Cyprus

Who profits from the bailouts

(Reuters) – Throughout Europe’s debt crisis, northern European leaders have often said they will not stand for taxpayers having to fork out for other countries’ problems, and the notion of “taxpayer-funded bailouts” has taken root.

 

Yet despite three-and-a-half years of debt and banking turmoil, with bailouts totaling more than 400 billion euros, northern euro zone taxpayers have not actually lost a cent.

What is more, governments in Germany, Finland, Austria, the Netherlands and France have saved billions of euros thanks to a sharp fall in how much they pay to raise money in financial markets since their borrowing costs have dropped steeply.

But that has not prevented the image taking root in voters’ minds of hard working northern Europeans putting money on the line to rescue profligate, work-shy southerners, fuelling resentment and undermining Europe’s unity.

In the run up to German elections in September, that resentment is only likely to grow, and Chancellor Angela Merkel, bidding for a third term in office, will have to reaffirm her commitment to protect voters from potential losses.

But the truth remains that German taxpayers, as well as those in Finland, the Netherlands and elsewhere, are no worse off at all, and their finance ministries have racked up savings.

“As an unintentional consequence of the crisis, Finland has benefited enormously,” said Martti Salmi, the head of international and EU affairs at Finland’s ministry of finance.

“We have not lost a cent so far,” he told Reuters. “The same as for Germany very much holds for Finland.” (more…)

EU Official: Cyprus Was A Special Case, But…

HELSINKI (Reuters) – Big bank depositors could take a hit under planned European Union law if a bank fails, the EU’s economic affairs chief Olli Rehn said on Saturday, but noted that Cyprus’s bailout model was exceptional.

Olli Rehn

“Cyprus was a special case … but the upcoming directive assumes that investor and depositor liability will be carried out in case of a bank restructuring or a wind-down,” Rehn, the European Economic and Monetary Affairs Commissioner, said in a TV interview with Finland’s national broadcaster YLE.

“But there is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits. However, the limit of 100,000 euros is sacred, deposits smaller than that are always safe.”

The European Commission is currently drafting a directive on bank safety which would incorporate the issue of investor liability in member states’ legislation. (more…)

It Can Happen Here: The Bank Confiscation Scheme for US and UK Depositors

By Ellen Brown

Global Research, March 29, 2013

stealing_money_safe_lg_nwm

Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.  

New Zealand has a similar directive, discussed in my last articlehere, indicating that this isn’t just an emergency measure for troubled Eurozone countries. New Zealand’s Voxy reported on March 19th:

The National Government [is] pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts . . . .

Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.

Can They Do That?

Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash. Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.”  The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.

The 15-page FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.”  It begins by explaining that the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability.” Evidently anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite, the authors state: (more…)

Have The Russians Already Quietly Withdrawn All Their Cash From Cyprus?

Submitted by Tyler Durden on 03/25/2013

Yesterday, we first reported on something very disturbing (at least to Cyprus’ citizens): despite the closed banks (which will mostly reopen tomorrow, while the two biggest soon to be liquidated banks Laiki and BoC will be shuttered until Thursday) and the capital controls, the local financial system has been leaking cash. Lots and lots of cash.

Alas, we did not have much granularity or details on who or where these illegal transfers were conducted with. Today, courtesy of a follow up by Reuters, we do.

The result, at least for Europe, is quite scary because let’s recall that the primary political purpose of destroying the Cyprus financial system was simply to punish and humiliate Russian billionaire oligarchs who held tens of billions in “unsecured” deposits with the island nation’s two biggest banks.

As it turns out, these same oligrachs may have used the one week hiatus period of total chaos in the banking system to transfer the bulk of the cash they had deposited with one of the two main Cypriot banks, in the process making the whole punitive point of collapsing the Cyprus financial system entirely moot.

From Reuters:

While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money.

No one knows exactly how much money has left Cyprus’ banks, or where it has gone. The two banks at the centre of the crisis – Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus – have units in London which remained open throughout the week and placed no limits on withdrawalsBank of Cyprus also owns 80 percent of Russia’s Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks’ largest depositors.

So while one could not withdraw from Bank of Cyprus or Laiki, one could withdraw without limitations from subsidiary and OpCo banks, and other affiliates? (more…)

Cyprus: Savage Austerity Measures and Economic Dictatorship

depression

By Jordan Shilton and Chris Marsden

Global Research, March 24, 2013

Cyprus’ fate illustrates how the European Union imposes the dictatorship of the global speculators, banks and corporations on the working class. The EU yesterday continued to demand massive austerity in Cyprus to raise €6 billion ($7.8 billion) in return for a €10 billion bank bailout.

The island country has been the centre of an escalating financial crisis, with its parliament voting Wednesday to reject proposals to raise the necessary funds by taking money from anyone with deposits in Cypriot banks.

A new vote on whether to impose a “haircut” on depositors was delayed until today. The EU and European Central Bank (ECB) dismissed proposals by Cypriot politicians—themselves wholly reactionary—to create a “solidarity fund” to raise the six billion demanded.

Cyprus’s aim was to preserve its financial relations with Russia and force workers to pay the price by nationalising pension funds to pay the debts of the super-rich. Other proposals included seeking contributions from the church and selling gold reserves—all in order to avoid levying a significant one-off levy on major depositors.

However, the EU bluntly dismissed these measures as insufficient. German Chancellor Angela Merkel declared baldly after a parliamentary meeting of the Christian Democratic Union (CDU), “We want Cyprus to remain in the euro zone”, but insisted that its “current business model is dead.”

The ECB has insisted that the levy on investors should be re-imposed—this time with a widely-anticipated penalty of 15 percent on depositors with balances over €100,000, as initially rejected by Nicosia. If not, it was made clear that proposals had been discussed to prepare for and limit the impact of a Cypriot exit from the euro zone. (more…)

NEVER ENDING MISTAKES OF AN INCOMPETENT EU MAY BE LEADING TO ITS DISSOLUTION

lc--280In the morning hours of March 16,2013 the Eurogroup issued its infamous statement which could precipitate the dissolution of the eurozone and perhaps of the EU. It starts with words of welcome. ”The Eurogroup welcomes the political agreement reached with the Cypriot authorities on the cornerstones of the policy conditionality underlying a future macroeconomic adjustment programme…………” It continues wth difficult to understand words with double meaning until it gives the coup de grace. ”These measures include the introduction of an upfront one-off stability  levy applicable to resident and non-resident depositors……”  With this sentence the Eurogroup put an end to economic stability in the EU since for the first time in its history, the EU steals money belonging to bank depositors, under the guise of a so-called stability levy. A tax would be imposed on accounts under 100.000 euros and a heavier tax for accounts over 100.000.

Two days later, Cypriot Parliament voted against this decision. Not one member of Parliament voted in favour. The banks closed for more than a week, as depositors were able to get some money from ATM machines. The population, rightfully angry, demonstrated and protested against state robbery, while one angry depositor tried to break in his bank with a tractor. The President of the Eurogroup, simply took note of the decision of the Parliament while Merkel said that she would respect the decision. The decision of Parliament gave courage to the people of Greece, which were quite disappointed with the docile position taken by its Parliament which adopted with a great ease, measures that were even violating the Greek Constitution. (more…)

Cyprus rejects bailout deal leaving eurozone facing fresh crisis

Cash-strapped nation expected to seek funding lifeline from Russia after dramatic no vote in country’s parliament

 in Nicosia and 
The GuardianTuesday 19 March 2013 21.09 GMT

Protesters outside Cypriot parliament

A Cypriot protester outside the country’s parliament after hearing news that MPs had rejected the bailout deal. Photograph: Filip Singer/EPA
 

The Cypriot parliament has thrown out a controversial plan to skim €5.8bn from savers’ bank accounts, in a move that risks plunging the eurozone into a fresh crisis and heightens expectations that the cash-strapped nation will seek a funding lifeline from Russia.

Cyprus has just 24 hours to find a solution to its funding gap before its banks are due to reopen following the dramatic no vote on Tuesday night, which failed to support a hastily renegotiated change to the original deal.

With the crisis escalating, an RAF flight carrying €1m (£850,000) in low denomination notes set off for Cyprus to provide cash for 3,000 British service personnel based on the Mediterranean island.

The banks have been shut since Friday and electronic transactions halted, although cash machines are still working and the Ministry of Defence said the euros were being flown in as “contingency measure”.

About 2,000 of the military staff, who typically serve out 18- to 24-month postings to the island, have their salaries paid into local accounts. The MoD said it was “approaching personnel to ask if they want their March, and future months’ salaries paid into UK bank accounts, rather than Cypriot accounts”.

Even before the no vote was announced, the euro had already slumped to its lowest level in four months after speculation that the Cypriot finance minister, Michalis Sarris, had resigned.

Sarris, who was in Moscow ahead of his meeting with his Russian counterpart on Wednesday, was forced to text-message Reuters to deny the quick-spreading rumours that he had quit.

There were also reports that the banking arm of the Russian energy company Gazprom might pump cash into Laiki, Cyprus’s second largest bank, which is in urgent need of a capital injection. Gazprom officials insisted this was not being planned. (more…)