Making matters difficult for President Nicos Anastasiades, the Cyprian government controls only 28 of 56 seats in the chamber and needs support and backing from two deputies of a small pro-European party.
Today's vote was postponed for one obvious reason. The votes are not there.
As one would expect Cypriot authorities in revised deal talks.
Cyprus’ embattled president was on Sunday in talks with Brussels and political rivals to ease the terms of a planned levy on smaller deposit holders as he tried to scrape together a parliamentary majority for a €10bn bailout for the debt-laden island.Lie of the Day
A revised deal being discussed in Nicosia, with the blessing of the European Commission, would shift more of the burden on to deposits larger than €100,000, according to officials involved in the talks.
“The ECB officials were very blunt,” said one Cypriot official familiar with the discussions. “There are serious fears of contagion regarding Italy and Spain if this legislation doesn’t go through.”
Cypriot officials insisted no levy on smaller depositors was impossible. One senior Cypriot official involved in the talks said that because about 35 per cent of all deposits are below the threshold, exempting them would mean a rate so high for the rest that it would no longer be viewed as a tax.
Archbishop Chrysostomos, the island’s influential spiritual leader, called for Cyprus to leave deposits intact, leave the eurozone and readopt its former currency, the Cyprus pound.
Cyprus President Nicos Anastasiades now states "depositors would be offered bank shares covering the full amount of their losses, while those who left their savings in banks for another two years would be rewarded with bonds backed by future income from exploiting Cyprus’s natural gas deposits."
The Mish response is "Please be serious". Bank shares are worthless, and if they are not, they should be and soon will be. As for leaving money in the bank for two more years, subject to still more confiscation at the whims of the EU, I also say "please be serious".
"Bailout Math"
The Financial Times stated "The depositor levy was demanded by a German-led group of creditor countries to bring down the bailout’s price tag from €17bn."
I went through the Cyprus Bailout Math addressing the question "can depositors be left whole?" The answer is yes, up to €17.7 billion (and depositors were only hit with €5.8 billion).
Poker or Chicken?
Some have likened events in Cyprus to the world's largest game of poker. A game of "chicken" where one side has an unfair advantage is more like it.
The Financial Times reports "The message, delivered by the ECB’s chief negotiator, Jörg Asmussen, meant that if no deal was reached, Laiki would collapse, probably bringing the island’s largest bank down with it, and saddling Nicosia with a €30bn bill to reimburse accounts covered by the country’s deposit guarantee scheme. It was money Nicosia did not have. All of the island’s account holders would be wiped out."
Apparently this is another one of those "offers you cannot refuse". The ECB is willing to inflict €30 billion in damages on Cyprus to collect €5.8 billion from Cyprian citizens.
Put a German Flag in Cyprus
Here is an interesting quote courtesy of Google Translate: Put a German Flag in Cyprus
Russian President Vladimir Putin placed an angry call to Cyprus president Nikos Anastasiadis Sunday morning.Not sure if that story is validated but the quote seems reasonable enough.
The Putin reportedly said verbatim "Better to put the German flag at the Presidential Palace. Don't you understand this decision will destroy your country?" Who will trust banks on Tuesday?
Contagion-Begging Actions
What is someone in Greece, Spain, or Italy supposed to think?
Consider Spain. By a 526 to 86 vote, the nannycrats in Brussels just passed a regulation that will require a country to accept a bailout if offered. (Please see An Offer You Cannot Refuse; EU Passes Law Forcing Countries to Take Bailout; Is Spain the First Target?)
Also note that EU Court Strikes Down Spain’s Eviction Law.
Think about the parlay of EU contagion-begging actions for a second.
- Spanish banks will not be able to evict homeowners, who in turn will be give reason to default. Losses will soar at Spanish banks and they are insolvent already.
- The "Offer You Cannot Refuse" action by the EU is sure to arouse suspicion of a forced bailout in Spain.
- Cyprus actions will heighten fears of bank takeovers, capital controls, and theft of deposits via confiscation.
Reader Scott had this pertinent comment:
"This has simply got to be ruinous for legitimate business in Cyprus. Right off the bat every business in Cyprus is having part of its capital confiscated. Governments may not understand this but a lot of people and businesses are on a razors edge. That $1000 rent payment may not withstand a $67.50 haircut. A monthly payroll of $100,000 might not be made if 10% of the businesses cash is seized."
My friend Bernd who lives in Germany had these comments. "Judging by the German forums on Focus, Der Spiegel, SZ, FAZ and Die Zeit, there is hardly any support for this action. The name calling and swearing is rather blunt. These guys did not study their Machiavelli. He said roughly if you hurt people, you must never hurt all of them at once."
The closest Machiavelli quote I can find is "If you need to injure someone, do it in such a way that you do not have to fear their vengeance."
"F" the EU
It will not stop here. There will be more demands and more haircuts. Staying in the eurozone cannot be worth the price.
It is high time something be crammed straight down the throats of the EU and for that matter, straight down the throats of anyone in Cyprus parliament who votes for the imposed terms.
I encourage 100% of Cyprus citizens to take every penny out of their banks the second the "bank holiday" ends.
Justifiable vengeance is coming, in spades.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Addendum:
Reader Ayal asks "I'm sure you know that is mathematically impossible for everyone to take out their deposits".
Of course it's impossible, at least system-wide. As far as Cyprus goes, what choice will the ECB have other than provide the funds, impose capital controls, or impose another haircut exposing them as liars?
The ECB will lose in any "bank run" scenario.
Wine Country Conference
I am hosting an economic conference on April 5 in Sonoma, California. Proceeds go to the Les Turner ALS Foundation (Lou Gehrig’s Disease).
Please see My Wife Joanne Has Passed Away; Stop and Smell the Lilacs for my association with the disease.
To learn about the economic conference with world-class speakers including John Hussman, Michael Pettis, Jim Chanos, John Mauldin, Mike “Mish” Shedlock, Chris Martenson with guest moderator Lauren Lyster and other Special Guests, please visit Wine Country Conference April 5, 2013
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