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
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
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.
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
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
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