Greece hitting the wall - again ! Will Greek depositors face the next bail -in ? If you're greek , do you want to keep your money in a bank there and find out ? ERT updates ......

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_19/06/2013_504954

Third meeting of party leaders in less than a week aims to clinch agreement on ERT, power-sharing

Prime Minister Antonis Samaras and his coalition partners, PASOK leader Evangelos Venizelos and Fotis Kouvelis of Democratic Left, are to meet at 8.30 p.m. for the third attempt in less than a week to resolve a dispute sparked over the closure of state broadcaster ERT after a three-and-a-half-hour meeting Wednesday failed to yield a compromise.

In statements delivered from their respective party headquarters after the talks with Samaras, the junior partners both repeated their demands for ERT to reopen immediately and for its signal to be restored so that broadcasting can resume. They also called for a reassessment of the basis of the tripartite administration’s policy program agreement.

“It’s important that an agreement is reached for the immediate enforcement of the court’s decision and the restoration of broadcasting,” Venizelos said. He was referring to Monday’s ruling by the Council of State, the country’s highest administrative court, demanding the restoration of the state broadcaster’s signal. The PASOK leader also emphasized the need for any agreement reached by the coalition leaders “to provide a boost to the government with a revised policy program,” he said.

Kouvelis covered similar ground in his statement, insisting that the state broadcaster start airing immediately while also calling for an overhaul of governance. “The three-party government must express the common position of all three parties,” he said.

The fact that neither Venizelos nor Kouvelis said the word “ERT” – they both referred to “the public broadcaster” – was broadly seen as a concession toward the stance of Samaras, who wants a transitional service to operate before the new broadcaster is set up.

There was little comment from ND’s camp after the talks Wednesday, with government spokesman Simos Kedikoglou describing the meeting as “a complex discussion that will continue tomorrow.”

Earlier Wednesday, both PASOK and Democratic Left had pursued a very tough line on ERT, insisting that it must reopen before any restructuring can be carried out and that the majority of the broadcaster’s staff be rehired. Meanwhile aides close to Samaras scrambled to draft alternative scenarios for a “transitional service” to replace ERT until the new broadcaster is set up with a reduced staff.

As the coalition leaders met at the Maximos Mansion, some 3,000 demonstrators gathered outside ERT’s headquarters in the northeastern suburb of Aghia Paraskevi for a peaceful demonstration organized by the country’s two labor unions.

The leader of the leftist opposition party SYRIZA, Alexis Tsipras, was at the rally. “Let them understand that there can be no compromises while there are barbaric layoffs and black screens,” Tsipras said, referring to the coalition leaders.

On Thursday the Council of State, which ruled on Monday that the government had the right to shut down ERT but not to cut the broadcaster’s signal, is to convene in the wake of varying interpretations of its decision by politicians as well as legal experts.

At the behest of the court’s president, Constantinos Menoudakos, the court’s “suspensions committee” is scheduled to convene at 4 p.m. today to reassess the closure of ERT. The court is not expected to issue its decision until Friday at the earliest.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_20/06/2013_504960

Eurogroup to vote on separate funding for credit sector recap

By Nikos Chrysoloras

Greece and Cyprus are hoping to reap significant benefits from Thursday’s Eurogroup meeting of eurozone finance ministers as it is likely to discuss and maybe decide on the possibility of the direct recapitalization of eurozone banks from the European Stability Mechanism (ESM) without that money being

considered part of their countries’ debt.

This is an instrument that would become available from fall 2014, when the single monitoring mechanism for European banks will be in full operation under the control of the European Central Bank and by which time the complete legislation package on the eurozone banking union will have also been voted on.

What is crucially at stake for Athens and Nicosia is whether the option will also apply retroactively – i.e. for countries that have already entered a streamlining program and have borrowed funds to recapitalize their banks. It is likely, though by no means certain yet, that the Eurogroup will approve that retroactive element in principle.

However, eurozone sources said on Wednesday that this will not have a full retroactive application, which would have wiped 50 billion euros off Greece’s debt. Instead, they say, each bank’s request for the use of that mechanism will be examined separately and, if approved, its home country would be expected to contribute between 10 and 20 percent of the funds required. The rest would be covered by the ESM, which would acquire an equivalent stake in each lender’s share capital, thereby buying it from the state and therefore reducing the state debt accordingly.

The ESM would then appoint a representative to each bank’s board, gaining a decisive role in all strategic decisions, and when market conditions permit, ESM will sell its stake to private investors.

Such requests will be accepted from fall 2014 at the earliest. If the Greek state is still the main shareholder of the systemic banks through the Hellenic Financial Stability Fund (HFSF), it will need to prove that it cannot bear the weight of the recapitalization by itself. The total funds for the direct recapitalization of banks will range between 50 and 70 billion euros, with the most likely amount being 60 billion euros.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_20/06/2013_504959

Gov’t eyes tranche frontloading

Funds cashed in immediately could reach 8.1 billion euros to cover the financing gap up to mid-2014

By Sotiris Nikas

Provided that the inspection of its streamlining program comes to a successfully conclusion, Greece can hope that the next bailout tranche will total 8.1 billion euros, as the eurozone is examining the option of disbursing to Athens the installments for the third and the fourth quarter of the year immediately.

That way a major part of the funding gap will be covered, allowing the ources, more than half of the total 8.1 billion euros is the 4.2 billion from the eurozone and the European Central Bank. Of this, the amount of 3.1 billion concerns the last couple of installments for 2013 (700 million for the third quarter and 2.4 billion for the last). The other 1.1 billion euros concern the ECB’s profits from Greek bonds bought during the crisis to support the Greek bonds market. This has already been approved on a political level and Athens is expecting its disbursement.

Another 1.8 billion euros will come from the IMF, which is the Fund’s share in the installment for the second quarter of the year. An additional 2.1 billion euros could come from the bonds bought by national central banks from the eurozone on the secondary market.

With that 8.1 billion, Greece would would be able to safeguard the coverage of its funding gap not only for 2013 but also up to mid-2014. This shortfall was created by the apparent failure to collect 2.6 billion euros from privatization revenues and from the non-implementation of the Eurogroup decision for the postponement of payouts of matured Greek state bonds that the national central banks had acquired before the crisis erupted. The latter was a decision that was never applied. Greece continues to pay for the bonds that have matured and the Eurogroup has not yet found a solution to that problem.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_19/06/2013_504938

Troika takes a ‘pause’ amid coalition concerns

As Greece’s coalition leaders struggled to solve a dispute over the closure of state broadcaster ERT on Wednesday, troika envoys said they were leaving Athens for a “pause,” noting that “important progress” had been made in talks while a senior eurozone official expressed concern about the repercussions of Greek political upheavals on the reform program.

The statement, issued jointly by the European Commission, European Central Bank and International Monetary Fund, did not provide details of the progress achieved – nor of the challenges that remain. It said however that, “to allow completion of technical work, policy discussions will pause, but are expected to resume by the end of the month.”
The statement made no reference to the political tensions in Greece which are believed to have influenced the troika envoys’ decision to take a break, along with the demand that government officials come up with proposals to plug a projected funding gap for 2013 and 2014 of 2.1 billion euros.

Speaking to reporters in Brussels on condition of anonymity, a senior eurozone official emphasized the importance of political stability being maintained if Greece’s economic reform program is to remain on track and rescue loans to keep flowing.

As eurozone finance ministers meet in Luxembourg on Thursday, Greece’s Yannis Stournaras is expected to face questions from his peers regarding the political situation in Athens. Stournaras was involved in the first round of crisis talks between the coalition partners on the ERT debacle on Monday.

http://hat4uk.wordpress.com/2013/06/18/greece-was-the-ert-shutdown-a-dumb-move-or-a-distraction/

GREECE: Was the ERT shutdown a dumb move or a distraction?

Hints of Troika raids on social security budgets and private pensions

Devious, moi?

In one mighty bound over the last week, Greek Prime Minister Antonis Samaras has managed to do what no other politician has since the Greek crisis began: unite the Opposition and divide the Government at one and the same time. But Samaras is supposed to be a wily coyote: so is he really that gauche? A valued contact there described Samaras to me as one of “a small group of self-styled shakers & movers who think they own Greece…not smart at all. Local bully boys. Incompetent and unsavvy to boot”. Yet I am left wondering whether anyone could be that naive, and become Prime Minister. Of course, I then think about David Cameron and remember that such is perfectly possible. But then in turn, other information pops out – and makes me ponder about it further.

Surprise, surprise…after the ‘crisis’ talks got going between the Coalition partners, government collapse (and the need for more elections) was avoided. After over three hours of talks late last night, the coalition partners said talks would resume tomorrow. Not surprisingly, the main Opposition Party Syriza launched a vicious attack on the government yesterday, condemning New Demiocracy’s policy as “An act of tele-piracy on behalf of the Prime Minister.” The Greek Communist Party (KKE) also accused the government in similarly emotional terms, while extreme right Golden Dawn suggested the Prime Minister’s cost-cutting efforts should start from “the high salaries of deputies, the millions picked up by political parties and the ‘golden-boys’ of the public sector.”

Meanwhile – and completely out of the public eye now – six potentially deal-breaking issues remain on the negotiating table in talks between the Finance Ministry and the Troika. The aim – how many times have we heard this? - is for the Troika’s ‘assessment report’ to be completed by July 31st so that the IMF can approve the disbursement of the next installment of €1.8 bn on August 1. The issues include how successful tax measures have been, tax payment monitoring, new ‘collection mechanisms’, privatisation progress, banking recapitalisation, and a rubber stamping of all 15,000 state sector layoffs to be processed by the end of 2014.

But there is, I’m told, a great deal more going on. And most of it represents the sort of high-explosive stuff requiring the media to be distracted in a major way. This is what I have learned so far:

* The Troika is demanding to see full details of all the Greek social security funds that are still intact.

* It is refusing to take off the table plans to steal private pension contributions via direct access to the assurance companies involved.

Further, the following are already under way, and largely unreported:

* 200 Primary and nursery schools abolished.

* 13 hospitals closed.

And finally, other moves (and data) have been carefully kept away from prying eyes….only now starting to emerge. They include the abolition of the Ministry of Culture, a projection that fully 60,000 businesses will go belly-up in 2013, and another twenty public institutions are to get the chop in the wake of ERT.

So maybe Samaras isn’t so dumb after all. As the classic Slog triad dictates, there will be distraction, then distortion…..and finally, deception.

and....

http://www.publicserviceeurope.com/article/3598/eu-threatened-greek-broadcaster-days-before-it-went-off-air

EU threatened Greek broadcaster days before it went off air

by Justin Stares

17 June 2013

Revelations about a dispute with the Hellenic Broadcasting Corporation over pro-EU news channel Euronews cast doubt on the European Commission's claim to have been an impartial bystander

The European Commission threatened to take "action" against the Hellenic Broadcasting Corporation – or ERT - for failing to broadcast pro-European news just days before Hellenic was taken off air. Commission vice-president Viviane Reding told an MEP the Brussels executive planned "action at European Union level" against ERT, after it cancelled a contract to broadcast subsidised channel Euronews.

The commission, which effectively rules Greece as part of the so-called 'Troika' that also includes the European Central Bank and the International Monetary Fund, claimed last week that it had "not sought the closure of ERT" - even if Greece is under constant pressure to lay off government employees. The Brussels executive does, however, admit to a dispute with ERT over Euronews, which ERT management forced off air in December 2012.

Money was at stake; the commission had already handed over €1.35m for the recruitment of staff for the Euronews Athens office as part of a Greek language service that would also broadcast in Cyprus. Set up costs were expected to total €3.3m, while European taxpayers were due pay a further €1.7m to fund programme production over the first six months. "The commission signed a specific grant agreement with Euronews in May 2012 to co-finance the launch of a new Greek Euronews service in line with the European Parliament resolution calling for an extension of Euronews' linguistic coverage," Reding told Chrysoula Paliadeli, a Greek Socialist MEP, in a document released by the parliament on June 11 - the day ERT was suddenly shut down.

"The commission took this decision following the interest expressed by the Greek and Cypriot authorities through the public broadcasters ERT and CyBC in a joint letter signed March 2012, whereby they committed to providing free-to-air terrestrial digital transmission to Euronews in Greek." The commissioner added that her colleagues were "currently analysing the potential scope for action at EU level as regards the cessation of terrestrial transmission of Euronews in Greece".

According to Euronews, the dispute arose when ERT brought in new managers. "The management changed last summer and they decided to stop everything," said Euronews spokeswoman Lydie Bonvallet. "They thought Euronews was a competitor to their own channel, though it wasn't as we are not a national channel covering Greek events. We are an international channel, covering international events in Greek." The commission on the other hand claims the dispute arose due to an incorrect interpretation of Greek law. "The decision to shut down Euronews' signal in December 2012 followed a declaration by ERT's new management in October 2012 that the allocation by their former management of a free slot to Euronews on digital terrestrial television was invalid and violated Greek law," said Reding's spokeswoman Mina Andreeva.

Euronews challenged the decision and won, Andreeva pointed out. The Greek Broadcasting Council ruled in February that Euronews had the right to broadcast, and ordered that the signal be restored. "This decision had not been implemented when the Greek government announced the closing down of ERT on 11 June," Andreeva said. While there is no proof that the commission played a role in ERT's closure, it is no secret in Brussels that EU officials are using their position within the Troika to force through reforms in their protectorates, which include Portugal and Ireland. Governments have been leant on to privatise utilies and to crack down on unions where closed-shops still exist - dockside labour being just one example.

Euronews is owned by European broadcasters, including ERT. France Télévisions, Italian state conglomerate RAI and Russia's RTR are the largest shareholders. The commission has handed out millions of euros to aid its expansion; in addition to the Greek language service, Hungarian, Arabic and Persian language services have been subsidised. Eurosceptics claim this funding ensures coverage remains largely pro-EU, although Euronews' supporters say it is merely helping correct disinformation.

"Euronews is almost objective," Paliadeli told PublicServiceEurope.com. "I had a small issue with them over their use of the word Macedonia instead of the Former Yugoslav Republic of Macedonia but it was changed straight away." It was "absolutely necessary" for Euronews to broadcast in Greece and across the EU, the MEP said: "If not, the European Parliament will be full of Eurosceptics." When asked if EU funding compromised its coverage, Bonvallet said Euronews was forced to seek partners by its limited budget. "We are not a big company like the [British broadcaster] BBC or [American news channel] CNN," she said. "We only have a budget of €70m."

http://www.zerohedge.com/news/2013-06-18/greece-has-one-month-plug-%E2%82%AC12-billion-healthcare-budget-hole

Greece Has One Month To Plug A €1.2 Billion Healthcare Budget Hole

Submitted by Tyler Durden on 06/18/2013 18:16 -0400

Bond

Creditors

Funding Gap

Greece

Think Cyprus is the only country that will need a repeat bailout (as the FT reported earlier)? Think again. Cause heeeeere's Greece...again.... where as Kathimerini reports, a brand new, massive budget hole for €1.2 billion has just been "discovered." Only this time it is not some C-grade government service that can just be swept away: it is to fund the country's biggest healthcare provider, EOPYY. And the deadline is imminent: Greece has less than a month to plug it.

From the Greek publication:

The Health Ministry has less than a month to find ways to plug a funding gap of around 1.2 billion euros in the budget of the country’s biggest healthcare provider, EOPYY, following a meeting between representatives of the country’s creditors and Minister Andreas Lykourentzos on Monday.

“There are important issues still to be discussed, such as restructuring EOPYY and the issue of costs created by shortfalls from social security funds,” Lykourentzos said.

He added that the inspectors noted progress in curbing the costs of hospitals and in supplies, but he also said that spending on medicines still has some way to go to reach a set target of 2.44 billion euros by the end of the year from 2.8 billion in 2012.

Why are all these "funding shortfalls" coming out suddenly, two months before the German general election? Because Europe's periphery is now an expert in leverage, which is precisely why the budget holes are emerging at this moment.

Because if there is one time Angela Merkel is most vulnerable, it is right about now, and with an election to focus on, a crash in the EUR, and a repeat spike in bond yields in the European periphery, not to mention a test of the EFSF, the ESM, and of course, the non-existent OMT, is that last thing she would want on her mind. And, the insolvent thinking goes, any demands for extra cash issued now will be promptly met.

So: first Cyprus, now Greece. Who's next? Because now is the time to make demands from Mama Merkel.

and.......

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_18/06/2013_504697

Coalition partners in last-ditch bid to mend gov’t rift

Party leaders to meet again on ERT with PM set to make fresh proposal

Prime Minister Antonis Samaras and his coalition partners, PASOK leader Evangelos Venizelos and Fotis Kouvelis of Democratic Left (DIMAR), are to meet at 6 p.m. on Wednesday for crucial talks aimed at bridging a rift over the closure of state broadcaster ERT that has put the future of the government in doubt.
Until late on Tuesday, aides to Prime Minister Antonis Samaras were working on proposals that would avert the risk of snap elections by restoring the signal of the state broadcaster – which the two coalition partners have strenuously demanded – without going back on pledges to foreign creditors for permanent layoffs in the civil service.
According to sources, the final proposal foresees the rehiring of all 2,600 dismissed ERT employees on fixed-term contracts that would allow them to work for another two months – the estimated period of transition from ERT to a new, streamlined state broadcaster. The proposal was reportedly sent to PASOK and DIMAR and, although there were no official reactions, the general sense was that it could provide the basis of a settlement.
Earlier on Tuesday, a leaked proposal from Samaras’s camp foreseeing the hiring of a skeleton staff of 30 to 100 employees to run the temporary broadcasts reportedly prompted the anger of the junior coalition partners.
Both PASOK and DIMAR have insisted that ERT must reopen before its restructuring can begin while New Democracy counters that ERT is defunct. In accordance with their different positions, the parties have different interpretations of a Council of State ruling, issued late on Monday, according to which the government had the right to close ERT but not to cut the broadcaster’s signal.
Sources said earlier in the day that Kouvelis was furious with Samaras for refusing to reopen ERT following the ruling, deeming this a “direct provocation.” “As long as ERT remains closed, the risk of early elections remains and is the exclusive responsibility of the premier,” a DIMAR official said. The stance of PASOK remained that ERT must reopen as soon as possible.
Meanwhile there was heated speculation about whether the coalition leaders will be able to find a way out of the deadlock.
“I hope those handling the situation are sensible,” said former Premier Costas Simitis.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_18/06/2013_504700

Troika raises doubts over property tax

Creditor representatives call for measures to plug the budget gap for 2013 and 2014, equal to 2.1 bln euros

By Prokopis Hatzinikolaou and Sotiris Nikas

The representatives of Greece’s international creditors are set to extend their inspection in Athens beyond this week for four main reasons, these being the 2.1-billion-euro gap in the budgets for 2013 and 2014, delays in the privatizations program as well as in the restructuring of the public sector, and reservations regarding the application of the new property tax for 2014 as expressed in talks at the Finance Ministry on Tuesday.

The representatives of the European Commission, the European Central Bank and the International Monetary Fund – collectively known as the troika – will not return to Athens immediately after Thursday’s Eurogroup meeting in Luxembourg, but only when Greece has the answers ready to all of the open issues, likely next week.

On the new single property tax, the troika disputes the Finance Ministry’s forecast for revenues of 3.17 billion euros per year and is asking for a simpler tax system for properties, and an easier process to calculate the tax due. The creditors say that the complex system will prevent the collection of taxes due and have even proposed retaining the tax payment through electricity bills, which had been foreseen stopping after 2013.

Another major issue is the 1-billion-euro hole for this year and next stemming from the National Organization for Healthcare Provision (EOPYY). The gap for this year amounts to 500 million euros. The government is resisting the implementation of a levy on enterprises equal to 0.1 percent of their turnover, which would bring in a total of 600 million euros in 2013 and 2014. The troika says that if this is not applied, an alternative measure will be required, as that amount is necessary for the funding of the social security fund of the self-employed (OAEE).

Meanwhile, after processing research data, the ministry and the troika agreed on Tuesday that a reduction in the value-added tax on food servicing from 23 percent to 13 percent would entail a drop in state revenues of some 300 million euros per year. Although the troika disagrees with the argument that the VAT reduction will benefit the market, it said it would be willing to drop the measure provided the government comes up with an alternative plan to collect 300 million euros.

http://www.keeptalkinggreece.com/2013/06/18/ert-the-day-after-court-decision-lost-in-interpretations-and-proposals/

ERT – the day after Court decision: Lost in interpretations and proposals

Posted by keeptalkinggreece in Politics, Very Mix

More than 12 hours after the Council of State ruled that the Greek government has to restart the transmission of public broadcaster ERT, nothing has changed. Except that the black on second channel of ERT ‘NET’ was replaced with color bars.
ERT journalists continue to be on air with their pirate broadcast via the internet.

Court ruling
Countil of State ordered that all TV and radio frequencies of public broadcaster ERT must be restored. Also the internet (website) has to start operation again.
The court indirectly accepted the abolition of ERT as legal entity and the dismissals of the 2,656 employees over night as it did not ordered reversal of these decisions as well.
[I think the court was not in charge to rule also about these two issues. But not 100% sure]

The political parties, including Samaras’ coalition partners, loudly demand from Samaras to restart the broadcast of ERT immediately.
It looks as if nothing will change until the meeting of prime minister Samaras with Venizelos (PASOK) and Kouvelis (Democratic Left) scheduled for tomorrow evening, June 19th 2013.
PASOK and DemLeft issued statements describing as “illegal” the fact that ERT is not back on air yet.

PASOK and Democratic Left demand the immediate restoration of all ERT TV and radio frequencies and full program with all ERT personnel.
DemLeft threatens to refrain form joining the leaders’ meeting on Wednesday, should ERT not restart broadcasting.

Samaras’ coalition partners are said to support a bill that will be submitted to Parliament by Communist party KKE today. The bills will ask that lawmakers vote to annul the Legislation Act. This Act bearing the signatures of Samaras’ ministers only, orders the immediate shutdown of public institutions – among them ERT too.
Main opposition party SYRIZA demands also the immediate restore of ERT frequencies.
ERT reopening: Mission impossible?
After the first applauds, it turns out that the court decision caused a lot of confusion as it leaves spaces for several interpretations. Then the court order is temporary until judges will decide in ordinary ‘trial’ procedure in upcoming September.
How can ERT re-start broadcasting again, while its legal entity remains dissolved and the personnel is dismissed?
Greek media report of several proposals submitted to PM Samaras by his advisers:

create a new temporary public broadcaster entity
broadcast from other premises than the ERT headquarters with just 200 people staff [i.e. 1/10 of current staff]
hire new personnel
broadcast from the Greek Parliament channel [i.e. only one TV frequency will be restored. Parliament Channel has also one radio frequency]

The political crisis continues…

For more details, read our live-blogging from Monday, June 18/2013

For the moment it looks that in the context of ERT restructure, we will end up with establishing a new broadcaster every couple of months and we’ll have two media ministers, one exclusively for ERT or whatever the names of the new temporary and permanent public broadcaster.

For a better understanding of the Greek Theatre of the Absurd, below two Greek proverbs

that may be well used as play titles:

“Drawn in a spoon full of water”

“Take an egg and shave it”

PS I think his coalition partners will topple Samaras from inside the Parliament…

Cyprus decides today is the day to seek bailout number two - if you say bailout number one has to be completely undone , that is what you are seeking !

http://www.zerohedge.com/news/2013-06-18/cyprus-bail-blows-president-urges-complete-bailout-overhaul

The Cyprus Bail-In Blows Up: President Urges Complete Bailout Overhaul (Full Letter)

Submitted by Tyler Durden on 06/18/2013 12:18 -0400

Bank Run

European Central Bank

Eurozone

Greece

Gross Domestic Product

International Monetary Fund

non-performing loans

Recession

Unemployment

Cyprus' President Nicos Anastasiades has realized (as we warned), too late it seems for the thousands of domestic and foreign depositors who were sacrificed at the alter of monetary union, that the TROIKA's terms are "too onerous." Anastasiades has asked EU lenders to unwind the complex restructuring and partial merger of its two largest banks leaving EU officials "puzzled", according to a letter the FT has uncovered, as "essentially, he is asking for a complete reversal of the program." The EU officials claim that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government, which voted down a first agreed rescue before succumbing to a similar deal nine days later.

The FT goes on to note that although the letter does not request it explicitly, Mr Anastasiades is in effect asking for further eurozone loans on top of the existing EUR10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time.The return of beggars-can-be-choosers we presume - or just token gestures to recover some populist support as the enemy of my enemy is my friend.

As we noted here (and on the chart below), it seemed pretty obvious where this was going to end - obvious that is to everyone except Europe's victory-claiming politicians.

It seems the ongoing flood of capital (despite controls) and collapse of the economy that we discussed here is occurring at ever increasing pace - and demanding even more gold be sucked out of their vaults...

"Unless Cyprus implements some controls that truly work, at this pace its entire banking system will be completely deposit-free in under one year. And it will need to sell much more than all its gold to continue keeping the Troika happy and in compliance with all the future (because there will be many more) bailouts."

In other words, anyone who has been paying attention to the facts on the ground, in this case represented by the record April collapse in deposits (during a capital-controlled month!), would be well aware of the inevitability of this happening; and that in a continent in which the link between the banking sector and the sovereign is stronger than an umbilical, it was only a matter of weeks or most months beforeCyprus pulled an Oilver Twist once again.

Via The FT,

Cyprus’ president has asked eurozone leaders for a complete revamp of his country’s €10bn bailout, warning Nicosia may not be able to meet the rescue’s current terms because it has harmed the country’s economy and banking system even more than expected.

...

“[T]he economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult,” Mr Anastasiades wrote to the heads of three EU institutions and the International Monetary Fund.

“I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people.”

...

A senior eurozone official directly involved in the Cypriot talks saidEU officials were “puzzled” by the letter

...

“Essentially, he is asking for a complete reversal of the programme,” the official said, adding that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government

...

Although the letter does not request it explicitly, MrAnastasiades is in effect asking for further eurozone loans on top of the existing €10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time.

No explicit M.A.D. "we'll leave the Euro" threats aside from the implicit view that this is not a viable path for his people.

Finally, when bailing out ungrateful European insolvent nations (who voted on the terms of the onerous bailout through their own government precisely two months ago), can Europe next time makre sure they get the memo to not make a ruckus before the critical reelection of Europe's de facto viceroy, Angie Merkel?

Full Letter below (via Open Europe):

I am writing to update you on the economic and banking system developments in Cyprus following the Eurogroup decisions of last March and to request your support regarding a number of very pressing issues which need to be addressed the soonest.

1. The Cypriot economy is adapting to major shocks

The Cypriot economy is adapting to major shocks. Substantial private wealth has been lost and a significant number of Cypriot firms have lost their working capital at the two systemically important financial institutions which were subject to the bail - in. Restrictive measures, including capital controls, are seriously hampering the conduct of business and confidence in the banking system has been shaken. As a result the economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult.

2. Application of bail-in was implemented without careful preparation

It is my humble submission that the bail-in was implemented without careful preparation. Its form was changed drastically within a week. Originally designed as a general bail-in across the banking system, it eventually became focused on the two distressed banks, the Laiki Bank and the Bank of Cyprus (BOC). There was no clear understanding of how a bail-in was to be implemented, legal issues are being raised and major delays in completing the process are being observed. Moreover, no distinction was made between long-term deposits earning high returns and money flowing through current accounts, such as firms' working capital. This amounted to a significant loss of working capital for businesses. An alternative, Ionger-term, downsizing of the banking system away from publicity and without bank-runs was a credible alternative that would not have produced such a deep recession and loss of confidence in the banking system.

3. Cyprus was forced to pay the cost to ring-fence Greece but no reciprocity has been granted

Another feature of the current solution was that deposits at the branches of Laiki and Bank of Cyprus in Greece were spared from a haircut to prevent contagion. These deposits amounted to €15 billion. The wish to avoid contagion to Greece was also evident in the Eurogroup's insistence that Cypriot banks sell their Greek branches. In addition and as a result of the sale, the Cypriot banks have lost their Greek deferred tax assets. As understandable as ring-fencing may be, this was absent at the time of deciding the Greek PSI in relation to the Greek Government Bonds which cost Cyprus 25% of its GDP (€4.5 billion). The heavy burden placed on Cyprus by the restructuring of Greek debt was not taken into consideration when it was Cyprus' turn to seek help.
4. Imposition of Laiki's ELA liability to Bank of Cyprus

The implementation of the sale of the Greek branches of the Cypriot banks, as urged by the Eurogroup, resulted in Laiki selling assets that were pledged against its ELA liability to Piraeus Bank, without Piraeus assuming the corresponding ELA liability. As such, Laiki was left with the related ELA liability but without the aforementioned assets. The ELA liability which was left "unsecured" as a result of the sale amounts to around €3.8 billion and was imposed on Bank of Cyprus as a result of the Eurogroup decision. It is worth reminding that a substantial part (in excess of €4 billion) of Laiki's ELA liability was required in the first place in order to cover deposit outflows experienced by Laiki's Greek branches.

Bank of Cyprus itself has a total ELA liability of around €2 billion. By taking an additional €9 billion from Laiki, which was accumulated over the course of the last year under very questionable circumstances, BOC has substantially increased the vulnerability of its own funding structure, with its cumulative ELA liability reaching a very high €11 billion. BOC was called to pledge its own assets to cover for the collateral shortfall for the €3.8 billion liability carried over by Laiki. Such a high amount of ELA liability hinders BOC's funding sources as the room for obtaining additional ELA is limited. The imposition of Laiki's ELA liability on Bank of Cyprus is the main contributor to the liquidity strain Bank of Cyprus faces.

5. Urgent need for Troika to provide a long-term sustainable and viable solution to the liquidity issues Bank of Cyprus is facing as a result of the Eurogroup decisions

Instead of addressing the issue of severe liquidity strain on Cyprus' mega-systemic bank through a long-term sustainable and viable solution, the Troika partners seem to have chosen the path of maintaining strict capital restrictions. Artificial measures such as capital restrictions may seem to prevent a bank run in the short term but will only aggravate the depositors the longer they persist. Rather than creating confidence in the banking system they are eroding it by the day. Maintaining capital restrictions for a long period will inevitably have devastating effects on the local economy, will also affect the country's international business and will have an adverse impact on GDP. Under such scenarios spill over effects will no doubt register on other local banks through higher non-performing loans as a result of dampened economic activity. In addition, increased deposit withdrawals from other local banks, as fear of lack of liquidity of the only systemic bank will have a domino effect on the entire banking system.

I stress the systemic importance of BOC, not only in terms of the banking system but also for the entire economy. The success of the programme approved by the Eurogroup and the Troika depends upon the emergence of a strong and viable BOC. It is for this reason that I urge you to support a long-term solution to Bank of Cyprus' thin liquidity position. Such a solution will re-instate depositor confidence in the banking system and will allow the full functioning of the economy away from restrictive measures and capital controls. It will also facilitate the attraction of foreign direct investment in Cyprus.

My Finance Minister has alerted the Troika Mission Chiefs in writing on 19 May 2013, in relation to the need to implement a long-term viable solution to Bank of Cyprus' liquidity position. No response has been received yet.

A possible long-term solution could be the conversion of part of Laiki's ELA liability into long term bonds and the transfer of these bonds and corresponding assets into a separate vehicle. Another solution could be the reversal of the Eurogroup decision in relation to the merger of Good Laiki (carrying the €9 billion ELA liability) into Bank of Cyprus. In any case the BOC should exit resolution status without any further delays and should be granted eligible counter-party status by the ECB. Of course more options need to be examined. I should mention that an interim Board and an interim CEO is already in place at BOC and the final asset valuation is progressing according to schedule.

I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people. The new government of Cyprus, despite its expressed disagreements, has abided by the Eurozone decisions and remains determined to implement the programme fully and effectively. I am personally determined to lead Cyprus out of this dire situation and towards a path of sustainable growth and development. We are also fully committed to re-establishing Cyprus's stance as a credible EU partner. However, at this crucial juncture, we are calling upon you for active and tangible support.

http://cyprus-mail.com/legal-challenge-over-boc-restructuring/

Legal challenge over BoC restructuring

By Elias Hazou

A FORMER Bank of Cyprus (BoC) board member is mounting a legal challenge against the decision to place the island’s largest lender under administration.

In an application filed with the Supreme Court earlier this month, Irini Karamanou, formerly a non-executive member of the bank’s board, is also contesting the decision for the fire-sale of the bank’s Greek operations, as well as the transfer of all of Laiki’s emergency liquidity – which are liabilities on the balance sheet – to BoC.

Her application is directed against both the Central Bank of Cyprus and the finance ministry, the two entities co-responsible for restructuring the two Cypriot banks.

Whether the Supreme Court agrees to hear her application or dismisses it outright remains to be seen. Only recently the top court ruled that it has no jurisdiction to hear appeals lodged against the ‘bail-in’, noting that the matter falls under private law and not administrative law.

But Karamanou hopes the court will see her action as different and will agree to hear the case. That’s because she is demanding neither compensation nor a direct reversal of the haircut decision, although implicitly her application does challenge those decisions.

Rather, Karamanou’s application takes the line that, as a board member of BoC, she was unable to meet her fiduciary duties toward the shareholders.

She claims the appointment of an administrator for BoC was illegal as the bank was neither bankrupt nor insolvent at the time of the appointment.

Therefore the decisions subsequently taken to the detriment of the bank’s shareholders should likewise be considered illegal and void.

The bank’s board disagreed with the restructuring, but it was enforced by decree regardless.

To back her argument, Karamanou’s application cites the fact that in September 2012 the bank published results showing that it was both solvent and had positive equity, even after sustaining losses due to the write-down of Greek debt that it held.

A key point Karamanou raises is an apparent conflict concerning the Central Bank’s sweeping powers. The Central Bank, she says, cannot act as a regulator for the banks – for which someone might argue that the regulator was at least partly responsible for the lenders’ woes – and simultaneously oversee their resolution or restructuring.

Under the terms of the bailout, Cyprus was required to fold part of Laiki into BoC; the latter was also required to sell its Greek operations to Piraeus Bank.

Karamanou argues that the decision to sell the bank’s Greek operations was a political one, and that it had been taken long in advance of the fact.

What’s more, that decision contravened the procedures laid out in the ‘Resolution of Credit and Other Institutions Law’ of March 2013. The law provides for highest-bid tenders prior to the sale of bank operations, something that was never done.

In addition, the law stipulates that the operations of a bank that is under administration or undergoing restructuring may be sold to another credit institution, to an ‘interim’ bank, or to an assets management company.

But the same law makes no stipulation for selling a bank’s operations (Laiki) to a second bank (BoC) which is also undergoing restructuring. Yet this is precisely what happened with BoC.

In her application, Karamanou argues that BoC has landed in hot water precisely as a result of the deals providing for the sale of Greek operations – which stripped the bank of assets – and for assuming Laiki’s €9bn in emergency liquidity without any tradeoffs. Despite the capital controls now in place, these actions have brought about an outflow of deposits due to loss of depositors’ confidence and also a decline in the bank’s goodwill, jeopardising its chances of survival.

And regarding the decision to recapitalise the bank through a ‘bail-in’ of depositors, Karamanou says shareholders were never given the chance to raise capital.
The point Karamanou makes is that the burden of proof for restructuring the bank fell on the regulator, who needed to support, with data, his decision to place BoC under administration. The regulator never adequately justified its decision, she says.

Moreover, the findings of investment firm Pimco – which had calculated the bank’s capital needs – were kept from the BoC leadership.

However it’s also true that when in March a decision was taken to restructure the BoC, the bank did need recapitalising as it did not meet core tier 1 capital requirements.

On the sale of the bank’s Greek operations and the assumption of Laiki’s ELA obligations, Karamanou says neither of these decisions was ratified by the BoC board at the time as both were perceived not to serve shareholders’ interests.

Karamanou resigned along with the rest of the board in late March.

http://cyprus-mail.com/deadlock-over-boc-layoff-scheme/

BUSINESS LOCAL NEWS June 18, 2013

Deadlock over BoC layoff scheme

By Elias Hazou

NO WHITE smoke emerged from the Presidential Palace yesterday after a high-level meeting to discuss, among others, an early retirement scheme for Bank of Cyprus (BoC) employees.

Attending were President Nicos Anastasiades, the Central Bank governor, the finance minister and the bank’s interim chairman.

The meeting, lasting two hours, was convened by the president who had asked to be briefed on the ongoing restructuring of BoC, the island’s largest lender.

The BoC chairman also updated President Anastasiades on the ongoing talks between the bank and the bank employees union on an early retirement plan.
No statements were made afterwards.

There have been mixed reports as to how close to a deal the bank is with the union. BoC’s board of directors will today likely discuss the subject and announcements could be forthcoming.

After the winding down and folding of Laiki Bank into BoC, the latter’s workforce has now exploded to some 5,500.

BoC, which is under restructuring by the Central Bank, must slash its payroll and thus its operating costs. The bank reportedly intends to reduce staff by about 1000 to 1500 through early retirement plans. For the remaining employees, an up to 15 per cent cut in salaries has been mooted.

The bank’s monthly payroll currently amounts to €25m.

A sticking point in the talks is the fate of the bank employees’ provident funds, which have suffered a ‘haircut’ along with uninsured deposits.

Provident and pension funds are not covered by the Deposit Protection Fund, but the government has pledged to limit the losses of provident fund members to around 25 per cent of the amount they would have received before the EU decision to restructure the two Cypriot banks.

Previously the finance minister has said around 40 per cent of the funds would be covered by bailout money, and 35 per cent credited to the Social Security Fund, to be collected when a person reaches retirement age. In effect, it represents a partial nationalisation of the affected provident funds.

The government has declared that it reached a deal with international lenders to transfer the assets of all provident funds from Laiki to BoC. Parallel to this, a mechanism for reimbursing any losses arising from the deposit-to-equity swap within BoC is being prepared.

Participation in the programme would be mandatory for provident funds in Laiki while those in BoC would have a choice: either to participate in the scheme by handing over BoC shares of equal value or keep their shares and stay out.

The bone of contention is that the bank employees union ETYK insists the provisions of the early retirement scheme as well as any salary reductions are bundled with the provident fund arrangements in an all-in-one deal.

The government, it’s understood, says the two issues should be kept separate. And it has stressed that the early exit plan for bank employees should not be such necessitating an increase in the ‘haircut’ for uninsured depositors in BoC, who have already ‘lost’ 37.5 per cent of their savings over and above €100,000.

Merkel , Merkel .. ....Anyone ?

Catharsis Ours

Tuesday, June 18, 2013