Now that he has seen the worst and it has reached an agreement with the financial rescue of Cyprus I will offer my reading about what has happened and the reasons that have led to unleash panic among cypriots, russian and other european. These last months has spoken much about the rescue, the playpen and about the impact on financial markets. The truth is that affection to European stock as a deck of cards falling into red during two weeks of madness. They are now above the string and any external factor would make them correct up to normal considered points in my humble opinion... Even more if correct until the 7500 ibex would not be a threat but an opportunity for massive purchase for the exciting period from July until January 15, 2014.
On the other hand, the media have covered us the real reasons for this rescue and as always focus it us from the site that are of interest to caregivers of the markets. The "evil" Eurogroup has done a good job in law firms negotiating the rescue but a terrible performance every time you gave a microphone. As it will be a model to follow for other countries when Cyprus is unique in that the marketing of Russian capital is the order of the day. It is ridiculous, international and european agencies involved had intended to go for these capitals of dubious from the beginning, but nothing, put again the sign of the crisis, Greece and that we will do the same to our deposits. Let's be honest... If it is assumed that we are a group of countries that form Europe and have a basic principle of equality that should be required for all and Cyprus had to correct the problem to adapt to the level of required taxes. now that the Russians pay the fine, foreigners and Cypriots than for that have exploited these paradisiacal conditions for a long time. they have help to begin to manufacture the new European philosophy, pay higher taxes and that there is a fiscal transparency. Whether we like it or not it is what it is, why the rescue of Cyprus has more positives than negatives.
- The notice
The origin of the story comes from 25/06/2012 when Cyprus requested assistance to its partners in the eurozone to deal with their financial problems and the weakness of a banking sector very handicapped by the Greek crisis. They opened the doors to the agencies so they began to work on how to approach the problem of capital that took advantage of the circumstances of the Bank.
After months of negotiation, it was a principle according to end of november where stood the Bank at 17 billion € provided bailout by the IMF and the European Union. The most essential aspect calling for taking institutions was that they have to take care with the privatization of public companies and that major gas fields remain to safeguard future payments of the debt that would begin to be paid soon.
Meanwhile Moody´s, S&P and Fitch lowered the note of the solvency of Cyprus. What was expected.
- The time has come
In mid-February they let you glimpse the agreement general that should contribute to its own rescue. For Cyprus it was not understandable that they provide money when you only need it but the goal is that it disengages not problems with their banks and to not assume the EU all the weight.
Finally in the early morning of 16/03 come to an agreement with the ministers of economy and finance with a bailout of 10 billion euros in Exchange for the multi-billion dollar aid from its partners (mainly Russian). That is, 10,000 by the EU and IMF and any number by cypriot partners, for the time being. There is still uncertainty and does not speak of how much will be remove. It begins to spread fear by the Mediterranean island since Cyprus has agreed to remove that will mean a huge amount of liquidity of deposits.
- Pure speculation
It starts the period syncope, which sets out various forms of domestic funding through the fifth of deposits. First, that all deposits would suffer losses with the consequent "small chicken run" beginning tuesday and the amounts corresponding to the tax retained. With this measure, they intend to raise more than 5.8 billion euros. i.e., what was once a 17 billion bailout provided entirely by European agencies and IMF, is now a ransom of 10 billion, saving the remaining amount by value of the retained amount of cypriot deposits. a master plan which corner to the Government of Cyprus and leaves him no choice. Really believed that they would leave popcorn?
The IMF is an expert in negotiation strategies and proved it against the cypriot banking sector:
- only participate if the rate retained the majority of Cypriot banks depositors.
- If the IMF does not fit into the rescue Germany not participate.
- the IMF and the Eurogroup will be an acceleration of the privatization of public enterprises plan (a few months ago wanted to otherwise).
Another point is that Cyprus has accepted that he is conducted an external audit to check whether banks comply with the General principles of money laundering. This situation leads later to see that it did not comply with them and to request a rate higher for these deposits of doubtful origin in terms of the legality of the capital.
In addition, corporate enterprise tax is 10% and with the rescue will be 12.5%. causes this tax to be so low that affiliates and phantom companies have given high in this country to pay less taxes than in their countries of origin and to deduct taxes.
Anastasiadis President went on television communicating in local chains trap in the negotiations that had previously been quite deliberate: "I had to choose between bankruptcy and remove". Meanwhile, cypriot banks only could remove a maximum of 1,000€ per day. quantity that was decreasing while the events occurred to the 260€ and a few days later 100€.
- Unrest in Russia
Russians begin to fear the fifth since in principle they could lose up to two billion dollars to bank deposits in Cyprus. and it is that the Russians have more than one-fifth of all deposits (between 20,000-35,000 million dollars). An extremely strange in a population less than 2,000,000 million people and with the amount that the Russians have in the island gets Cyprus GDP.
Russian Finance Minister Anton Siluanov, tried to anticipate asking for information about the accounts of Russian companies and citizens in order to launder capital not declared in origin. This graft situation arrived late and they will not grant it to be illegitimate. This will hurt the russian economy since they will lose power consumption and disposable income.
In terms of the companies will lose power liquid payment short term but had think before you take refuge in opaque societies.
However the Russian ploy is logical since Cyprus is its main foreign investor and would directly affect him on both sides.
Therefore interested them rescue money and that untie of the EU with the consent of Cyprus give them all of the financial information and to not remove for the time being be held.
Russia has contributed greatly to the well-being of the cypriot people and with this rescue trust will evaporate and leave to Russian money. It is natural, but over the years the banking sector will be normalized and will be a country that will provide his experience in other economic sectors.
If this were not enough, in recent years russian banks have granted credits amounting to $ 40 billion to the opaque societies and other $ 12 billion in accounts of the subsidiaries that have Russian banks. That is to say, the interest of the Russian Government extends more than to individuals and companies.
- Development of Bank panics
What in principle would last a day lasted one week. Cypriot banks remained closed while the last fringes of the negotiation. Since the Saturday prior 16/03 was prevented from any financial transaction to prevent capital flight.
Meanwhile, the day 21/03 voted in the cypriot Parliament the rate on deposits. Negative result since refused. The ruling party abstained while others voted against. They don't want to do but being the IMF for the medium is always all the losing. This blackmail to Cyprus has no other way out than to accept the rescue or go bankrupt will be most feasible decision since the Russians will not put a euro on the table.
Mario draghi in those days said that the ECB would provide liquidity within existing laws. That is to say, they would give you the necessary liquidity until Monday 25/03 waiting for rescue response since Cyprus only has funds to hold until may and if do not receive aid soon would enter a so-called moratorium on payments.
Finally, they had come out of the euro, I would with a banking system almost in bankruptcy and a massively devalued currency. and to recover it would take more than any country in the euro zone.
Of the 68.363 million €, representing in total deposits of Cyprus, 28.713 million € correspond to account holders with more than 500,000 euros. These wealthy savers are those who most contributed to the rescue. According to the sources where I got the data, the majority of these deposits are held by russians. Hence, the existing contacts so that Russia be involved in the plan of aid to Cyprus.
Between 100.000€ and 500.000€ they are at 12% of deposits. Therefore, 52% of savers of the country overcome the barrier of 100,000€. Germany has claiming to be those depositors who carry the weight of the Cypriot participation in their own rescue.
On the other hand, 46% of deposits are less than 100,000€ obviously.
- Cyprus = Turkey + Greece
To find out about the Cyprus problem need to know that this country is divided in two. The mediterranean island is divided since 1974 between the turkish- cypriot north and greek- cypriot south. Since the beginning of the playard Turks warned it not put as collateral for the rescue of gas reserves that exist in its waters, which will be operational from 2018. These reserves of gas are essential to the Rescue Agreement and in the future will create problems between Turkey and Greece by the struggle of the Mediterranean island.
- The new banking system
The impact on shareholders, customers and bondholders of the banks will focus on two banks:
- Laiki, the second largest bank in the country, will be liquidated, which will mean losses for shareholders, bondholders and unsecured deposits. The entity will be divided into two banks, the good (with insured deposits) and the bad (the uninsured). The good will be integrated into bank of Cyprus, the largest bank in the country. The bad entity will be liquidated as assets are liquidating. Depositors and bondholders of laiki will contribute 4.2 billion euros.
- Bank of cyprus (BoC), the loan of 9 billion (remember that the IMF delivered 1,000 million remaining) the ECB to laiki will be assumed by boc, who will receive the necessary support from the ECB. The savings from 100,000€ in this Bank will be frozen and will suffer a conversion to shares of the entity, which could lead to heavy losses (not so much or so bald).
There has been speculation with % that will bring. I have read that if a 20%, 30%, 40% or even 60%. Everything 20% pass in my opinion is go stripe since that both percent punishes all customers and companies that took advantage of low tax quotas withstanding. But the real problem is not that... The quit of the issue is that the money will be frozen. namely, everything you spend of 100,000€ is you may not transfer or remove up to new order and the banking sector is set to a period of time that is still unknown.
- And Russia slept quiet...
As I have previously explained, the russians have a capital and important savings in Cyprus and the suffering they were going through was mortal of need. But everything took a turn of 180 ° when they told him to losses that would suffer not approached far that others endure.
When they learned that the rescue would only affect the two major Cypriot banks... And not touch to the russian commercial bank... Then they breathed quiet.
Then soon... left Igor Shuvalov (No. 2 of the Russian Government) and said that Russian companies affected by the situation in Cyprus have unsolicited moment help the Executive to unlock their funds... Logical, doesn't it?
With the days, two of the largest consortia of russian hydrocarbons, gas Gazprom and the Rosneft oil, as well as world-class companies, declared that the crisis in Cyprus has not affected them in any way...
All this shows that Russia has done its job. as the IMF, the ECB, the EU and Russia have negotiated as if from a graft were the cypriot territory... It is the harsh reality.
In my opinion, if the rescue dictates have to tax all deposits, by which Russia does? It is true that they have many investments in Cyprus but they have also benefited from fiscal conditions that has the same and therefore should provide the rate that all neighbor's son is to be made. fear of European to lose an ally such as Russia has been able to more and they have gotten away with it. But it continues to show that we are puppets that we only serve to pay for the problems of our Governments.
It is also true that Russian depositors who were with the Cypriot banks will be subject to remove. and that those people or companies won't them help if the Russian State has no economic interest. What find me strange is that a company that is in another country taxed with taxes in that country or can choose between their country of origin or which performs commercial operations. For that reason is elected the country's less taxes and the result should be the same remove for all. Why is speculating one greater reduction to cover what they won't pay for Russian banks.