Cyprus

Deposit haircut back on the table: reports

Second day of talks planned over multibillion-dollar loan to save Cyprus from financial crisis

Troika representatives arrive at presidential palace

Cyprus Star,

20 March, 2013

THE government ordered banks to stay shut until next week as the proposal to tax deposits – at lower rates – was back on the table to avert a financial meltdown.

"We don't have days or weeks, we have only hours to save our country," ruling DISY deputy chairman Averof Neophytou told reporters as crisis talks in Nicosia dragged into the evening.

Reports suggested the government may submit a bill tomorrow proposing a haircut on deposits but at lower rates than legislation that was rejected by parliament on Tuesday.

MPs threw out a proposed tax on bank deposits in exchange for a 10-billion euro bailout from the EU, a stunning rejection of the kind of strict austerity accepted over the past three years by crisis-hit Greece, Portugal, Ireland, Spain and Italy.

The tax -- 6.7 per cent on deposits under 100,000 euros and 9.9 per cent on deposits over 100,000 euros -- was designed to fetch the government 5.8 billion euros.

The shortfall resulting from the lower rates could be covered by nationalising the provident funds of semi-state companies.

Banks are to stay shut for the rest of the week and will not reopen till Tuesday after a holiday weekend.

Cyprus finance minister to stay in Russia 'as long as it takes' to reach deal

Second day of talks planned over multibillion-dollar loan to save Cyprus from financial crisis

the Guardian,

20 March, 2013

Russia and Cyprus were set to launch a second day of talks in Moscow on Thursday over a multibillion-dollar loan to help save the Mediterranean island from a financial crisis that could have a disastrous impact across Europe.

The Cypriot finance minister, Michael Sarris, held inconclusive negotiations with top Russian officials on Wednesday, but said he would stay in Moscow "as long as it takes" to reach a deal.

A lifeline from the Kremlin has gained increasing urgency after the Cypriot parliament rejected a plan on Tuesday to impose a levy on bank deposits in order to raise €5.8bn towards a €10bn bailout offered by the European Union.

Fears that a financial meltdown could ripple across Europe continued to grow. The Cypriot government was said to be considering imposing capital controls amid fears that money would flood out of the country once its banks were re-opened.

To stem the damage, Cyprus is seeking a five-year extension on a €2.5bn loan granted in December 2011 that is due to mature in 2016. It has also asked Russia to refinance the loan and lend an additional €5bn.

With an estimated $31bn held in Cypriot banks by Russian banks, businesses and individuals, as well up to $40bn in loans to Cyprus-registered firms, Russia has been gripped by fear since the crisis began to unfold, with state-run television transmitting rare live reports from outside the Cypriot parliament.

Yet the Kremlin's reputation for seeking hard assets abroad in exchange for aid has prompted speculation that negotiations were dragging as it bargained for stakes in offshore gas fields and Cypriot banks.

"We had a very good first meeting, very constructive, very honest discussion," Sarris said after meeting Anton Siluanov, the Russian finance minister. "We've underscored how difficult the situation is."

However, he said, there were "no offers, nothing concrete".

"We'll now continue our discussion to find the solution by which we hope we will be getting some support," he said. Asked by reporters whether that meant simply renegotiating a loan, Sarris said: "No, we are looking at things beyond that." He later met Igor Shuvalov, a deputy prime minister and close ally of Vladimir Putin.

Much speculation has fallen on Gazprom, the state gas monopoly that has often been dubbed a tool of Kremlin foreign policy. A spokesman for the firm shrugged off speculation that it was seeking exploration rights for gas deposits in the Mediterranean Sea. "There have been a lot of fantasies in the press," the Gazprom spokesman Sergei Kupriyanov told the Guardian. "We have made no proposals." He said no Gazprom officials took part in Wednesday's talks.

The appearance in Moscow of George Lakkotrypis, Cyprus's minister for energy, commerce, industry and tourism, only fuelled the speculation.

Cypriot officials said he was visiting a tourism exhibit.

The Russian press has reported that Gazprombank, a subsidiary of the gas giant, was interested in Cyprus Popular Bank, the country's second biggest. The Cypriot government on Wednesday denied reports that it had been sold to foreign investors.

Charles Robertson, the global chief economist at Renaissance Capital, a Russian bank, said a bid for gas fields would fit with Putin's strategy of boosting the country's influence on the basis of natural resources. "I could see some potential deal around the natural gas fields – energy is something that Putin believes makes the country powerful … it would fit with his long-term agenda," he said. A deal on banks appeared less likely, he said, particularly considering Russian clients were now seeking to move funds out of Cyprus and its banks were looking less than healthy.

A proposal to levy a charge on deposits in Cypriot banks provoked widespread rage in Moscow, where it was seen as a direct attempt to punish Russian clients because of a reputation for ill-gotten gains.

"It is illegal, crazy and ludicrous to label everyone a money-launderer based on their ethnicity," said Dmitry Afanasiev, the chairman of Egorov Puginsky Afanasiev & Partners, a law firm that advises Russian companies on Cypriot investments. "Last time bank deposits were confiscated in Europe with ethnic connotations was in the 1930s."

He accused Europe, led by Germany, of seeking to punish Cyprus for its growing ties with Russia.

"It's cold war thinking – not only is it not right or fair, but it's actually not pragmatic," Afanasiev said. "This cold war thinking, at this point, is about to cause a financial meltdown in the European Union."

Greece

Stournaras: Athens has Plan B for banks

Delia Velculescu (center), head of the troika delegation and representing the International Monetary Fund, departs with European Central Bank representative Isabel von Koeppen-Mertes (right) after a meeting with Cypriot President Nicos Anastasiades at the Presidential Palace in Nicosia, on Wednesday.

Ekatimerini,

20 March, 2013

Finance Minister Yannis Stournaras stressed on Wednesday that Greece was “fortified” against the repercussions of a possible failure by Cyprus to find the necessary funds to protect its banks, adding that Athens had an alternative plan for Cypriot banks based in Greece.

“There is a Plan B for Greece which I cannot reveal you to now,” Stournaras told Parliament’s European Affairs Committee. He said it was important that Cyprus find a solution “within the next few hours,” noting however that “Greece will do what it has to do” for Cypriot banks in Greece if it has to.

There was no official statement on the situation in Cyprus by conservative New Democracy, which leads the fragile coalition and has been cautious in its response to the burgeoning crisis in the neighboring country, expressing support for Nicosia but avoiding criticism of the contentious eurozone proposal for a tax on Cypriot bank deposits.

Evangelos Venizelos, who leads PASOK, the second party in the coalition, focused on the situation in Cyprus in a speech to the Socialists’ political council on Wednesday, referring to “political unity” in the Cypriot Parliament which, he said, was lacking in Greece. The PASOK chief also touched on Greece’s pledges to its foreign creditors, noting that any divergence would have to be “absorbed” by 2016. The government is bracing for the return of troika envoys early next month for talks that are expected to focus on a delayed overhaul of the civil service, one of several pledges made by Greece in a bid to clinch a 2.8-billion-euro tranche of rescue funding for March. The government has already sent troika officials a revised version of plans for streamlining the Greek civil service, Kathimerini understands.

Cyprus Banks To Reopen Next Tuesday At Earliest As Capital Controls Become Reality

Zero Hedge,

20 March, 2013

We can only hope that nobody will be shocked that the greatly overhyped Friday Cyprus bank reopen has been postponed.

CYPRUS BANKS EXPECTED TO REMAIN CLOSED THROUGH END OF WEEK:CYBC

And since March 25, Monday, is another Cyprus bank holiday, "Greek Independence Day" (from whom? Certainly not the Troika), it means Cypriot banks will now remain closed at least until next Tuesday and likely far longer.

In the meantime, since TV cameras can't show lines of people at their freindly neighborhood bank, which will have been closed for over a week, the propaganda machine will blast full bore how because the market is pushed higher by the Fed, any fears of bank runs can be forgotten. Actually instead of "can", replace with "must."

But since banks have to reopen at some time, at which point the inevitable bank runs will become reality, the already discussed Plan B is now taking shape:

CYPRUS CABINET TO DISCUSS DECREE ON CAPITAL CONTROLS: CYBC

It remains to be seen if a country can't have a bank run in the New Centrally-Planned and Despotic Normal, if there is simply