Perspectives on the global economic meltdown- (Nov 28 2010)

Singha · Post by **Singha** » 19 Mar 2013 14:31

after the cyprus loot, greece and portugal must surely next.

cyprus was a easy guy to mug - no political or military strength, russian money

the next two are not so easy pushovers and probably have violent public agitations forthcoming if same tactics are tried. so perhaps frogs will be boiled by other means like raising income tax and govts forced to pass that on to bailout slum lords.

TSJones · Post by **TSJones** » 19 Mar 2013 17:56

Look for the British Pound to sink as the Brit central bank ponders if more austerity is needed or not. Can they really be that stupid?

Christopher Sidor · Post by **Christopher Sidor** » 19 Mar 2013 18:10

vishvak wrote:So steps taken in Cyprus are not considered as 'standard' model for wealth confiscation (considering huge blackmoney w.r.t. savings/population), if such a problem occurs in la la land of Swiss bankers, will Swiss eat into black monies from India too? Meaning first allowing loot stores & black money stores as some kind of first world right and therefore sucking up from hard earned monies looted from the whole world using secrecy rules?

Would not bond market help first wold Europeans?

The Swiss are smart. They have not adopted a mutant variant of the gold standard, i.e. the Euro. And this mutant variant of Gold Standard is more insidious. The only reason euro has not been devalued is because the AAA rated countries of Euro-zone would be hit horribly by such a thing. Inflation would shoot up. And that is red-line which is not to be crossed.

If reports are to be believed, Cyprus took the unprecedented step because ECB would not finance a bank in Cyprus. If ECB did not work as a lender of last resort then that Cypriot bank have collapsed and a domino effect would have ensured. To be fair to ECB, it had always said that it would help countries in need, if they agree to harsh conditions imposed on them. There never was a blank cheque to do "whatever it takes."
Now in normal times if a Bank needs cash it has two recourse. The first option is that it can approach the market, i.e. funds/other banks/etc to give some bonds/collateral in exchange of cash. But with Cyprus and Greek banks being where they are, this was effectively a non-option. Also the sovereign of Cyprus was is no position to help the bank as it had just recently raided its pension fund to keep the government afloat. The second option is to ask the central bank. Now here is the kicker, cyprus does not have its own central bank. Its central bank is the ECB sitting in Brussels. Just as RBI steps in whenever the GoI demands it, just as Fed bails out the US treasury and agrees to even send the interest earned back to the US Treasury, Cyprus does not have such an institution.

Many of the southern European population believes in the euro dream. They genuinely seem to want to be Europeans. The elite on the other hand joined euro because one they had debased their currency horribly. Secondly they wanted the low interest rates which their northern brethren were paying. The second is no longer going to apply. How long will this state of affairs persevere is the unknown variable.

TSJones · Post by **TSJones** » 19 Mar 2013 20:04

"just as Fed bails out the US treasury and agrees to even send the interest earned back to the US Treasury"

The Fed doesn't bail out the US Treasury. It's there to bail out the US banking system and to maintain US employment. Yes, the money earned by the Fed belongs to the people of the United States and is sent to the US Treasury.

TSJones · Post by **TSJones** » 19 Mar 2013 20:24

How Russia could take revenge over Cyprus deal.

http://finance.yahoo.com/news/russia-co ... 07212.html

pentaiah · Post by **pentaiah** » 19 Mar 2013 21:24

Deleted

Theo_Fidel · Post by **Theo_Fidel** » 19 Mar 2013 22:44

Verily Germany owns Europe now. After all those wars the whole place has been handed to them on a platter. And surprise surprise the Germans realize they don't want the damn thing. Oh! the ironies. History repeating as farce....

The real harcut these countries need to take is in personal income. There is no case for folks in Greece having a per capita income of $40,000. They need to take the haircut to a modest $20,000 or so and bang the country will be solvent again.

This is what the USA did, hair cutting everyone's pay, esp. at the middle and low end and it looks like a titan of growth and prosperity at 1% GDP growth. The dollar grows stronger and stronger as everyone retreats to it.

RamaY · Post by **RamaY** » 20 Mar 2013 00:33

Cyprus Rejects Deposit Levy in Blow to European Bailout Plan

What next?

Suraj · Post by **Suraj** » 20 Mar 2013 00:52

Well done on the part of Cyprus to reject the measure. I hope the Russian mafia go after whichever stupid banksters came up with the idea in the first place.

RamaY · Post by **RamaY** » 20 Mar 2013 01:05

Suraj wrote:Well done on the part of Cyprus to reject the measure. I hope the Russian mafia go after whichever stupid banksters came up with the idea in the first place.

So far we have been hearing about Toxic-assets. Soon we will hear about Toxic-Bankers a.k.a radioactive-bankers.

Theo_Fidel · Post by **Theo_Fidel** » 20 Mar 2013 01:09

I'm confused. So was this proposed by the banks going bankrupt?

I thought it was the political leadership that wanted to haircut the citizens to protect the Russian Mafia!

What am I missing here....

Suraj · Post by **Suraj** » 20 Mar 2013 04:48

The EU agreed to facilitate a EUR10 billion bailout loan if Cyprus agreed to impose a tax on bank deposit base to service those loans - ~7% for accounts of less than EUR100,000, and 10% for those with a larger balance, if I recall right. The largest deposit holders are Russians, who would take a 10% haircut compared to the smaller one the local depositors would. The Cypriots rightfully revolted at the idea.

ManjaM · Post by **ManjaM** » 20 Mar 2013 06:12

RamaY wrote:Cyprus Rejects Deposit Levy in Blow to European Bailout Plan

What next?

So what happens if Cyprus defaults? Didn't Iceland also default. They seem to be doing fine now.

pentaiah · Post by **pentaiah** » 20 Mar 2013 06:29

Nothing happens if a country defaults
Argentina did
Brazil did
Mexico did

TSJones · Post by **TSJones** » 20 Mar 2013 06:36

ManjaM wrote:
RamaY wrote:Cyprus Rejects Deposit Levy in Blow to European Bailout Plan

What next?
So what happens if Cyprus defaults? Didn't Iceland also default. They seem to be doing fine now.

Basically, the foreign depositors take it in the neck. There are consequences:

http://www.businessinsider.com/what-the ... 011-8?op=1

Life is tough so should be your money. Don't chase island paradise banking schemes in order to avoid paying income taxes. The Russians may wish thay had paid the 10% tax.

I am a hide broke, medium level employee in the organization trying desperately to save for my retirement and for every extra dollar I make (that I don't put into my retirement account), I pay a 25% marginal tax rate. So I don't feel sorry for these guys in any way, shape, or form.

pentaiah · Post by **pentaiah** » 20 Mar 2013 06:40

Always hold deposits in country where
1) unquestioned money is printed or circulated
2) Only that money is world trade currency
even if it is Island country

Neshant · Post by **Neshant** » 20 Mar 2013 15:09

Avoid putting money in small countries no matter how much they pitch themselves as economic hubs.

Small countries in general are prone to what I call Sudden Collapse Syndrome. Example : Iceland, Greece, Ireland, Cyprus, Libya, Argentina...etc. and soon London, Singapore, Switzerland, UAE, Qatar, Kuwait

One moment they are flying high, next they are bankrupt or overrun through invasion by foreign powers and rebel terrorists injected by foreign powers. .etc. People with money in those banks lose it all in a flash.

Second when banking, only deposit funds with the govt banks. Do not trust foreign banks operating within the country. They share their client list with their home country for later tax grab purposes. In India, only trust SBI and none other.

These are the laws of money. Ignore them at your own peril.

pentaiah · Post by **pentaiah** » 20 Mar 2013 18:15

If SBI operates in US it is obligated to report to US all details about deposits of US citizens as well as others who operate their accounts in Us

TSJones · Post by **TSJones** » 20 Mar 2013 19:58

^^^^^It must obey US banking laws if operating in the US. Most foreign banks create a wholly owned subsidiary corporation in the US. Then the sub reports only those transactions pertaining to the subsidiary entity.

Christopher Sidor · Post by **Christopher Sidor** » 20 Mar 2013 20:01

Things would be amusing if not for the fact that it is getting slightly scary. The Russians are accusing euro-zone countries of being parasites and worse "Bolshevism". And there are dark whispers that Cyprus has turned to Russia for help. It is doubtful that Russia would help Cyprus, despite the fact that there are very close cultural and religious relations between these two countries. Euro-zone has a financial interest to help Cyprus. Russia does not. And in this world Financial interest is the best form of influence.

Two worst case scenarios, which I hope never to happen, come to my mind.
Firstly Cyprus defaults and leaves Euro. If that happens Euro could split up and the collateral damage would definitely reach all the remaining AAA rated countries of Europe, especially Germany. Further a precedent is setup. With worrying implications. And I am praying that they are able to avoid a global depression.
Secondly Cyprus defaults and does not leave Euro. It forces the Euro-zone to back down. If Euro-zone countries blink the implications for Angela and other politicians would be bad, very very bad. Imagine what message will go to Greece, spain and Italy.

Christopher Sidor · Post by **Christopher Sidor** » 20 Mar 2013 20:03

^^^^
And to think of it, all this for some few billions of euros. These people need to get some common sense knocked into their heads.

TSJones · Post by **TSJones** » 20 Mar 2013 20:08

I think there is a good chance that Russia will bail them out.

SwamyG · Post by **SwamyG** » 20 Mar 2013 21:23

http://chronicle.com/article/The-Sun-Se ... _medium=en

The moral explanation of the crisis, then, explains neither its cause nor its lingering effects, and I've come to the conclusion that a Marxist view of the recession is helpful in highlighting a historical and structural, rather than a moral, perspective. For 2008 must be seen as a major turning point in the economic and political history of the world, as were 1929 and the 1970s.

But the Marxist lens is limiting because this period has been less a crisis of a class order than of a caste order. In particular, 2008 is the beginning of the end of the 30-year dominance of the modern merchant caste.

For Marx, economic class was the overwhelmingly critical factor explaining people's politics. But that approach left out much that is important beyond pure economic interest, such as ideas, values, and culture. Marx was right to see our occupations as central to identity. And the concept of "caste" allows us to understand the importance of work in its broader cultural context.

This is something the ancients understood. They saw society as an aggregation of various occupational groups that each has its own ethos. In the medieval West, they were called "orders," and in India they are still called "castes" (varna). According to ancient Hindu ideas, each varna has its own dharma, or morality and way of life. And many cultures identified four castes or orders: the priests or "sages," who specialized in ideas; the rulers/warriors, who were expert in force and authority; the merchants, who ran trade and finance; and the peasants and workers.

Of course, applying an archaic system like this to our modern age may seem simplistic and wrong-headed, but in fact this premodern sociology has modern resonances. The French sociologist Pierre Bourdieu's notion that social and occupational networks generate their own habitus, or set of practices and attitudes, is not far from the Indian concepts of varna and dharma.

It is, then, these castes, or occupational-cultural groups, that compete and ally with one another to achieve hegemony—not only over our politics and economics, but also over the way we think. History, therefore, is less the story of class struggle or the inexorable "progress" toward liberty than it is of cycles of caste alliances, which emerge and dominate their societies for periods of time before collapsing. Indeed, history has seen several sharp reversals of apparently hegemonic caste orders—the most vulnerable often being the least balanced and inclusive. That is because individual castes, if too dominant, have a tendency to undermine the prevailing order. Sage-technocrats, unchecked, often bring bureaucratic ossification; workers, ruling alone, find it difficult to achieve broader economic prosperity; and warriors fuel endless wars of honor and revenge. The merchant, ruling without constraint, brings his own particular kind of catastrophe: roller-coaster economic instability and vertiginous inequality.

The year 2008 marked the crisis of the merchant ethos at its most extreme, and we can best understand both the strengths and the fragilities of the merchant order if we look at the last time that merchants were allowed to become globally dominant—the 1920s.

ramana · Post by **ramana** » 20 Mar 2013 22:45

Suraj wrote:Well done on the part of Cyprus to reject the measure. I hope the Russian mafia go after whichever stupid banksters came up with the idea in the first place.

Suraj, Last night the radio was reproting that the Fin Minister was in Moscow as Russains had 1/3 of the deposits. BTW his resignation after the vote was not accpeted. He was sent to Moscow!

Suraj · Post by **Suraj** » 21 Mar 2013 02:12

It's not merely deposits. Russians like high profile billionaire oligarchs Roman Abramovich run their business through Cyprus. There are also geopolitical issues - the Turks would not like Russia having leverage over Cyprus, considering they still occupy part of the island. Russia has been rumored to be seeking access to a port in exchange for bailing out Cyprus, something NATO would find rather disconcerting.

Christopher Sidor · Post by **Christopher Sidor** » 21 Mar 2013 17:46

ECB Hands Cyprus Ultimatum With Liquidity Guarantee --- Bloomberg Dated 21-March-2013

Cyprus has till 25-March-2013 to come to some sort of agreement with the trioka or the current emergency lending to Cypriot banks will be cut off. Cyprus is rated as junk, hence ECB cannot normally lend to the banks of Cyprus. But with emergency measures being invoked, ECB has till now been propping up a few banks in cyprus.

The silver lining is that taxing the depositors of Cypriot banks might not be on the agenda any more.
ECB Gives Cyprus Funding Deadline as New Plan Sought --- Bloomberg Dated 21-March-2013

Dutch Finance Minister Jeroen Dijsselbloem, who leads meetings of euro-area finance chiefs, told European Union lawmakers in Brussels today that it’s up to Cyprus to come forward with a new proposal for raising revenue to trigger emergency loans. The Eurogroup has insisted that Cyprus meet it’s 5.8 billion-euro revenue target, while allowing flexibility on how the levy is structured.

So Cyprus may get the 5 billion Euros from Russia by either pledging its recent gas discoveries or by raising corporate taxes or a combination of all the above and some other options. But the sticking point is that Cyprus has to be come up with 5.8 billion euros. This is almost half of the GDP of Cyprus. Are the euro-zone brethren of Cyprus going to make Cyprus pay through its nose?

pankajs · Post by **pankajs** » 21 Mar 2013 18:24

Euro zone call notes reveal extent of alarm over Cyprus

(Reuters) - Euro zone finance officials acknowledged being "in a mess" over Cyprus during a conference call on Wednesday and discussed imposing capital controls to insulate the region from a possible collapse of the Cypriot economy.

The German representative raised the need to learn more about capital outflows from Cyprus to Russia and Britain, and emphasised that "we stand ready to find a solution immediately" as long as the parameters of the bailout agreed among euro zone finance ministers on Saturday are respected.

The official also referred to the need to resolve the issue of Cyprus's two biggest banks, both of which are close to collapse, and mentioned the possibility of Cyprus leaving the euro zone.

In the event of an exit, the official said steps needed to be taken to "ring-fence" the rest of the euro zone from the impact and to ensure there was no contagion to Greece.

One issue repeatedly raised on the call was the risk of large outflows of capital once Cypriot banks reopen, probably on Tuesday. The ECB representative said the situation was being closely monitored and "technical preparations" were being made to try to limit the amount of any outflow.

"Some additional laws need to be passed. Overall we are in a very difficult situation," the official said, according to the notes. "(We're) trying to do everything within the powers to limit any unauthorised outflows.{Wah! Wah! you cannot withdraw your money for it is illegal or soon will be made illegal!. The Russians and the Brits are not going to like it.}"

Cyprus's finance minister continued discussions in Moscow on Thursday to see whether a way can be found to involve Russia in the bailout so that large depositors in Cypriot banks, many of whom are Russian, are not hit with a one-off levy.{More than the levy, it is the threat of Russian withdrawal that is the worry. If there is no agreement the only option before Cyprus will be to impose capital control and then all bets are off!}

"The economy is going to tank in Cyprus no matter what," the notes quoted him as saying. "Restrictions on capital will probably be imposed{So instead of 10-15% levy there is going to be 100% confiscation!}," he said, adding that further conference calls would be organised in the coming days.

By discussing a levy on deposits, they have let the Genie out of the bottle. Will they be able to stop the run on the banks without resorting to capital control?

RamaY · Post by **RamaY** » 21 Mar 2013 19:16

^ The swiss banks already have a restriction of $250k/yr limit since 2008.

Austin · Post by **Austin** » 21 Mar 2013 19:34

Russia, Cyprus in Second Day of Gas for Cash Talks

Cyprus’ Finance Minister Michalis Sarris told reporters ahead of a new round of talks on Thursday that the Cypriot delegation was negotiating the terms of financial aid from Russia in return for stakes in the Mediterranean nation’s banks and gas projects.

“We are, of course, seeking assistance but in a way that would make economic sense for Russia,” Sarris said. “A large number of conditions are emerging during the discussion, related to banks, natural gas and other assets, on which we could base cooperation with Russia.”

Cypriot gas projects to explore and produce natural gas in deep-water zones off the island’s coasts are likely to be a hard sell to Russia, in light of possible opposition from Turkey, which has never recognized the Republic of Cyprus or its maritime borders after the island was split into two parts in 1974.

Both teams of negotiators comprising officials and bankers from Cyprus and Russia are working intensively on the terms of a deal, Sarris said.

In an interview with Reuters news agency, Sarris said that Cyprus was not seeking a fresh loan from Russia, but was in talks with Moscow on investments in its banks and energy resources to reduce its debt burden.

"The banks are the ultimate objective in any support we get, so it'll either be a direct support to the banks or the support that we get through other sectors will be channeled to the banks, because this is our biggest challenge to recapitalize the banks," Sarris told Reuters.

Sarris also told the news agency that Cyprus was seeking a five-year extension of an existing 2.5-billion euro loan from Russia, and a reduction in the interest rate on it to 2.5 percent from 4.5 percent.

pankajs · Post by **pankajs** » 21 Mar 2013 20:47

Germany Calls the Shots

THE crisis in Cyprus has taken a nasty turn, but it will not wreck the euro. Chancellor Angela Merkel will simply not allow it to happen. For Germany the euro is the goose that lays golden eggs. It has allowed Germany to accumulate more than €1 trillion in trade surplus with other E.U. countries in a little more than a decade. Germany will not let the golden goose die.

The European sovereign debt crisis has fundamentally changed Europe’s geopolitical map. Instead of Europe being divided into West and East as it was during the Cold War, the Continent has become divided into a relatively prosperous North and a chaotic South. Instead of Europe being led by France and Germany with Britain playing a balancing act, leadership has fallen squarely on Germany’s shoulders. It is no longer about a more European Germany. It is about more German Europe.

Germany is calling the shots when it comes to the future governance of the euro zone. It is also calling the shots with regard to the Cypriot problem. If Cyprus can be guided out of the euro zone without endangering the credibility of the euro, Merkel will gladly make an example of the small island nation. If she thinks that a Cypriot exit will damage the euro’s reputation, she will not let it happen. The euro is simply too valuable for Germany to be risked.

There are two conclusions to be drawn. First, Germany is more dependent on the European market than it is on the rest of the world. Second, Germany can compete with other members of the euro zone better than it can compete with the rest of the world. One reason for this is the fixed exchange rate within the euro zone. As long as Germany can keep its own costs down, it is able to export to the rest of Europe more easily than to the rest of the world. This is about good housekeeping but it is also about geopolitics.

Also note the value of the euro will reflect the combined strength or weakness of the entire euro zone and not just that of Germany. In effect, making German goods more competitive against exports from other developed countries, including the United States and Britain.

anmol · Post by **anmol** » 21 Mar 2013 22:31

First rape charges against Strauss-Kahn.. now this:

Christine Lagarde's flat raided by French police

IMF chief's residence searched amid inquiry into her handling of €285m payout to Nicolas Sarkozy supporter Bernard Tapie

Kim Willsher in Paris
guardian.co.uk, Wednesday 20 March 2013 16.30 GMT

Police have searched the Paris home of the head of the International Monetary Fund as part of a fraud investigation centred on a supporter of former president Nicolas Sarkozy.

Christine Lagarde's flat was raided along with that of her office manager and the home of businessman Bernard Tapie, a former politician, actor, singer and television celebrity.

The IMF chief has been the subject of preliminary investigations for "complicity in the embezzlement of public funds", since 2011, when Tapie was awarded €284m of public money in compensation in a financial dispute while she was economy minister.

The search came hours after the French government was rocked by a separate scandal after the budget minister Jérôme Cahuzac was put under criminal investigation amid claims he hid money from the French taxman in a secret Swiss bank account. Lagarde and Cahuzac have vehemently denied any wrongdoing.

Lagarde's lawyer, Yves Repiquet, said Wednesday's searches would vindicate his client. "They will serve to establish the truth and will contribute to the exoneration of my client of any criminal wrongdoing," he told Reuters.

The accusations against Lagarde centre on her role in what is known as the Tapie Affair, a row that has rumbled for two decades, which ended when she made a controversial decision to refer the businessman's dispute with the public bank Crédit Lyonnais to arbitration. Critics say she abused her authority. Investigators are looking into whether Tapie was given a secret deal in return for supporting Sarkozy during his successful 2007 presidential election campaign.

Tapie, who specialised in picking up and resuscitating bankrupt companies, bought Adidas in 1990 for €243.9m using a loan from a sister company of Crédit Lyonnais, a part state-owned bank and partner in his company Groupe Bernard Tapie.

After being offered a government post in 1992 by the then Socialist president, François Mitterrand, he was ordered to sell the group, including the jewel in its crown, Adidas, the sportswear brand of which he was a major shareholder. Crédit Lyonnais was given the job of selling it.

Tapie, who used to own Olympique de Marseilles football club and was found guilty of match-fixing, later sued Crédit Lyonnais over its handling of the sale. He lost his case in the country's highest court, but had been appealing against the decision when Lagarde intervened.

Critics say the case should never have been referred for private and binding arbitration because public money was at stake, and that Tapie received considerably more than he would have been awarded by a court. There is no suggestion Lagarde profited personally.

Lagarde, who had ignored objections from colleagues, defended her decision, saying it was "the best solution at the time". There are concerns that Lagarde, who replaced disgraced Frenchman Dominique Strauss-Kahn as head of the IMF after he was arrested on charges of sexual assault, later dropped, could be forced to resign if she is formally put under investigation.

Cahuzac, the Socialist government minister in charge on clamping down on tax evasion, resigned on Tuesday and was relieved of his public duties by President François Hollande.

sooraj · Post by **sooraj** » 22 Mar 2013 11:11

Gartman Warns Cyprus: One Does Not Steal Russian Mafia Money And Get Away With It

http://www.businessinsider.com/gartman- ... ney-2013-3

sooraj · Post by **sooraj** » 22 Mar 2013 11:12

If Cyprus falls into Putin's grip, the West will have lost the first battle in the new Cold War

http://www.dailymail.co.uk/news/article ... ds-newsxml

sooraj · Post by **sooraj** » 22 Mar 2013 11:16

Why Turkey Would Be Furious If Russia Became The Savior Of Cyprus

http://www.businessinsider.com/cyprus-c ... ons-2013-3

sooraj · Post by **sooraj** » 22 Mar 2013 11:19

from twitter

@DividendMaster, Cyprus is far more afraid of the Russian Mafia than the ECB. I predict Cyprus will drop the euro and adopt the ruble.

Christopher Sidor · Post by **Christopher Sidor** » 22 Mar 2013 12:05

With Cyprus turning to its so called near east for relief all the basest instincts of people are coming out. Talk about the new cold war, when the cold war thankfully ended in 1989, about Turkey and about how certain countries do not deserve to be Euro-zone, etc has come out. It looks like the whole cupboard was rotten and now with this jolt, all the cockroaches are coming out. All of this happened because the euro-zone nations told Cyprus that it had to contribute to the rescue. And this is stupid. If a country is asking for help it implies that it cannot help itself. If Cyprus could have put money on the table, it would already have and this crisis would never have reached where it is now.

What the euro-zone nations have not counted is the long term impact of Cypriot actions. In the unlikely case that Cyprus is able to get relief via Russia, the signal that goes to the world community and financial markets is going to be that EU is nothing more than a monetary union. Also it implies that there is no concept of European solidarity. Rather it is every country for itself.

Worse from a geopolitical angle, the Euro was supposed to be the mechanism where a united Germany, stronger than all of the other countries in Europe, would be kept in check. Rather what has happened is that due to Euro, Germany has become the unquestioned financial czar of Europe. And where the money power is concentrated, the real power also lies there. Germany is out to make Europe in its image. 50 years after WWII ended what a full circle life has turned.

pankajs · Post by **pankajs** » 22 Mar 2013 12:41

Cyprus will hit large depositors with 40pc losses to save banks

Cyprus will inflict losses of up to 40% on large depositors but guarantee all deposits up to 100,000 euros in a plan to restructure its biggest banks and prevent the island's economic collapse.

Following a run on the Laiki bank on Thursday, the Cypriot parliament has passed laws enacting strict capital controls for when banks open next Tuesday, restricting the movement of funds for up to 60,000 British expatriates with accounts in Cyprus.

Cyprus will divide Laiki into two entities. One will contain all insured deposits of under euros 100,000 and the other will be a "bad bank" with larger deposits, many of them Russian, subject to an asset recovery programme and substantial losses.

Last night Cypriots queued to withdraw cash from the Laiki bank, the country's second largest, after the European Central Bank warned it would cut off funds on Monday unless there was agreement on an international bail-out.

To prevent the bank's collapse a cash limit of 260 euros a day was imposed as panic was fuelled by an angry demonstration by Laiki staff outside the Cypriot parliament. The restructuring means 10,000 jobs are at risk.

"If the financial sector collapses, then they simply have to face a very significant devaluation and faced with that situation, they would have no other way but to start having their own currency," said a senior EU official.

A Cypriot plan for a new state investment fund to recapitalise banks will be backed by nationalised pension funds, church property and as yet untapped oil and gas reserves.

John Cridland, the director-general of the CBI, warned that "the ill-thought-out 'stability levy' on bank deposits has created a real mess. While technically a tax, it undermined the confidence of ordinary depositors in the safety of their savings," he said.

Meanwhile, S&P cut Cyprus' credit rating to CCC from CCC+.

shyam · Post by **shyam** » 22 Mar 2013 12:46

It is too naïve to believe that policy makers did not understand the long term consequences of their actions. People who understand financial world can see it very well, and they are playing it with full knowledge. We are the people who don't know what their ultimate goals are. It is all a game.

shyam · Post by **shyam** » 22 Mar 2013 12:50

This has to be a joke.

Grandmother in Cyprus receives valuable advice from Russian economist grandson

An elderly resident of Pathos in Cyprus has been doing something odd for the past few weeks. Every Friday she goes to the bank and withdraws all of her money, then returns it on Monday. When asked why she gave the following statement to bank employees:

“My son is an economist in Russia and he has been telling me, if something happens with the Cypriot banks, it will happened on the weekend. He told me to withdraw the money every Friday.”

She was laughed at by the bank employees, but now unlike most of the country she has access to her money while the banks in Cyprus stay closed until at least Tuesday of next week. While the Cypriot legislature did not pass a bill that would have taken between 6.75% and 10% of bank deposits, who knows what desperate politicians will do now to get their fix of financial aid from the IMF. At least one person won’t be affected, thanks to a caring grandson.

Christopher Sidor · Post by **Christopher Sidor** » 22 Mar 2013 13:47

Cyprus’s Sarris to Leave Moscow Without Russian Financial Help --- Bloomberg Dated 22-Mar-2013

The Cypriot finance minister returns from Russia, empty handed. The Cypriot parliamentarians have now to start to debate the next step. It looks like the Euro-trioka has won again. From where will Cyprus get the 5 billion euros?