http://www.zerohedge.com/news/2014-04-09/year-later-cyprus-still-has-emergency-situation-and-capital-controls
Submitted by Tyler Durden on 04/09/2014 15:57 -0400
Chrystalla Georghadji's plea fell on deaf ears
A Year Later, Cyprus Still Has "An Emergency Situation" And Capital Controls
Submitted by Simon Black via Sovereign Man blog,
Imagine that your country and banking system are so broke that you have to receive approval from a special committee just to send your own money to your kids who are away at university…
Crazy, right?
But that’s exactly what’s going on in Cyprus. And it all happened overnight.
Just over a year ago, people across Cyprus went to bed thinking everything was just fine. They woke up the next morning to a brand new reality: their government AND their banking system were flat broke.
In collusion with other European powers, the Cypriot government FROZE bank accounts across the country. Suddenly an entire nation had no access to their savings.
The government spent weeks bickering about whose funds they were going to confiscate in order to bail out the banks… all the while maintaining the freeze.
Finally they made a decision: wealthy people would have their funds seized.
But this wasn’t a victory for everyone else… because simultaneously the government announced a flurry of severe financial restrictions.
Sure, people could log on to a bank website and see an account balance.
But it was nothing more than a number on a screen. It didn’t mean the banks actuallyhad the money. Nor did it mean they were free to access their own funds.
Cash withdrawal limits were imposed. Funds transfers were curtailed. Cypriots were even forbidden from doing something as simple as cashing a check.
Peoples’ savings were essentially trapped inside of a highly insolvent financial system.
These destructive tactics are called capital controls. And one year later they’re still in place. Some are being relaxed. Others are being maintained.
But by its own admission, the Ministry of Finance still believes there is a “lack of substantial liquidity and risk of deposits outflow. . . that could lead to instability of the financial system and have destabilizing consequences on the economy and society of the country as a whole.”
Naturally, since this is an “emergency situation” in their view, they have to impose these “restrictive measures” in order to safeguard “public order and public security”.
In other words, capital controls are for your own good.
This is exactly the sort of thing that happens when governments and banking systems go bankrupt.
And every shred of objective evidence suggests that many of the ‘rich’ nations of the West are in a similar position.
Some of the largest banks in the US (like Citigroup) have failed their stress tests; this means they are inadequately capitalized to withstand any major financial shock.
Then there’s the FDIC, which is supposed to insure deposits in the Land of the Free. But the FDIC itself is inadequately capitalized, failing to meet the legal minimum for its insurance fund.
All of this is backed up by the US government, whose net worth is negative$17 trillion.
The Federal Reserve is supposed to be able to bail out the banks. But at this point, with $50+ billion in unrealized losses and a net equity of just 1.35% of its record $4+ trillion in assets, the Fed itself is practically insolvent.
This is the reality: inadequately capitalized banks are backed by an inadequately capitalized insurance fund backed by an insolvent government and nearly insolvent central bank.
Hardly a beacon of stability. Yet this is the system in which literally hundreds of millions of people have misplaced their trust and confidence.
It doesn’t take a financial guru to figure out that this is not a consequence-free environment.
All that’s required is the independence of mind to look at the facts rationally and understand that, like Cyprus, this could all change overnight.
It’s worth considering that at least a portion of your savings may be much safer elsewhere– in a stronger, well-capitalized foreign bank located in a stable country with minimal debt.
It may be wise to consider those options while you still have the ability to do so.
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But don't worry because Greece is issuing 5Y bonds into the "public" markets so everything must be fixed in Europe...
http://cyprus-mail.com/2014/04/05/mps-ignore-georghadjis-plea/
MPs ignore Georghadji’s plea
Chrystalla Georghadji's plea fell on deaf ears
By Angelos Anastasiou
THE House Legal Affairs committee has voted to bring a bill protecting the primary residence and small-to-medium business premises from foreclosure to a plenary vote on Thursday, despite a last-minute appeal by the incoming Governor of the Central Bank to postpone the vote.
In a scheduled meeting yesterday morning, the committee convened to review the finalised draft of the bill before putting it to a plenum vote on April 10. But the new Governor of the CBC Chrystalla Georghadji, who takes office on April 11, was called to appear before the committee in order to explain the risks associated with the proposal.
Georghadji cited the upcoming stress tests to be performed by the European Central Bank on all systemic banks in the Eurozone, including the Bank of Cyprus, Hellenic Bank and the Cooperative Central Bank.
She said an asset quality review would precede the tests, and voting this bill into law would mean lower valuations of collateral eligible for protection, adversely impacting banks’ balance sheets and possibly pushing lending margins down and interest rates up.
She also voiced the troika’s objection to the bill, presenting the committee with an email sent to Finance Minister Harris Georgiades from the European Commission, by which the Troika clarified that, while it was true that it wished to avoid mass foreclosures, it did not favour the passing of this bill.
“Don’t pass it now,” she pleaded with the committee members. “The timing is not good.”
Georghadji even tried to put the full weight of her personal credibility behind her request, citing the long and trusting relationship she had developed with the House as Auditor General.
Her objections echoed a warning issued to the committee by the finance minister in a letter dated March 4.
In it, Georgiades had urged the committee to refrain from pressing ahead with its bill as it was considered an isolated proposal that failed to address the risks posed to banks, and advised them that the government was in the process of preparing a comprehensive bill that would address all issues relating to insolvency later in the year.
“With this proposal and its possible approval I doubt there will again be a Cypriot bank that will give a housing loan,” Georgiades said yesterday. “Everyone’s aim should be to restore the Cypriot banking system’s capability to afford loans to the economy and households.”
The bank association also disagreed with the bill.
But all appeals were ignored as the committee voted to put the bill to a vote on Thursday.
The committee argued that, while respecting Georghadji’s positions, they felt that her concerns would be fully addressed in the bill’s final draft. The final touches to the proposal, relating to maximum limits on the value of properties eligible for protection and the moratorium periods, will be added on Monday.
The decision raises questions as to the stance of committee members who belong to the ruling party DISY. Committee chairman Sotiris Sampson and member Rikkos Mappourides – DISY deputies – also voted in favour of pressing ahead with the bill despite his party’s pro-postponement position. Following yesterday’s committee session, DISY leader Averof Neophytou posted a message on Twitter that fell short of naming names but raised the issue of party discipline.
“DISY’s official position is in favour of postponing discussion of the primary residence bill. Any other position does not represent the party,” Neophytou’s tweet said.
But while Mappourides issued a statement later yesterday explaining that although he opposed the timing of the bill he voted for its submission to the plenum because “the majority on the committee was in favour,” Sampson made no attempts at diplomacy. His position was that Georghadji’s concerns would be fully addressed in the finalised bill, which he appears to support despite his party’s opposition.
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Income tax revenue dropped 8.0 per cent or 27.3 million year-on-year for January and February, it was announced on Friday.
According to data released by the Inland Revenue Department (IRD), the total income for the above period was €305.3 million compared with €332.6 million in January and February 2013.
The data shows a drop of €7.01 million or 26 per cent in the tax revenue from civil servants, a drop of €8.09 million or 15 per cent from corporate tax,…
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According to its World Economic Outlook, the IMF sees unemployment in 2014 revised from 19.8 per cent to 19.2 per cent, and 18.4 per cent in 2015.
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“There could not be a safer and clearer sign that the Cypriot economy is on the right path,” Finance Minister Harris Georgiades said.
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