Tuesday 19 March 2013

Cypriots decide against a haircut

Cyprus bailout

MPs on the island have rejected the harsh bailout.
36 against - 19 don't knows and none in favour.
This seems unlikely to have happened if the government didn't have a plan B.
Or possibly a plan P?

British bases on Cyprus are Sovereign base areas. They are treated as part of the UK and British rules and laws apply.And then there's the small problem of the Turkish neighbours on the other side.

Well, Cypriots are nothing if not adaptable.


Timbo614 said...

Mr. Excrement, please meet Mr. Fan.

Cyprus may be about to suffer the full loss (except for the "guaranteed" €100,000)... We may one day have a lot to thank them for.

The Troika will U-turn. Betcha.

Coin Operated said...

The Russians are keen to get involved. Cyrpus has been THE conduit for them to get their money out of the country and launder/place it elsewhere.

You only have to look at the number of "brass plate" addresses held by Gazprom alone there.

rwendland said...

Caught the tail-end of a Cypriot MP(?) talking on Newsnight. His plan P seemed to be "Print". Print lots of New Cypriot Pounds, and leave the Euro. Wouldn't have thought that would work well for the Russian (and other foreign) savers!

Anonymous said...

Was watching the twitter feed of Sharon Bowles - Chair of European Parliament's Economic and Monetary Affairs - over the weekend. She was caught out by the news i.e. nobody told the politicos. However since then she's gone to ground despite initially "uber cross" about guarantee being scrapped.

German pensioners to get their revenge?

Anonymous said...

Or Gazprom to the rescue....


Ryan said...

It seems to me that the Cypriot government has adopted a negotiating position here, one which says "Basically, creditors, you can choose to get some of your money back, or none of your money back. That's the reality. Which is it to be? Because we aren't paying for any of it. So you can bail us out and let your silly Euro game continue, or go hang." The ball is always in the creditors court. It is now up to the EU to decide just how much pain they are going to let Cyprus inflict on them before they give in and bail them out. Right now Cyprus has already inflicted considerably more pain than the level of debt would suggest was needful! The issue has probably wiped out far more in share value, bond prices and exchange rates across the EU than 100x the Cyprus debt!

It is worth looking at the stats. Cyprus TOTAL debt is about 17bn Euros. Chick feed really. It has a deficit of about 1.5bn Euros. Not that bad. Problem is that 6.5bn Euros of that debt happens to mature this year, as does a 2.5bn Euro bail-out from Putin. That's the real problem - they can't get this money from the markets so about half the total debt needs to roll-over. Then you have the Cyprus banks. The reason they are in a mess is because they lost 10bn Euros in Greece. Hmmmm, so basically the Cypriot banks got shafted by the EU that forced Greek private creditors to take a haircut on debt they were holding and now the EU is refusing to bailout the banks that are failing in Cyprus as a result of that decision???? Cheeky.

Seems to me that the EU is playing hardball on Cyprus on the weakest of pretexts. The Cypriot banks were screwed by the EU so the EU does have an obligation to bail them out. As for the bailout it seems to me that the real issue here is to restructure the debt outstanding so it doesn't all become due this year - the EU could manage that without even taking a paper loss. Then the Cypriots have to balance the books - but they are going to have to bite the bullet on that one anyway and at least they are likely to have half the population behind them when the do it.

You do have to wonder why the Germans and the Dutch decided that Cyprus would be made an example of. It seems they chose the wrong target. Many a bad decision made in haste.

Bill Quango MP said...

Excellent analysis Ryan.
Its most odd that the EU is so extraordinarily reluctant, even now, to not just make all debt affordable with fixed low rates and fixed long terms.

Now, we know they can't. But we also know, if they wanted to, they could.
Remember when Portugal and Ireland nearly overturned the cart? A quick restructure, problem partially solved.
And eventually, surely, if the project is to be kept on the road, they will have to.