Brussels mulling preemptive Takeover of Cyprus ? " The Slog " say yes....... And as we await the vote of the Cyprus Parliament vote on the Bail-out , Cyprus trys to mollify the troika and the ESM makes happy talk about everything proceeding swimmingly.....

http://hat4uk.wordpress.com/2013/04/25/ec-coup-planned-for-cyprus/

EXCLUSIVE: BRUSSELS MULLING PRE-EMPTIVE ANNEXATION OF CYPRUS

Business community discontent pushes EC into plans for total control

Draconian new property tax a condition of receiving bailout loan

Sources in Brussels allege that the European Commission has been exploring ‘stages of media information development’ in order to establish much tighter control over the immediate future of Cyprus. The bottom line will be on-the-ground  fiscal and financial policy management by technocrats. The move is being prepared in the light of a strong desire among influential public figures in Cyprus to get out of the euro as soon as possible. Sources on the island last night confirmed that the business and political communities there remain irreversibly unhappy about the deal reached with the Troika recently.

A three-stage media-spin operation is being hatched in Brussels to rationalise and disguise an effective annexation by the EC of Cyprus.

The first stage being followed at the moment consists of “it is all going rather well, the problem has been overstated, but the Cyprus banks are now fully stabilised, and the EC hopes very soon to be able to supply the Government with investment funds to speed up exploitation of offshore energy and mineral deposits, thus giving the island a more soundly based economy that it had before”. It is, of course, complete bollocks, but this part of the spin operation is already starting: the Cyprus Mail this morning confirms that ‘Cyprus is on track to get €3 billion by the end of June after the Board of Governors of the European Stability Mechanism (ESM) yesterday decided to show “solidarity” and grant, in principle, financial assistance to the troubled island.” On cue, FinMin Chairman Djisselbloem this morning added, “By providing loans of up to €9 billion the euro area member states are showing solidarity with Cyprus. The implementation of the conditions attached to the assistance should ensure that Cyprus can build its economy on a sustainable basis.” What he didn’t say, however, is that the interest rate will be 2.5%, and not be repaid for 35 years. Thus Cyprus is about to join Greece as a prisoner state in the EU.

The second stage will begin as follows: “Nicosia has been lying to us about the size of the debt problem. This is iniquitous but sadly true, and we told you so. They will now need more money sooner than we could have known. The haircut being applied to those who foolishly risked their money by investing in crazily high  interest rates will thus have to be much higher.”

We can expect supine euromedia to start peddling this one any day now. Effectively, the result will be total confiscation for larger depositors. The EC is hoping to cement this part of the rationale (and stifle opposition) by witch-hunting any examples of suspected wrongdoings among MPs. Already recognising that this rumour is widespread on the island, President Anastasiades issued a back-handed press release yesterday stating that ‘the government neither intends nor aims at penalising political life in Cyprus, [but] at the same time no one enjoys immunity with respect to the investigations into the circumstances that have led economic hardship.’

It’s already clear, meanwhile, that even the €10billion bailout needs some newly onerous taxes to get off the ground for Cyprus to receive it. Government spokesman Christos Stylianides said yesterday that a new property tax was being rushed through: “We must send a bill to parliament … because we all know that we need the disbursement of the first tranche,” he told Cypriot media. The new tax will be paid by property owners towards the end of September, and hopes to bring in a 150% increase on the Cypriot residency system, from the current €30 million to €75 million.

The Cypriot business community is rightly suggesting that this can only suppress consumer demand and worsen the island’s economic outlook.

The final part of the rationale will stress that, due to the Nicosian government’s corruption in tipping off its criminal friends, the EC has now established very tight currency controls, but these will have to remain in place for longer than they thought. Senior EC staff will thus have to oversee this process on the ground, and also assist in giving the political process technocratic help.

This last stage, if reached, would act as the rationale for a complete takeover of the island….almost a form of direct rule as existed during the 1970s troubles in Northern Ireland. To this, it seems, will be added some pleading about Cyprus having problems that could easily destabilise the entire EU, and so the EC must be hands-on.

As a programme of disguised annexation,  from the Belgian-Berlin gargoyle standpoint, this move is being mooted as vital: for the truth is that a growing number of politicians and senior businessmen on the island have spent the last ten days lobbying Cypriot leaders very hard for an immediate exit from the eurozone, a rapid default, and then the re-establishment of a new currency. This last, they argue, is vital if Cyprus is to become competitive again – because it will immediately drop like a stone in value.

The lobbyists argue (and they’re right) that without this approach, the Cypriot GDP could easily fall by 25-30% in the next two years, and result in inevitable political instability….perhaps even a Turkish move to take advantage of it and establish hegemony over the island.

Hence the urgent need for the EC to complete a de facto annexation in the guise of a ‘rescue them and protect ourselves’ approach.

“The destruction of Cyprus’s banking business and the removal of all credit for small business here means we now have nothing to gain at all by staying in the euro,” said a source on the island. “Our group has been stressing this constantly before and since the deal”.

But my Brussels mole says he doubts the potential success of any such move to leave.

“For once, the Commission has seen this one coming,” he told me, “And they’re keen to establish their power to control things on the ground. Cyprus is under half a percent of the EU economy and of little real significance. But any sign of [Brussels] weakness could easily make things worse in places like Italy.”

Also, lest we forget, Cyprus is surrounded by a fortune in energy and mineral deposits.

Later today at The Slog: How the rebellion contagion is spreading to Italy and Greece

http://www.cyprus-mail.com/christos-stylianides/interim-ipt-bill-satisfy-troika/20130425

‘Interim IPT bill to satisfy troika’

By George PsyllidesPublished on April 25, 2013

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Cyprus has until now taxed properties according to their 1980s values while many properties have not even been registered

YEARS of omissions and delays have forced the government to submit provisional immovable property tax legislation (IPT) in a bid to meet immediate bailout conditions, but which will have to be amended by the end of June to make it fairer, spokesman Christos Stylianides said yesterday.

The spokesman said authorities lacked sufficient data to prepare a comprehensive proposal but at the same time the bill had to be approved in the next few days for Cyprus to be eligible for the much-needed first tranche of a €10 billion bailout at the beginning of May. 

“Unfortunately, past omissions and shortcomings have resulted in insufficient data,” Stylianides said, adding that the government could not accept the current distortions in the system.

Cyprus has until now taxed properties according to their 1980s values while many properties have not even been registered. 

“There are whole areas in Limassol, Nicosia, and Larnaca, where houses worth millions of euros are built, which do not have a building permit at the moment and are considered plots and fields,” Stylianides said. 

This means any law passed under current circumstance would be unfairly distributed among registered home owners. 

The administration was asking for more time, pledging to have a fairer final proposal before parliament by the end of June.

“We must send a bill to parliament … because we all know that we need the disbursement of the first tranche. We expect the approval of this proposal being fully aware there will be a much better and much fairer IPT by June,” Stylianides said.

The finalised IPT was expected to be paid by property owners towards the end of September.

Stylianides said the state would use information and data held by local authorities, the land registry and even the VAT service.

The finance and interior ministries judged that they could not collect all the data in such a short time, he said.

“We are asking for this small extension because we saw that the data is distorted and insufficient,” Stylianides said.

The bill aims to raise €75 million on top of the €30 million collected from the IPT in 2012.

Stylianides said the final bill provided for €125 million in revenues from IPT – €75 million plus €30 million plus a ‘cushion’ included because “not everyone will be able to respond during the specific timeframe.”

“’Cushions’ are included in all memoranda in all countries,” the spokesman said.

According to the bill, reports said, individuals will pay between €50 for a property valued at €12,500 in 1980 to €51,419 for those over €3.0 million.

Owners whose properties were worth between €40,001 to €120,000 would pay an average €305 and a maximum of €640.

Properties worth between €170,001 and €300,00 will be taxed an average €1,500. The maximum amount for this bracket will reach €2,340, reports said.

http://www.cyprus-mail.com/cyprus/esm-grants-stability-support-cyprus/20130425

ESM grants stability support to Cyprus

By Stefanos EvripidouPublished on April 25, 2013

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CYPRUS IS on track to get €3 billion by the end of June after the Board of Governors of the European Stability Mechanism (ESM) yesterday decided to show “solidarity” and grant, in principle, financial assistance to the troubled island. 

Following the Eurogroup’s decisions taken on March 25, 2013, Cyprus will receive assistance of up to €10 billion over the next three years. 

Repayment of the loan will begin in ten years time and have a maximum maturity of 20 years and an average of 15 years while the interest paid will be calculated based on the funding costs of the ESM, likely to be between 2 and 3 per cent. 

The ESM is expected to provide approximately €9 billion, subject to approval by its Board of Directors, and the International Monetary Fund (IMF) is to contribute around €1 billion, subject to approval by its Executive Board.

“By providing loans of up to €9 billion the euro area member states are showing solidarity with Cyprus,” Jeroen Dijsselbloem, Chairman of the ESM’s Board of Governors and Eurogroup President said. 

“The implementation of the conditions attached to the assistance should ensure that Cyprus can build its economy on a sustainable basis,” he said. 

Klaus Regling, the ESM’s Managing Director, said: “This is the first fully fledged macro-economic adjustment programme financed by the ESM.”

So far the ESM has financed the programme for financial sector reform in Spain to the tune of €41 billion. 

“Even after this second assistance programme the ESM will be able to fully play its role as the euro area’s effective firewall as it will still have about 90 per cent of its total lending capacity of €500 billion,” he added. 

The ESM was set up last October to preserve the financial stability of Europe’s single currency by providing direct financial assistance to euro area Member States in difficulty.

It was preceded by the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM).

The EFSF and EFSM continue to handle money disbursements and programme monitoring of previously approved bailout loans to Ireland, Portugal and Greece.  

Greece alone has secured around €200 billion in bailout funds so far from the two previous instruments. 

Cyprus is not only the first fully fledged macro-economic bailout financed by the ESM, it is also the first country forced to contribute to its rescue package with a “bail-in” of over €10 billion by uninsured depositors of the island’s two biggest banks. A further estimated €3 billion will come from privatisations, state gold sale and fiscal adjustments. 

Laiki Bank and Bank of Cyprus (BOC) were the worst hit by last year’s writedown of Greek sovereign debt, suffering €4.5 billion losses, equivalent to around 25 per cent of Cyprus’ GDP. 

The initial Eurogroup decision had foreseen a ‘bail-in’ of depositors in all banks in Cyprus, big and small. 

This was reversed after parliament rejected the proposal and the Eurogroup decided on March 25 to wind down Laiki and recapitalise BOC while lumping the latter with Laiki’s over €9 billion debt to the European Central Bank. 

While the ESM’s mandate includes providing loans to eurozone countries in financial difficulties or to finance the recapitalisations of banks, in Cyprus’ case, no portion of the €10 billion can be used to recapitalise the Bank of Cyprus or Laiki whose losses are considered too big to be covered by the EU.  

Instead, €3.4 billion of the funds will be used to cover Cyprus’ fiscal needs, €4.1 billion to redeem its medium and long-term debt, and €2.5 billion for the recapitalisation of banks apart from Bank of Cyprus and Laiki. 

Despite containing buffers for possible upward adjustments, the above figures regarding the state’s fiscal needs and banks’ recapitalisation needs are merely estimates. The true figures will depend to a large extent on how many depositors try to take their money out of Cypriot banks once capital controls are lifted and the impact of the crisis on state revenue and expenditure.  

The first disbursement of ESM financial assistance to Cyprus, around €2 billion, is expected in mid-May 2013, to pay maturing government debt while a further €1 billion will come before the end of June. Each tranche will be disbursed roughly every quarter after that. 

The ESM can tweak the size of each tranche disbursed based on the current needs of Cyprus at each stage and its adherence to pledged reforms. 

The country will be subject to quarterly reviews of its needs and implementation of an extensive programme of policy reforms including restoring the soundness of the Cypriot banking sector, continuing the process of fiscal consolidation, and implementing structural reforms to foster competitiveness and sustainable growth. 

Cyprus is expected to receive around half of the full bailout money within 2013. 

The aim is for Cyprus to return to international markets for loans after the three-year programme ends in 2016. 

It remains to be seen whether Cyprus will go cap in hand in three years time, seeking further bailout funds and whether the ESM will consider extending a hand.