Here is Das’s summary of the Cyprus deal points and possible outcomes.
But first, the latest news snapshot:
- The bailout terms are still changing (that controversial haircut for small depositors was a major sticking point);
- Cypriot parliament to vote on Tuesday (and there are rumours that even that’s postponed);
- at the moment the banks in Cyprus will be closed until Thursday (unless still more time is needed to find terms that the Cyprus parliament will agree…).
- Grumpy Russians toss a spanner in the works, saying “The EU took action to levy a tax on deposits without consulting Russia, and for this reason we will further consider the issue of our participation from the point of view of restructuring the earlier loan”.
- So this update will soon be out of date too…
By Satyajit Das
It would be ironic if Cyprus, one the smallest countries in Europe with little over 1 million people and about 0.5% of the European Union (“EU”) economically, were to prove a key inflexion point in the crisis.
Since June 2012, it has been known that Cyprus needs around Euro 17-18 billion to recapitalise its banks (around Euro 10 billion) and for general government operations including debt servicing (around Euro 7-8 billion). While small in nominal terms and well within EU’s resources, the amount is large relative to Cyprus’ Gross Domestic Product (“GDP”) of Euro 18 billion. It is unlikely that Cyprus can realistically repay it, in the absence of a dramatic change in its circumstances such as the mooted oil and gas reserves in the Eastern Mediterranean.
The various options considered to generate the required funding included: privatisation of state assets, increases in corporate taxes (from 10% to 12.5%) and withholding taxes on capital income (to 28%) and restructuring of existing bank or sovereign debt. Debt restructuring options included a “bail-in” of creditors (the new fashionable term for a write off of principal). It would also entail easing terms and lengthening maturities of (up to) Euro 30 billion in loans from Russian banks to Cypriot companies of Russian origin.
The package proposed by the EU incorporates almost all of the above measures. Most controversially, ordinary depositors will face a “tax” on Cypriot bank deposits, amounting to a permanent write down in the nominal value of their deposits. The deposit levy will be 6.75% on deposits of less than Euro 100,000 (the ceiling for European Union account insurance) and 9.9% for deposits above that amount. In return, the depositors will receive shares in the relevant banks.
The unprecedented write down of bank deposits expected to raise around Euro 5.8 billion is motivated by a number of factors.
Firstly, International Monetary Fund (“IMF”) participation requires the debt level to be sustainable. The write off of depositors reduces debt and also the size of the required bailout package to Cyprus to Euro 10 billion.
Secondly, Cypriot banks have limited amounts of subordinated or senior unsecured debt. This means that a write down of bondholders would only raise between Euro 1 and 2 billion, below the required amount.
Thirdly, the European Central Bank (“ECB”) has major exposures to Cypriot banks via its Emergency Lending Assistance (“ELA”) Program whereby it provides funding to Euro-Zone Central Banks. Based on the accounts of the Cypriot central bank, the ECB may have provided as much as Euro 10 billion, a very high levels relative to the size of the Cypriot economy. As in the case of the 2012 Greek debt restructuring, the ECB and other official lenders are unwilling to take losses on their exposure, requiring the depositors to take a haircut.
Fourthly, restructuring the sovereign debt of Cyprus is risky because many of the bonds are governed by English law. Any attempt to restructure these whilst insulating official creditors from losses would invite litigation. Cypriot domestic-law sovereign debt is held by local banks. So write downs would aggravate their problems, requiring the sovereign to intervene in any case.
Fifthly, Germany, Finland and Holland are increasingly concerned about losses on bailout loans. German Chancellor Angela Merkel does not want concern about actual cash losses to German taxpayers to affect her prospects in September 2013 elections. She also does not want the ECB to take losses which might trigger the need for Germany to inject additional capital.
Sixthly, Germany wants to prevent any bailout fund flowing to Russian depositors, such as oligarchs or organised criminals who have used Cypriot banks to launder money. Carsten Schneider, a SPD politician, spoke gleefully about burning “Russian black money”. However, as of January 2013 Euro 43 billion of the Euro 68 billion in Cypriot bank deposits were from domestic residents, while Euro 20 billion were from the rest of the world, believed to be primarily from Russia.
The tax on depositors is a significant expansion of the principal of PSI (private sector involvement), which was applied in the case of Greece and presented by the EU as a “one off” measure. Whereas in Greece, losses were allocated to sovereign as well as junior and subordinated bank bond holders, the Cyprus measures extend burden-sharing further to ordinary small depositors.
The EU will argue that depositors (and especially foreign depositors) funded the over-extension of the Cypriot banking system domestically and abroad, with reached around five times GDP. They would argue that depositors should bear losses, contributing to the bail out. The EU will also argue the risk of moral hazard in bailing out depositors. They would also argue that there was no other option in reality.
Whatever the case for the Cyprus package, it risks significant side effects.
Firstly, it may trigger capital flight from banks in Greece, Portugal, Ireland, Italy and Spain, based on depositor concerns about loss of capital in any future debt restructuring.
Europe has total bank deposits of around Euro 8 trillion, including around Euro 6 trillion in retail deposits. Around Euro 1.5-2 trillion of these deposits are in banks in peripheral countries.
In the period leading up to July 2012 banks, these peripheral countries lost between 10% and 20% of their deposits. This only abated when the ECB made its extraordinary announcement in July 2013 that it would do whatever it takes to safeguard the Euro.
If depositors withdraw funds in significant size and capital flight accelerates, then the ECB, national central banks and governments will have intervene, funding affected banks and potentially restricting withdrawals, electronic funds transfers and imposing cross-border capital controls.
Secondly, the Cyprus bail-in provision will make it increasingly difficult for European banks, especially in vulnerable countries to raise new deposits or issue bonds. There will be increasing concern about the risk of loss but also subordination to claims to official lenders. The ECB, national central banks and governments will have to cover any funding shortfalls.
Thirdly, the Cyprus arrangements undermine the credibility of the ECB and EU and measures announced last year to combat the crisis, which have underpinned the recent relative stability.
The ECB’s OMT (Outright Monetary Transactions) facility allows it to purchase sovereign bonds to assist nations to finance and lower their cost of borrowing. The facility which is yet to be used requires the affected country to apply for assistance. After Cyprus, it will be politically difficult for countries like Italy and Spain to ask for assistance if required, knowing that if a future debt restructuring is necessary then domestic taxpayers face a loss on their bank deposits.
The EU’s much vaunted banking union was rightly criticised for failing to provide sufficient funds to undertake any required re-capitalisation of banks as well as the lack of a Euro-Zone wide consistent deposit protection scheme. Cyprus highlights these shortcomings.
Fourthly, the Cyprus package highlights the increasing reluctance of countries like Germany, Finland and the Netherlands to support weaker Euro-Zone members.
There are also broader geo-political ramifications of the measures.
British military personnel and government officials based in Cyprus, who are believed to have over Euro 1.5 billion in local bank accounts, will be affected by the tax. The UK government have announced that they, but not other UK depositors, would be compensated. The unexpected cost and approach to the bailout will increase the divisions between Britain and Euro-Zone.
The Russian reaction is also unknown. Cyprus’s finance minister is scheduled to fly to Moscow to discuss extension of loans, which is one element of the package. If Russia refuses then the entire deal may need re-consideration. As a major supplier of gas to Europe, Russia’s reaction to its citizens being asked to take losses of around Euro 2 billion is difficult to predict.
The ability of the recently elected Cyprus government of Prime Minister Nicos Anastasiades to pass the necessary enabling legislation is unclear, given a lack of clear parliamentary majority. He may face difficulties persuading reluctant lawmakers, especially since he pledged that he would “never” accept a haircut of deposits as a condition for a bailout.
If Cyprus does not agree, then a default is likely and the economy may collapse very rapidly. Businesses would face bankruptcy. Many banks would fail with most Cypriots losing their savings.
But even if they agree, the package would stave off immediate collapse but may not address Cyprus’ problem. As in Greece and Portugal, privatisation proceeds and the revenue from increased taxes may not reach targets. The imposition of the tax may not raise sufficient funds. But it will encourage remaining deposits to flee Cyprus,
As with Greece, there is a risk that Cyprus will need additional assistance, entailing further write-offs in depositor’s fund.
Irrespective of the fate of Cyprus, the solution adopted will exacerbate the European debt crisis.
As several commentators have noted, a debt crisis, especially on the current scale, cannot be dealt without other than by financial repression. To date, it has taken the form of higher taxes, interest rates below the rate of inflation, directed investment and increased government intervention in the economy. Cyprus marks a new phase of financial repression, shifting the burden increasingly onto savers directly by confiscating savings.
In any debt crisis, there are several possible methods of allocating losses. The borrower bears the losses, either through austerity or bankruptcy. The lenders bear the losses. Some rich sugar daddy (in Europe read Germany) bails out the indebted borrower. Another option is to just ignore issues, fudge the numbers, and hope that fortunate events will remedy the problems. Europe has now tried all of the above.
Unfortunately, in each attempt at resolution, as shown by the proposed Cyprus package, the measures have become the problem rather than a solution.
Albert Einstein observed that “we cannot solve our problems with the same thinking we used when we created them”. Unfortunately, Europeans continue to believe they are the exception that proves the rule.
© 2013 Satyajit Das
Satyajit Das is a former banker and author of Extreme Money and Traders Guns & Money
Cross-posted from The Big Picture. An abridged version appears in The Independent.
48 comments
Comments are closed.
I’d like an explanation of HOW the Cyprus banks got so screwed.
Bad loans? Bad investments?
The conversation always seems to run to “how do we bail them out,” with little attention to how they got to the place of needing a bailout.
Precisely. It certainly was the depositors, especially the small ones, who caused the problems.
I imagine most of the money was loaned by corrupt bank officials to crooked speculators who set up shell companies and bought inflated assets that they or their friends owned, and that this money flew off to tax havens like Caymans, Tortuga or Luxembourg. Or maybe to Russia or Swiss bank accounts.
If the EU, IMF and the government of Cyprus was serious about solving the problem, they would find out where the money went and use clawbacks to get it back, using Interpol and threats from the big countries. Money just doesn’t disappear, it goes from one pocket to another.
But of course that won’t happen, because TPTB don’t want to disturb all the financiers and money-laundering centers and tax-havens throughout the world.
“I imagine most of the money was loaned by corrupt bank officials to crooked speculators who set up shell companies and bought inflated assets that they or their friends owned, and that this money flew off to tax havens like Caymans, Tortuga or Luxembourg. Or maybe to Russia or Swiss bank accounts.”
This is my major question, although addressing it won’t solve the immediate problem in Cyprus.
But the ones who caused the problem must be identified by name and extent of how much they bamboozled. Public embarrassment at minimum is deserved, and at maximum a full-out effort to catch them, make them pay and be placed in public stocks — at minimum.
“Money just doesn’t disappear, it goes from one pocket to another.”
Read more at http://www.nakedcapitalism.com/2013/03/the-cyprus-file.html#hhU1tr7fjBkveGG8.99 ”
Could someone with more economics background comment here please? My understanding is that money can indeed disappear or be destroyed as it were. Leave aside burning dollar bills for the moment which is one means – or contaminating Fort Knox Goldfinger style – if the government creates money by issuing bonds, the latter can be also destroyed by people devaluing what they are worth in trading by changing their minds and viewing them as worthless or worth less.
And this is what we have seen with CDOs and CDSs or mortgage backed securities which are devalued as being worth-less. To be sure there are also the sharks and rip off merchants and oligarchs putting their two bits in. But this claim that money cant be destroyed seems wrong. At bottom money is a debt instrument but if that debt becomes uncollectable for whatever reason it is inherent destroyed.
What matters is who owns what pocket.
It also matters what you trade your pocket money for.
‘Money’ isn’t destroyed but the stuff you trade for is. Buy 20 gallons of gas and you destroy it. You have nothing to show for 20 gallons of gas. Someone else has the money so they can destroy 20 more gallons of gas.
See how money actually works? It doesn’t do anything but enables things to happen, money isn’t something you have but something to get rid of.
Peeps focus intently on the character of money: this is the old shell game. What matters is the 20 gall … oops, the 88 million barrels of crude oil that are destroyed every day … for nothing.
Nothing! What we get are ‘indicators’ … as seen on TV. A few blutocrats get a little richer. That’s it.
This is the reason why the world is coming apart. Consider topsoil, fresh water, strategic minerals, coal and natural gas … biodiversity which we need to survive as slightly furry animals … waste carrying capacity. These things die as we spend money and our economy dies along with them.
BTW: money is created (by lending it into existence) and destroyed (by repayment of the debt).
Could we refer to money created by “lending it into existence” by the name of fiat credit?
mainly it was the result of forcing its banks to participate into the Greek PSI (around 4.5 billions lost) also a bad Greek bad moved it’s base to Cyprus (Marfin bank now part of the much troubled popular bank of Cyprus
@ Koku:
They wanted to be Singapore in the Eastern Mediterranean, they wanted to be rich without working. Just like everyone else.
The borrowed from everyone including shady Russians, English on vacation and soldiers, they lent that money and much more to the (defunct) Greek banks and government!
Because Greece is bankrupt, Cyprus is also bankrupt. All that remains is the denouement … the final bloodletting.
BTW: as long as ONE CAR is running in Greece that country’s economy will continue to unravel until the country becomes Yemen. ONE CAR. Each car represents an unmeetable claim against Greece’s rapidly shrinking capital base. One car can gobble the petroleum down (and poison the atmosphere at the same time) it cannot hope to put any petroleum back.
ONE car? Even if that car is an ambulance? Or a fire engine?
Major typo – doh!
“It certainly wasn’t the depositors”
I liked the sarcasm in your original post.
Yes, I got the sarcasm too. Hard to read anything that appears positive as anything but sarcasem.
I should have said it was a Fraudian slip.
Move along people. Nothing to see here.
This just doesn’t sound right to me:
“However, as of January 2013 Euro 43 billion of the Euro 68 billion in Cypriot bank deposits were from domestic residents, while Euro 20 billion were from the rest of the world, believed to be primarily from Russia.”
The most recent Fed report shows total deposits in all commercial banks in the US of around $9.3 trillion, which is about 62-63% of GDP. Deposits in Cyprus banks by locals only are 230% of GDP?
Doesn’t sound likely.
I recall seeing an 800% of GDP estimate earlier today…
The Tax Justice Network has some interesting references to Cyprus and how it might have trouble with its banks.
Also, here’s a link from Testosterone Pit – you can also search at that site, or NC, on ‘Cyprus’ for some interesting info:
http://www.testosteronepit.com/home/2012/9/6/bankrupt-cyprus-and-the-russian-connection.html
Below the mess of all this lies a neoliberal, neoclassical view of ‘magic money’ and the power of debt that seems to be coming a cropper these days.
We certainly seem to live in interesting times.
Cyprus is a tax haven. Wouldn’t we expect there to be a higher percentage of deposits than a country such as the United States where money tends to flow out of the country?
Yes I would – but I also would expect most of it to be foreign deposits.
Of course, if the are counting shell companies as “domestic”, that could explain it….
With a population of about a million people it doesn’t seem likely that every man woman and child on the Island would have an average balance of Euro 40,000 in the bank.
The UK’s bank system is ~ 600% of GDP. Depending on how current the figures are, Cyprus’s banking system is pegged at 800% to 900% of GDP.
Even in countries that supposedly did not bail out their banks, the people with deposits in any financial institution (including credit unions) are being forced to surreptitiously bail out the banks through the ZIRP. In 2009, the interest rate was a modest 4.5% on savings. Now the interest rate is about half of that and may be still going down, so depositors are losing money on their deposits that cannot keep up with inflation. That, too, is a kind of tax levied on customers to the advantage of the banks.
I cannot imagine being levied a tax for my savings and I feel sad for the ordinary citizens of Cyprus. Apparently, the tax will be levied on savings, chequing, and business accounts. Institutions like hospitals can be affected also.
The banks have done such a horrendous job of extracting wealth from others while enriching themselves. It may be decades before anyone trusts any bank anywhere. I know I don’t trust them and would love to see them all nationalized for public purpose. Let the private banks be the hedge funds and speculators they so desire to be so we can avoid them like the plague.
@ Bystander:
The Russians will do that, they have been practicing ‘negotiation’ in Ukraine. A valve will be turned in Siberia and the Germans will become very eager to negotiate.
It gets very cold in the winter in Germany I understand …
I keep wondering if Cyprus and Greece can work out a MAD strategy that would, with a high degree of certainty, cripple a German bank or two.
I’m not suggesting they deploy such a measure, however from the sidelines it appears that Germany is on the offensive in this financial war and the smaller countries are not negotiating as if they are at war with Germany…
Work out how to make German banks feel real painful losses. Present that plan to Merkel and team with the real intent of carrying it out, then see if Germany is open to negotiating in good faith.
re: Europe has now tried all of the above
and yet… “The Song Remains The Same” http://www.youtube.com/watch?v=he6TQsU8d6k
But to be fair, I coming to think there is no “solution” to the problem and that things will muddle along, in typical messy historical fashion, until the next “perfect storm” hits.
In related news…
Bitcoin apps soar in Spain – will the Cyprus shocker boost virtual currencies? http://news.yahoo.com/bitcoin-apps-soar-spain-cyprus-shocker-boost-virtual-124020102.html
Boom!
If you have substantial assets in Euros it is time to get out or hedge.
I don’t advocate filling mattresses or coffee cans because it’s just paper anyway, but prepare for an across the board haircut on the rich.
Because that’s where the money is.
The details regard Cyprus are interesting but of no consequence to the outcome.
At some point, there will be the matter of the exit strategy that they forgot to enable.
Cyprus has become the second-tier proof that the EMU is patently unworkable.
There is no sense in spending another few years settling the chaos that was Cyprus.
Rather the opportune time to change the system.
A systemic change.
With a view that the economic union can only prevail by acknowledging the failure of the monetary union, use the real insolvency of Cyprus to restore true sovereignty and autonomy to its money system.
The sovereign of Cyprus needs a money system of exchange media in size with its national economy.
It does not need any creditors to issue its currency, and can do so without any debt attached.
How Cyprus settles the size of its existing bank accounts is for Cyprus to determine.
It’s their money.
Lenders have zero recourse.
Including the ECB.
Or else, let’s move on to thee third stage of destruction.
When “too many promises” have been made on paper, eventually some promises will be marked down. Small nations like Greece, Cyprus, Ireland, and Iceland aren’t heavily armed. Amongst countries, they will bear the first losses.
It’s very simple really.
The rich and powerful financiers are in full-on looting mode. They will tax wages. They will tax purchases. They will steal from pensions funds. They will steal from bank deposits. They will demand that public assets be sold at 10 cents on the dollar (if that). They will demand that medical care for non-rich people be slashed and the difference put in their pockets. etc.etc.etc.
They will not be stopped by words, any more than a mugger beating you up in a back alley will be stopped by words. They will only be stopped by force, of one kind or another.
This is not an ideological or academic dispute. This is about a handful of obscenely rich financiers looting the general public. They produce nothing – they don’t even allocate resources efficiently or evaluate risk! They make bad investments, and instead of going bankrupt as capitalism demands, they bribe the politicians to force the general public to bail them out. Rich bankers are the ultimate welfare queens, and they would suck the universe dry if they could. Like sharks that smell blood, they will only stop when either a greater power forces them to stop, or they run out of blood.
We know what is going on. It’s not complicated, really. The issue is whether the general public will have the strength and ability to say “no more” and throw these b******* in jail where they belong. Or babble along wailing on internet chat room ghettos. Like the rich care.
Bottom line: vote for someone like Obama or Romney and you have only yourself to blame. We need less analysis, and more emphasis on voting for our friends and not voting for our enemies lesser of two evils be damned. That’s how this battle was won two generations ago. And that’s how it will be lost now, if we don’t wake up fast.
There are many threads, as many as European countries using the euro or within the European Union. Some are more important than others:
@ Satyajit sez:
Lenders bear the losses if they are junior lenders, or now unsecured. The senior creditors, the central bank and preferred equity holders dodge the bullet … as they always do!
Surprise!
Ed Harrison pointed out yesterday that there are few seniors on Cyprus banks’ liability side. That does not mean that those who are there should be given a pass … they can contribute a billion euros and they should be wiped out along with equity!
There is a well-established order of liquidation that must be followed otherwise the infernal rules that everyone seems hell-bent to pay homage to … are irrelevant.
Another escapee from responsibility is the central bank which is a senior secured lender to the Cypriot banks. When does the ECB take a haircut? Institutional preference and simple arrogance on the part of Draghi delayed the restructuring of Cyprus sovereign bonds. He believed that the Italians would vote for the Goldman-Sachs golem. Instead, enter Grillo, the Italian public and the menace to the euro.
The chance to alter the terms of Cyprus’ English law bonds vanished, this was the miscalculation on the part of Draghi and no other … the Cypriot citizens get to pick up the multi-billion euro tab!
Simply outrageous!
Another thread: the only real collateral in the euro system is bank deposits. No other asset-like item in Europe is worth anything … pretty clearly. The starving euro-system cuts off its own leg to get a meal.
!!!
“The EU will argue that depositors (and especially foreign depositors) funded the over-extension of the Cypriot banking system domestically and abroad…”
Heh?
Mom and Pop who put their money in a checking or savings account did that? Or did they just put it in a bank because that is what most people do? Were mom & pop telling the bankers directly what to do with those deposits?
No sane person thinks so. But, now, Mom & Pop are expected to “share the burden” as if they were the ones who decided to invest the money?
RIIIIGGGHHHHT.
I was just imbibing a glass of wine or two with a friend. And, we thought, how about:
How about:
• Cyprus Defaults – Wipes out the bondholder and all outstanding debts (including European Central Bank loans)
• Immediately, Russia – recapitalizes (Euro 17-18 billion) to the entire Cypriot banking system with rubles (backed by gold and Russian energy) at parity to the euro.
• Russians don’t lose anything
• Cypriots don’t lose anything
• Germany doesn’t bail out Russian “mafia” money or Cyprus.
• 2015, Cyprus can reverts back to the Cyprus Pound (or whatever) should it want to.
Quid pro quo:
• Russia gets a nice new country to play with and beachfront dachas on the Mediterranean.
• Russia takes a majority stake in the Cyprus Gas revenues (due to stream sometime 2015) as payback.
• Cyprus votes to eject British (UN) forces from the island
• Russia takes over (leases) the strategic Mediterranean bases.
• Russia sets a precedent for building a new league of empires.
Now, that’s a generational, historical front seat spectacle if ever there was one.
In vino veritas ;-)
That’s a nasty twist of thought, Claudius.
clink, me likes the way you drink n think
party @ Claudius’
Got to park those Kirov-class battle cruisers some where…
In a default, the losses will be bigger, more like €30 billion. Would you pay more than 2X GDP to buy a country that has been a tax haven but is being put out of business? You gotta have a lot of confidence in those gas fields.
Well, it’s not the Dardenellles, but I bet the Russians wouldn’t turn up their noses at a warm water port…
Last year, Russia’s output exceeded $2 trillion. Equalizing for prices difference with purchasing power parity, Russia’s economy is the sixth biggest today. It has a strong trade balance surplus, a fiscal balance surplus, and the Central Bank has bolstered its foreign and gold reserves.
An average public debt level in Europe exceeds 100 percent of GDP; Russia’s public debt is no more than 10 percent of GDP. The World Bank forecasts Russia’s GDP to grow 3.9% in 2013, depending on oil prices (The baseline one assumes oil will average at $98.2 a barrel in 2012 and $97.1 in 2013; and the second scenario assumes it will trade at $125 a barrel.) So, Russia has some pocket change.
As I see it (now through the bottom of an empty wine glass), as Russia’s biggest trading partners are the European Union and China, for a mere 30bln, Russia gets “membership” of the Common European Market(s) by proxy, but without the Euro’s constrains (somewhat like the UK).
It’ll be like Russia’s personal HK (SAR) – economic development zone, Financial Center, cum moguls, Admirals, Field Marshals and Air Marshals playground. Plus Russia is the ones that gets to stick it to the “Western Capitalist Pigs” Now, how many westerners would smile at that notion.
More wine?
I agree with Pat. Follow the money. We keep talking about Greece or Cyprus or Germany or even Russia. What we should be talking about are a kleptocratic 1% and its servant elite on the one hand and the 99% on the other. I expect most of the money that went into Cyprus went straight back out. Some of it may have been siphoned off by Greek kleptocrats but I think to we need to look a lot more closely at the money laundering aspect, as in what mechanisms were used to launder it.
None of the math adds up. The size of domestic deposits is way out of whack for a small country with a small population. If Cyprus has 68 billion in deposits from whatever source, where is that money now? I expect most of it was lent out, but lent where? It certainly didn’t remain in Cyprus. It wasn’t just lent to Greece or even the Cypriot government. So where did it go? You see Russian oligarchs depositing money in Cypriot accounts and then transferring them to shells with some destination like Panama would not leave any liabilities to the Cypriots. On the other hand, if they deposit money in Cyprus and then grease corrupt Cypriot officials to loan their money back out to a shell they have created and the money goes through a couple more shells before the money is deposited in Panama and the shell is folded, then they not only have their money in Panama but a call on their deposits in Cyprus. A twofer if you will. If much of this went on, then even with a 10% haircut, the oligarchs would still have made a 90% profit on their money. Only if the Cypriot bankers loaned it out to somebody else would the oligarchs get burned. So if we really want to know what went on in Cyprus, we need to know where the banks made their loans, to whom, and for how much.
I remember when Cyprus joined the EU and the EuroZone in 2004. Everybody was so ecstatic, so proud, so irrationally exuberant. The reason? Because Cypriots were now finally “Europeans.” Yes, they too were now equals to the genetically superior super-humans of France, Germany, Britain. And they were going to show those Turks who stole one third of their island. Yes, they were Europeans too. That was the fantasy.
Let’s look at reality. Culturally-speaking, Cypriots (as well as Greeks and most Eastern Europeans) have nothing in common with the common definition of a “European.” They have a lot more in common with the Middle Easterners and the Russians. Throughout history, Eastern and South-Eastern Europe suffered greatly at the hand of the West. For example, Cyprus was until recently a British “colony.” Let me repeat that word, in case somebody missed it: “colony.” How’s that for “equality?”
As such, it is about time that this European Delusion, this disgusting European scam, comes to an end. It is time that the West goes on its own usual ways imperialistic theft, plunder, and genocide that it proved to be so adept at for the past few hundred years, while the East of Europe goes on its own way, without the Euro, without the European Union, without NATO, or any other equally criminal “institutions.” Believe us, we will do just fine without the French, the Germans, the British, etc.
So, in closing, let me say this to all proud Westerners reading this: Fuc* you! You scumbags! We better not catch any of you here in the East for the next 5000 years. Is that clear?
Yes, they are Dravidian.
Peoples found, principally, in the Asia/Indian South? Huh!
Yes uck, uck and uck. But… There’s a load of money to be made from the Eastern European poverty; look at the Austrian banks who went boldly in all the places where the defunct Austro-Hungarian Empire was once thriving.
Rufus:
Cypriots “were so ecstatic, so proud…” to join the EU.
And yet you blame Europeans. Not sure if your post was an attempt at humor.
Try reading Hugh’s post right above yours. Its not about Europeans and Cypriots. The ripoff of Cypriots is benefitting a very limited set of transnationalists that include Cypriots as well as Europeans. Put the racism back in the box and you may see things more clearly.
Rufus, in case you hadn’t heard, the British empire was the greatest force for Good the world has ever seen. You take it for granted now but stop and think where the world would be without it. The fact that the British have since degenerated into a kind of ghastly rabble of nobodies, roaming a rainy, winswept island floating off from the north-west coast of France is immaterial to the greatness of a people that history will never forget.
And what allowed them to be so great was that: any foreign climate was better than the English weather, they could easily lay railway in a straight line, and they didn’t mind who they slept with.
Ah! E.M.Forster….where are you now?
“Whatever the case for the Cyprus package, it risks significant side effects. Firstly, it may trigger capital flight from banks in Greece, Portugal, Ireland, Italy and Spain, based on depositor concerns about loss of capital in any future debt restructuring.” Given the relatively small amount of money involved in the Cyprus issue, is it possible that the elite operators of this global scam are purposely inciting disaster to accelerate the global banking collapse to their advantage?