog banking source suggests Russian back-pedalling
Russian Finance Minister Anton Siluanov….concerned about cost of Cyprus bailout?
The “no” vote from Nicosia and wholesale decamp to Moscow is producing mixed signals all round
Brussels continues to salt the press with opinions and TINA ( there is no alternative) pieces this morning, the bottom line being that “we are not convinced there is an alternative to levying depositors, and total bailout put-line of a €10bn package from the eurozone”. But then, Dutch Finance Minister Jeroen Dijsselbloem, who chairs the meetings of finance ministers and probably drafted the release, said that the euro group “stands ready to assist Cyprus in its reform efforts.”
In Moscow, the man with the fib for every occasion, Barosso of Portugal, has told the Kremlin that “the EU Governments were not informed of the Cypriot decision” about a levy, and so the EC couldn’t warn them about it. Apart from EU Governments being a different group of people to the EC, Schäuble’s opening gambit of a 40% levy, and massive Russian bank deposit withdrawals on the Tuesday and Wednesday before the deal, this explanation makes sense.
And from the ECB soon after dawn today came a time-limit: accept the bailout deal by Monday, or else. Presumably a door somewhere in the Central Bank issued the threat, as Mario Draghi is hiding under a duvet somewhere in the attic.
So all the B-am-B axis has to offer are lies, obfuscation and threats. Elsewhere in Moscow, the situation is more complex still. Cypriot Finance Minister Michael Sarris continues to hold talks, hopeful that the Russian companies and individuals who already have $31 billion of deposits in Cyprus will affect Russian political opinion in his favour. But although Russian President Vladimir Putin has already called the levy “unfair, unprofessional and dangerous”, there were one or two signs of Kremlin back-pedalling overnight.
Sarris stressed yesterday that Cyprus is offering Russia “opportunities” including banking and natural gas assets in return for help in bailing out the island nation. He added pointedly, “We are asking for help clearly, but something that would make also economic sense for Russia,” Sarris told reporters in Moscow this morning before going back into the negotiations.
But a banking source with business interests in Russia suggested to me last night that Russian Finance Minister Anton Siluanov and his team are expressing anxiety about whether what the Cyprus team says it wants is really enough.
“I get the sense that they see the ten billion as something that will get the Cypriot government nowhere fast,” said the informant. “I think they’re right. There’s no point to the Russians giving too little and it being eaten up by more borrowing. So they need to decide what they want and how much they’re prepared to pay for it. The moot point then is whether Cyprus could swallow what they want.
But, as things start to heat up, you can always rely on a CDU MP to say something truthful and tactful. “Cyprus has rebuffed the outstretched hand of its partners. The vote is an act of collective unreason and the people of Cyprus must now pay a high price,” sympathised Hans Michelbach, a finance expert in the Merkel Government. Arbeit macht frei, and all that.
Stay tuned: this can only get sillier. And stand by for rebellion contagion in Greece.
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Russian Finance Minister Anton Siluanov….concerned about cost of Cyprus bailout?
