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Cypriot bank savers forced to pay towards Euro/IMF bailout

not-bono-ever said:
so then kids, what now ?

this is fairly uncharted waters...
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Like I said earlier, fuelled with a resentment at the way the overbearing, arrogant troika has tried to railroad them they, possibly on the rebound,fall into the arms of a Russian lover;)
 
Richard Murphy's seems to be almost gloating over this, shows up the gulf between him/that end of the anti-austerity movement and people coming from a more radical start-point. I understand that he's attacking the assumptions of classical economics here but the way he does it is pretty revealing:


Of course, rational economists in state ministries wonder why they should be. Cypriot people (and others) lent money without security to a commercial operation undertaking an inherently risky business (especially so in tax haven Cyprus) and demanded a risk free return. Welcome to the market folks. This is the free enterprise you all so believe in. And when the IOU's proved worth less than full value what those depositors demand is that someone literally pick up the IOU and pay them even though they don't have obligation to do so. What's more, if no one does agree to pay the depositors threaten, by undertaking a run on the bank, to commit an act of collective economic suicide to undermine any remaining value in the IOU they have. Such is the rationality of economic agents.
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What the EU tried to impose on Cyprus looks rational. Except rationality in the face of irrational agents called frightened small depositors, and powerful agents, called Russians with big bank balances, did not work.

Theft is now the rational option? If this depositors 'tax' had been a component of all bailouts and depositors informed in advance,then fair enough,but to put a 'special condition' on Cyprus alone and do it in the way they have tried,stinks.
 
He's showing the daftness of the idea of rational actors which is at the base of mainstream economic thinking (or at least is presented as such).
 
On a broader picture, you have to ask yourself how much damage will those running the EU be willing to inflict on the periphery in order to preserve the Euro dream?
 
coley said:
What the EU tried to impose on Cyprus looks rational. Except rationality in the face of irrational agents called frightened small depositors, and powerful agents, called Russians with big bank balances, did not work.

Theft is now the rational option? If this depositors 'tax' had been a component of all bailouts and depositors informed in advance,then fair enough,but to put a 'special condition' on Cyprus alone and do it in the way they have tried,stinks.
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If it is done in the right way, it's hardly theft. The banks concerned are insolvent. They don't have enough money to cover their obligations let alone pay all deposits back. If they don't get bailed out, all deposits above 100,000 Euros are lost, the rest covered by the deposit protection scheme. The shares will be worthless. This is my preferred option.
 
Some unconfirmed rumours making their way around that one Cypriot bank (Laiki?) will be bought by Russian investors, and that Russian tycoon Dmitry Rybolovlev - a major shareholder in the Bank of Cyprus - will do a capital injection into the economy to the tune of 1-2 billion euros. God knows.
 
TruXta said:
Some unconfirmed rumours making their way around that one Cypriot bank (Laiki?) will be bought by Russian investors, and that Russian tycoon Dmitry Rybolovlev - a major shareholder in the Bank of Cyprus - will do a capital injection into the economy to the tune of 1-2 billion euros. God knows.
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I don't understand why anyone would buy an insolvent bank. What would motivate anyone to do so?
 
TopCat said:
I don't understand why anyone would buy an insolvent bank. What would motivate anyone to do so?
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To a) get control or at least a large stake in the gas fields and b) to get a naval base. That's the suggestions doing the rounds. Melding of economic and political there.
 
butchersapron said:
To a) get control or at least a large stake in the gas fields and b) to get a naval base. That's the suggestions doing the rounds. Melding of economic and political there.
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Why bother investing in an insolvent bank to get assets like Gas? Wait instead for (like the Chinese with Longbridge) Cyprus to go bankrupt and then buy what you want at a knock down price. As for the naval base concept, would the Russians (I presume you mean them) want to pay billions to get a base in the eastern Med?
 
TopCat said:
Why bother investing in an insolvent bank to get assets like Gas? Wait instead for (like the Chinese with Longbridge) Cyprus to go bankrupt and then buy what you want at a knock down price. As for the naval base concept, would the Russians (I presume you mean them) want to pay billions to get a base in the eastern Med?
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The Russians would kill for a base like that.
 
TopCat said:
Why bother investing in an insolvent bank to get assets like Gas? Wait instead for (like the Chinese with Longbridge) Cyprus to go bankrupt and then buy what you want at a knock down price. As for the naval base concept, would the Russians (I presume you mean them) want to pay billions to get a base in the eastern Med?
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First one, because the longer term profits make it worthwhile - and your money in the bank may push it away from insolvency, and at this time, you've got some serious leverage due to the situation. Second one, it seems to have been an aim of theirs for some time - can find links going back some time. Obviously part of wider projection of international interests and would tie right into the gas interest.
 
The reality here is that the Cypriot banks will remain shut. No political solution will be found to come up with the 6 billion required cash input to the bailout deal. I predict the ECB will cut off the financial support for the zombie banks that they are currently supporting. The banks then declare they are insolvent. Everyone loses their money apart from the first 100,000 euros. Cyprus exits the Euro and returns to the Cypriot Pound. The Russians and other investors and depositors leave the island and go elsewhere.
 
TopCat said:
The reality here is that the Cypriot banks will remain shut. No political solution will be found to come up with the 6 billion required cash input to the bailout deal. I predict the ECB will cut off the financial support for the zombie banks that they are currently supporting. The banks then declare they are insolvent. Everyone loses their money apart from the first 100,000 euros. Cyprus exits the Euro and returns to the Cypriot Pound. The Russians and other investors and depositors leave the island and go elsewhere.
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The Russians are currently going to Latvia, in the short term. But in the long term there's billions to be made from the Russia-Cyprus laundering operation. Worth an oligarch running that operation for his mates.

Or, alternatively, if the Cypriot banks all go bust, other EU banks will move in to pick up the trade. Currently about half of the banks in the Baltic Republics are Swedish franchises.
 
FNG said:
Any Plans for a Russian base on the Island could be hampered by NATO plans to take over the British installations on the Island
http://famagusta-gazette.com/britis...to-under-new-peace-plan-reports-p17207-69.htm

It's the real politik that makes cypriot withdrawal from the EU highly unlikely IMO
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This is why, were I a player in the Russian elite, I'd be looking to move in now while things are still all over the place. Didn't the Russians pick up a base on Iceland in 2008? This is where nationalistic state capitalism wins, it has more of a strategic mindset.
 
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It would be an interesting situation seeing as Cyprus is a Non NATO member and the base is ostensibly there to protect it from another NATO member with territorial ambitions, the water pipeline is a pretty high indicator that the Turks have no intention of abandoning their claim to the region.

Think the president is very pro NATO,though it is doubtable he will last another election it would i imagine put a break on Russians getting a foothold on the Island in the interim

http://www.cyprus-mail.com/alexander-downer/us-welcomes-stronger-ties-nato/20130313

The situation with Iceland is slightly different as far as I can see, firstly NATO had unilaterally withdrawn its base 2 years prior.
Second there was always a strong anti NATO sentiment on the island, membership led to massive riots.
thirdly doesn't cyprus play a vital logistical support role for military action in the Middle East?
 
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