While you were sleeping, the Cyprus fiasco came to a head. President Anastasiades threatened to resign, or to pull his country out of the eurozone, or both, but in the end he managed to spare depositors of under 100,000 euros from a seizure. In fact, there is no actual deposit tax at all, but larger depositors in Laiki Bank and Bank of Cyprus will still get hosed (Telegraph):
Popular Bank of Cyprus, also known as Laiki and the nation’s second largest bank, will be shut as part of the deal, with the raid on uninsured Laiki depositors expected to raise €4.2bn.
The Bank of Cyprus, the island’s largest lender, survives but investors not protected by the €100,000 deposit quarantee (sic) will suffer a major “haircut” – a forced loss on the value of their investment – over the coming weeks of up to 40pc.
Deposits above €100,000 in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and recapitalise (UK sp) Bank of Cyprus. The Bank of Cyprus must also assume over €9 bn in liabilities owed to the ECB by Laiki.
…
Jeroen Dijsselbloem, head of the Eurogroup of finance ministers, of the Netherlands, said: “We’ve put an end to the uncertainty that affected Cyprus and the euro area over the last few days.”
Even the best-protected senior bondholders investing in Laiki Bank would see their holdings “wiped out”, Mr Dijsselbloem said.
“Laiki bank will have to be resolved so yes, senior bond holders, along with the others, will basically be wiped out there,” he said.
Ouch!
It’s projected that Cyprus financial sector will be cut in half, and its overall economy will shrink by 20% over four years (Telegraph).
So far, reaction is mixed – as in mixed between angry and furious. Russia’s Prime Minister called it outright theft. The head of Cypriot’s Greek Orthodox Church called for his country to exit the single currency zone. The Telegraph‘s Jeremy Warner took it apart, piece by piece.
Of course, the German government is thrilled, as their taxpayers will be spared the cost of this de facto empire. To be fair to the German people, however, no one asked them if they would be OK with this in the first place.
Everyone involved in the deal (at the elite level) is convinced they have sealed the breach. I’ll believe it when the Cypriot people accept the draconian capital controls imposed on them, the quintilimation of its economy (McGuirese for the 20% drop in GDP that’s coming), and the national humiliation they have suffered.
In other words, I can only assume the folks in Brussels are high.
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