http://www.cyprus-mail.com/cyprus/russia-ties-cyprus-loan-terms-release-vtb-assets/20130421
Russian banks and companies have poured money into Cyprus since the 1990s, taking advantage of low taxes and relaxed business regulations.
Many of them were caught unprepared when major account holders were told they would lose a proportion of their deposits over €100,000 under a European Union bailout to save the islandy from bankrutpcy.
"We held general talks about the need to increase the participation of the Russian Federation in negotiations over Cyprus, since we are a creditor," Anton Siluanov told journalists on the sidelines of the Group of 20 developed and developing nations meeting in Washington.
Siluanov, who met a series of euro zone and International Monetary Fund officials during the session, added he wanted to look at Russia's role in Cyprus, but in a way that "our interests are taken into account".
Russia granted Cyprus a five-year €2.5 billion loan in 2011 and has said previously it was ready to restructure the terms by extending the credit and cutting interest to 2.5 per cent from an earlier 4.5 per cent.
"We will deliver our support (restructuring of the loan) taking into account our interests, and our interests are that our subsidiary (the Russian Commercial Bank) should operate in normal conditions," Siluanov said.
"It does not require any bailout or financial support. Money of our companies has been frozen there. We would like this money to reach its recipients."
The Cyprus-based Russian Commercial Bank is a subsidiary of Russia's number two bank, VTB.
VTB's management sent a letter to Russia's government authorities in April asking for help in removing the restrictions on its operations in Cyprus.
"In theory, all support the early lifting of restrictions (in Cyprus)," Siluanov said, summing up his meetings with euro zone and IMF officials.
"Next week, there will be another round of talks on the issue, let's see how it will be decided."
http://hat4uk.wordpress.com/2013/04/21/crisis-athens-the-price-of-everything-and-the-value-of-nothing/
One building (left) not as yet for sale in central Athens is that of the left-wing Party led by Alexis Tsipras, Syriza. But across from that square and two blocks down, the People’s Republic of China has bought a building that was once a major department store.
Russia ties Cyprus loan terms to release of VTB assets
Published on April 21, 2013
RUSSIA wants to play a bigger part in talks over solving Cyprus' financial problems but will only restructure its loan to the island if its interests here, especially those related to VTB Bank, are protected, Moscow's finance minister said.
Russian banks and companies have poured money into Cyprus since the 1990s, taking advantage of low taxes and relaxed business regulations.
Many of them were caught unprepared when major account holders were told they would lose a proportion of their deposits over €100,000 under a European Union bailout to save the islandy from bankrutpcy.
"We held general talks about the need to increase the participation of the Russian Federation in negotiations over Cyprus, since we are a creditor," Anton Siluanov told journalists on the sidelines of the Group of 20 developed and developing nations meeting in Washington.
Siluanov, who met a series of euro zone and International Monetary Fund officials during the session, added he wanted to look at Russia's role in Cyprus, but in a way that "our interests are taken into account".
Russia granted Cyprus a five-year €2.5 billion loan in 2011 and has said previously it was ready to restructure the terms by extending the credit and cutting interest to 2.5 per cent from an earlier 4.5 per cent.
"We will deliver our support (restructuring of the loan) taking into account our interests, and our interests are that our subsidiary (the Russian Commercial Bank) should operate in normal conditions," Siluanov said.
"It does not require any bailout or financial support. Money of our companies has been frozen there. We would like this money to reach its recipients."
The Cyprus-based Russian Commercial Bank is a subsidiary of Russia's number two bank, VTB.
VTB's management sent a letter to Russia's government authorities in April asking for help in removing the restrictions on its operations in Cyprus.
"In theory, all support the early lifting of restrictions (in Cyprus)," Siluanov said, summing up his meetings with euro zone and IMF officials.
http://www.cyprus-mail.com/costas-apostolides/need-plan-b-return-cyprus-pound/20130421
The need for a Plan B: a return to the Cyprus pound
By Costas ApostolidesPublished on April 21, 2013
TOPIC TAGS
costas apostolides,pound, OpinionsRELATED CONTENT
CYPRUS has found itself in the extremely difficult position it is in because both the present and previous governments went into bailout negotiations at all levels unprepared and without identifying and examining their options. Furthermore they went into discussions believing that their “friends in Europe” would offer them reasonable terms, and they failed to make realistic assessments and study the alternatives.
One of these alternatives is a return to the good old Cyprus pound, with its history of strength and resilience in adversity and well managed by the Republic of Cyprus. One should, however, bear in mind that those characteristics were those of the old Cyprus pound. It would take a lot of hard work to ensure any return to the Cyprus pound achieves the same results under present conditions. For the strength of the Cyprus pound was always based on good policies, sensible management and good planning, plus the achievement of consistent high growth rates with relatively stable inflation.
The study of a possible return to the Cyprus pound should have been undertaken prior to negotiations given that Cyprus would be forced to accept the Eurogroup memorandum for resolving the island’s banking and public finance problems.
As a result of the memorandum no one really knows what will happen to Cyprus’ economy over the next couple of years. Olli Rhen, the European Commissioner on Economics and Monetary Affairs, anticipates that Cyprus national income will fall 10 to 15 per cent in two years, while several other overseas estimates put the losses in production and income at over 20 per cent.
The Eurogroup decisions were based on book keeping and simplistic arithmetic, while the economy, and especially the banking and financial sectors, function on the basis of psychology. The one thing you must not do in banking is undermine confidence in the system because no one can prevent total collapse of the financial system if there is a massive bank run by depositors. Yet the Eurogroup has totally undermined such confidence, and ignored the most basic of all banking rules. The miracle is that the people of Cyprus are showing amazing confidence in the system and are going about their daily business in a sensible and practical way, and that gives hope that yet again the island will pull through yet another test of the island’s resilience.
The new government has stated clearly that there is no Plan “B” and that it is determined to fully implement the Memorandum of Understanding, yet a plan B could be the orderly return to the Cyprus pound.
Such a move return requires good preparation and careful planning, and there remain a great many legal and other uncertainties. Here it is assumed that it is possible to leave the eurozone and stay in the European Union and join the European Monetary System (EMS) with UK, Sweden and Denmark among others
The first step would be to round up support for a euro exit procedure for any member which wants to leave the club. This would enable an orderly exit under a predefined procedure rather than an exit based on the “rule of necessity” with litigation and confusion all-round.
The safest way to leave the euro would be to issue pounds for all new payments but keep deposits in euros, in which case Cyprus would have massive foreign exchange reserves. Failing that, Cyprus could request its foreign currency reserves back from the European Central Bank (ECB). It appears that in 2008 Cyprus gave the ECB about €3.7 billion and its reserves fell from €4.453 billion in 2007 to €721 million (mainly gold) in 2008, consequently we should get back at least about €4.423 billion, possibly more if we added foreign exchange to the ECB between 2008 and 2012. With foreign exchange at €904 million in 2012 that would give something around €4.6 billion in reserves available. A worst case scenario would be foreign exchange reserves of around €2.5 billion consisting of gold, foreign currency and euro coins and notes in circulation.
In 2012 the current account deficit of Cyprus was just over€2 billion which would give us one year’s imports worth of reserves under the worst case, and two years if we get our reserves back. That is more than the level in 1974 when we only had one year’s reserves and achieved the economic miracle with full GDP recovery in four years, without burning up our reserves. In actual fact a devaluation of the Cyprus pound would reduce imports and increase exports and thereby probably reduce the current account deficit.
This brings us to the issue of whether to devalue the Cyprus pound. Whatever we decide to do the markets are likely to devalue a Cyprus pound and trying to sustain it at the 2004 level of €1.71 euros to the pound would be difficult to sustain and wasteful on resources. The best solution would be to devalue to par with the pound sterling, since the British market is still our major tourist market, and tourism is very responsive to price changes. Marketing Cyprus as “Where a pound is a pound” would be a great slogan with instant results.
But the surprise is that since Cyprus entered the EU in 2004 the British pound has depreciated from €1.50 to €1.17 this month, but has been steadier since we joined the eurozone in 2008 at between €1.10 to €1.25. A Cyprus pound devaluating to €1.16 would be a massive devaluation of 32 per cent which would be too excessive a shock and does not relate to the effective exchange rate of Cyprus. A devaluation of about half - around 15 per cent - should be studied as a possible level, assuming that the assumptions above on the exchange reserves are valid. A devaluation of that level and a peg on sterling of around five per cent variation could be a viable solution. Such devaluation would spur growth and could get us out of the present problems, but we have to look at the price elasticities of tourism and imports.
I do not believe that international business services are elastic to price, but more based on efficiency and tax avoidance. Furthermore it is not clear that the banking “decapitation” euphemistically called a haircut will affect international business by very much. If growth and prospects are re-established and the natural gas comes on stream on time it should be possible to avoid a mass withdrawal of foreign companies.
The key to a successful return to the Cyprus pound in addition to the exchange reserves is the issue of inflation, and more specifically domestically created inflation. If the Cyprus banks are supported with Cyprus pounds we do not need loans from anyone. However, printing money is inflationary if the money enters the system. In the case of the pound it should be used as building up reserves for the banks to meet their requirements, but not entering the economy through loans. That way the inflationary effect would be contained.
The crucial factors, however, would be to demonstrate seriousness by not over printing money, achieving a reduction in the current account imbalance (presumably by the initial devaluation), maintaining balances on both current and capital account, and most importantly controlling inflation by balancing public sector revenues and expenditure. Contrary to what AKEL believes, under a Cyprus pound state budget controls have to be stricter, because the Cyprus pound would have to inspire confidence immediately on its introduction. There is potential for a further reduction in the budget deficit with Maastricht criteria by targeted reductions (i.e. elimination of student allowances for students receiving scholarships (i.e. all students studying at university level in the state sector).
If the return of the pound could stimulate growth, as one could reasonably assume under conditions of minimal inflation, then Cyprus would be better off under the pound than under the troika. But this is just a first approach to the issue on principles. A proper full scale study involving economists that are both in favour of the euro and those considering a return of the pound is necessary.
Costas Apostolides is chairman of EMS Economic Management LtdCostas.a@highwaycommunications.com
http://www.cyprus-mail.com/bonds/cypriot-based-firm-takes-germany-over-pre-war-bonds/20130421
Cypriot-based firm takes on Germany over pre-war bonds
Published on April 21, 2013
A CYPRUS-BASED company, Mortimer Offshore Services, is engaged in a lengthy legal battle in the US over pre-World War II German Gold Bonds the company says are worth around $9 billion.
According to Avraam HadjiGiovannis, a Business Engineer Consultant who is close to the proceedings, the bonds were bought in the open market from American citizens who had been buying the debt for years over the last century.
These particular bonds, issued by Lee Higginson Trust Company, and printed by the American Bank Note Company, were traded on the US stock exchange. Mortimer began buying up the bonds in the nineties but says Germany refuses to allow encashment.
HadjiGiovannis says the bonds purchased by the company have been authenticated by German government experts on historical securities, Hans Georg Glasemann and Michael Geisel, among others.
The same bonds have been examined and verified by the German high courts as valid and genuine, he said.
Mortimer enlisted the services of major law firms in Germany and the US, Baker Hostetler, Arqis, Baker Mckenzie, SSD, Haag Eckhard Schoenpflug to fight their case.
He filed law suits initially against the German government and then jointly against the major obligor banks.
HadjiGiovannis said the plaintiff seeks a settlement for the outstanding obligations owed for the bonds it possesses. He said the respondents raise defences based on jurisdiction, sovereign immunity, Res Judicata - claim preclusion - and other procedural moves.
“The result is that none of the proceedings to date have looked into the substance of the cases, and the majority of evidence available to the plaintiffs has not been presented to the courts,” said HadjiGiovannis.
“It is the opinion of Mortimer and its legal advisors that the German government has gone to great lengths outside of the public forum to ensure that the US courts are not used as a vehicle to press claims against Germany,” he added.
“Claims for the settlement of these bonds were focused mainly in the US because this was the country in which these bonds were sold, however, as these bonds are international contracts, experts have advised that they can be pursued in other jurisdictions too.”
HadjiGiovannis said the bonds are financial instruments and should not be confused as political instruments. “That means regular financial rules and norms must be complied with, even with the application of government treaties,” he said.
He said these types of bonds and others like them had been the subject of much media attention, research, examination, and litigation for almost a century and the question of how to alleviate unsustainable sovereign debt were not new.
“The company has reaffirmed its intent to continue by legal and commercial means its work of over two decades to overcome the reluctance of Germany to honour her obligations.” HadjiGiovannis added.
According to Avraam HadjiGiovannis, a Business Engineer Consultant who is close to the proceedings, the bonds were bought in the open market from American citizens who had been buying the debt for years over the last century.
These particular bonds, issued by Lee Higginson Trust Company, and printed by the American Bank Note Company, were traded on the US stock exchange. Mortimer began buying up the bonds in the nineties but says Germany refuses to allow encashment.
HadjiGiovannis says the bonds purchased by the company have been authenticated by German government experts on historical securities, Hans Georg Glasemann and Michael Geisel, among others.
The same bonds have been examined and verified by the German high courts as valid and genuine, he said.
Mortimer enlisted the services of major law firms in Germany and the US, Baker Hostetler, Arqis, Baker Mckenzie, SSD, Haag Eckhard Schoenpflug to fight their case.
He filed law suits initially against the German government and then jointly against the major obligor banks.
HadjiGiovannis said the plaintiff seeks a settlement for the outstanding obligations owed for the bonds it possesses. He said the respondents raise defences based on jurisdiction, sovereign immunity, Res Judicata - claim preclusion - and other procedural moves.
“The result is that none of the proceedings to date have looked into the substance of the cases, and the majority of evidence available to the plaintiffs has not been presented to the courts,” said HadjiGiovannis.
“It is the opinion of Mortimer and its legal advisors that the German government has gone to great lengths outside of the public forum to ensure that the US courts are not used as a vehicle to press claims against Germany,” he added.
“Claims for the settlement of these bonds were focused mainly in the US because this was the country in which these bonds were sold, however, as these bonds are international contracts, experts have advised that they can be pursued in other jurisdictions too.”
HadjiGiovannis said the bonds are financial instruments and should not be confused as political instruments. “That means regular financial rules and norms must be complied with, even with the application of government treaties,” he said.
He said these types of bonds and others like them had been the subject of much media attention, research, examination, and litigation for almost a century and the question of how to alleviate unsustainable sovereign debt were not new.
“The company has reaffirmed its intent to continue by legal and commercial means its work of over two decades to overcome the reluctance of Germany to honour her obligations.” HadjiGiovannis added.
"Next week, there will be another round of talks on the issue, let's see how it will be decided."
Greece news of the day......
CRISIS ATHENS: The price of everything, and the value of nothing.
One building (left) not as yet for sale in central Athens is that of the left-wing Party led by Alexis Tsipras, Syriza. But across from that square and two blocks down, the People’s Republic of China has bought a building that was once a major department store.
“The Chinese already own half of Piraeus, and they are trying to buy the rest of it,” said a Greek businessman as we drove together Friday night to a restaurant in the outer southern suburbs of Athens.
“Over there – not far from the Syriza building – is an old warehouse bought by the Chinese,” another source told me as we walked about in the warmth of an Athenian early afternoon, “They have four floors in the building blocked off. Nobody knows what happens in there”.
Today, in April 2013, everything in Greece is for sale. Two days ago a small girl – aged no more than ten I would estimate – came up to me, playing her violin in a main market thoroughfare close to the Acropolis. She wasn’t much of a violinist, but after finishing the piece, she said something to me…and of course, I didn’t understand. A man watching nearby, resigned of expression, said “She is saying she costs very little for your pleasure”.
I gave the kid a small coin and asked the bloke if this was commonplace. “Not common,” he replied, “but not rare either. These bastards will reduce us to an animal state”. I wanted to ask him more, but he waved me away. I don’t blame him; imagine how I’d feel in my own country, being asked by a passing Swede if all English prepubescent kids now whored on the streets.
In a Telegraph piece posted last night from Rhodes by Harriet Alexander, she notes that a Mr George Georgas told her, “We are like a bankrupt housewife forced to sell the silver, to save the family,” he said. “Greece has no choice.” On the island of Rhodes, the 1,850-hectare Afandou estate, on the peninsula of Prasonisi – a paradise for windsurfers – is up for grabs…and grab (as in land) is the operative word.
Antonis Samaras the Greek Prime Minister knows only too well that flogging off bits of Greece is vital in order for his country to get the lifeline monies from the Troika. These monies, of course, zoom from an escrow account straight into the copious pockets of various lending institutions anything up to 9000 miles from Athens. The Greek people – his electorate – are left manage on their own. The ‘Government’ headed by Samaras offers them less and less help while demanding more and more of their money.
The mass of Greek people had little or nothing to do with the debts run up by a political élite at first naively keen to take advantage of cheap ECB loans…and then desperately cunning in the use of Goldman Sachs to help disguise their maxed-out credit cards. Yet the population must stand by and watch Greece become some kind of 19th century African country. In March, the Emir of Qatar bought six Greek islands for £7 million, while a Russian oligarch bought Skorpios – previously owned by the Onassis family – earlier this month for a reported £65 million. It was – wait for it – a present for his 24-year-old daughter Ekaterina Rybolovlev. Meanwhile, a 10 year old girl is for sale in Athens for – what? – five euros?
There are many who, on reading this post, will fall back on weasel excuses about idleness and the need to repay and the appalling consequences of tax evasion. But such observations consistently fail to recognise that 90% of that evasion comes from the 3% Greek élite, 99% of whom in turn are the very people now yelling from the rooftops about the iniquity of voting for Syriza. (And I am bound to record that, very probably, 90% of them in turn live in the smarter suburbs of Athens).
We will never, ever escape from wealth inequity, because we cannot resist the species wiring that insists on a power hierarchy. There is nothing at all wrong with a power hierarchy: the mistake we’ve made is to insist that money should be the currency of that hierarchy. Money is a Golden Calf – a false god. The real unit of power should be accountable leadership: that is to say, the willingness to be unpopular in the short term…and yet judged on the foresight of decisions taken.
Such is the basis upon which – allegedly – several monarchs became legends of history. Suleiman I, also known as Suleiman the Magnificent, reigned as Sultan of the Ottoman Empire for 69 years in the 15th and 16th centuries. Suleiman not only extended the influence of his benign empire: he also reformed education, taxation and the criminal justice system.
From January 16, 27 BC until August 19, AD 14 – a period of 41 years – Augustus Caesar ruled Rome. He improved the infrastructure and military of Rome, and reformed the taxation process. His reign was known as Roman Peace, because during his reign diplomacy flourished.
Cyrus II ruled Persia for nearly 30 years until 530 BC. During his reign, the Persian Empire encompassed much of the Middle East, including Iran, Israel and Mesopotamia. But at the same time, human rights and military strategy were greatly improved.
It is very hard to read about such people (most of whom had a life expectancy of no more than 45-50 years) and then observe the posturing of Antonis Samaras, listen to the evasive drivel of Evangelos Venizelos, or read about Golden Dawn yobs making a mockery of the Parliamentary process here. The politicians sell out, and so now the Greeks must sell up.
I have watched Alexis Tsipras over several months. For a Leftist, I found him inclusive, politically savvy, and media smart. But even if his Party building isn’t for sale, it is beginning to look like Tsipras himself might well be. He began talking to the Americans some time ago, then he visited the States. Now he is on TV all the time: the more exposure he gets, the more he dodges direct questions. Keen not to appear part of a lunatic fringe, the Syriza leader accepts the euro as “a given”, although in this sense he is out of touch with entrepreneurial Greek business – for whom it is a necessary evil they hope will implode in on itself, thus freeing them from the clutches of Berlin-am-Brussels.
If my sources are typical, then Alexis Tsipras is already seen by the US State Department as the coming man: they see him as their Muslim Brotherhood in Greece. I suspect the truth is that Tsipras is a man who will lose middle class support if conditions here improve, and is already leaking support further down the social scale as he backs away from EU and geopolitical confrontation
Everything and everyone in Greece, it seems, is for sale. Except the struggling Greek citizens themselves.
National postpones shareholder vote due to low attendance
NBG will now hold a second attempt on Wednesday and seek agreement from 50 percent rather than 66.6 percent of shareholders. [Reuters]
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