It appears that Cyprus’ attempt to bring in Russia as the savior have failed, and they’re crawling back to the EU, and back to the deposit seizure – although this time it would only affect deposits over 100,000 euro. Of course, that would essentially end the Cypriots’ banking advantage, but Angela Merkel made it clear that was a feature, not a bug: “The Cyprus business model is dead” (Telegraph). There will also be capital controls, because heaven forfend depositors try to protect their money by moving it to safer banking systems.
UPDATE: Once the bank restructuring and deposit levies are implemented, large depositors could lose up to half their money. As Open Europe puts it: “We can’t imagine Moscow would take that one lying down.”
UPPERDATE: The Telegraph (same link) has details on the capital controls: “compulsory renewal of all time savings deposits upon maturity, conversion of current accounts to time deposits, (and) ban or restrictions on non cash transactions.” Ouch!
Oh, and everybody who works for Laiki Bank (to be shut down) is unemployed. Good bye and good luck.
Then again, with the bank levy back in place (assuming I am correct and Cyprus knuckles under), nowhere in Europe would truly be safe. Odds are the levy will not bring in the revenue that is expected (taxes never do), thus leaving a hole in the EU bailout scheme, a hole that will need to be filled. Unless I seriously miss my guess, the Germans, Dutch, and Finns will look to wherever Russia’s money claims as a refuge for the next bank levy…
Meanwhile, if what Vesti says is true (and that is one colossal “if”), John Kerry at one point ringed up Cyprus to see if the US can get in on any gas-for-cash deal. This would probably be the smartest thing Kerry has ever done in his entire career: take an opening; see what could be accomplished; and make the EU realize that Washington is no longer slavishly tailoring its policies to Brussels’ whims. I can only say I hope it’s true.
Anyone looking for the background on all this can see my previous posts on Cyprus here, here, and here.
@deejaymcguire | facebook.com/people/Dj-McGuire | DJ’s posts
