Flag of Cyprus*

The Cypriot population will receive the necessary funds to live - Handelsblatt - Leading German Business Publication.

If there’s unrest in Cyprus – it’s not Portugal. It’s not Spain, it’s not Greece – it’s not a massive country. So what Germany was actually able to do was to enforce its might on a small country in which any kind of unrest, violence or protest will be relatively contained.  Financial Advisor Margaret Bogenrief, co-founder of ACM Partners.

The Cypriot crisis was neatly summed by Economist Paul Krugman when he said that  it was as if Europeans were holding up a sign which read time to stage a run on your bank. The pretext for the Cypriot crisis came from the collapse of the Greek economy. The Greek-Cypriot-controlled south lost more than €4 billion when President Demetris Christofias agreed to a “haircut” of Greek sovereign bondholders without a Cypriot exemption, increasing debts by 25%.

Ahead of the last round of discussions last Sunday, EU officials had insisted on been handed full control over the Cypriot economy. The position of the EU toward Cyprus is consistent with it’s past performance with regard to the PIIGS generally. The main EU demand was the winding up of Laiki bank (the Cypriot State bank), with German and IMF officials demanding the adoption of a higher levy on large, mainly Russian, depositors. Cyprus was reportedly told to adopt this proposal or leave the currency union. The Financial Times has reported on bankers in other tax havens, such as Andorra, courting Russian businessmen seeking to quit Cyprus.

Initially, the Cypriot government held out against raising any proposed levy on those with deposits of more than 100,000 euros to over 15%. The government feared this would effectively destroy its financial sector, as wealthy Russians, who are the largest foreign investors, are likely to pull their funds out of the island if the one-off tax is too high. A BBC reporter said that he has never seen this much pressure being applied to a member state by the rest of the eurozone community in recent years.

Bank of Cyprus chairman Andreas Artemis however, promoted the levy on larger depositers stating: “It should be understood by everyone… especially from the 56 members of parliament… there should not be any further delay in the adoption of the eurogroup proposal to impose a levy on deposits more than 100,000 [euros] to save our banking system”. During the negotiations, EU officials said Cyprus had conceded to a one-time levy on bank deposits over 100,000 euros, a U-turn from last week when the Cypriot parliament threw out a similar proposal as bank robbery.

The Cypriot finance ministry then proposed that those with savings less than 20,000 euros would pay nothing. Those with deposits between 20,000 and 100,000 would pay a one-off levy of 6.75%. Savings above 100,000 would face a 9.9% tax. A senior Cypriot official said Nicosia had agreed with its lenders on a 20% levy over and above €100,000 at the island’s largest lender, Bank of Cyprus, and 4% on deposits above the same level at other banks,  effectively destroying the financial sector in Cyprus. The Cypriot Central Bank Governor Panicos Demetriades said that he expected that 10% of deposits would be immediately withdrawn when banks finally open.

The agreement is conditional on the measures being adopted without a vote in the Cypriot parliament. To this end, the original proposal to impose a levy on bank deposits, which had been rejected by the Cypriot parliament, was removed from the final agreement. The new plan provides for the freezing of all deposits over €100,000 to cover the bailout. Depositors and shareholders in Laiki will see their assets transferred to a “bad bank” and could lose everything. This is probably worse than the original proposal, and will destroy the Cypriot economy as a financial centre.

These measures, together with a privatisation programme and tax increases, are projected to raise the €7 billion Cyprus has been ask to contribute to the €17 billion bailout from the EU, ECB and International Monetary Fund. The Central Bank of Cyprus (a branch of the ECB) will be granted powers to determine whether or not transfers outside of Cyprus will be allowed.

While power over the flow of money in and out of the island is formally held by Cyprus, Germany’s leading financial publication Handelsblatt noted that, in reality, the ECB will exercise control. This will include controlling the payment of pensions and other state benefits.

Other measures are specifically directed against the Cypriot population: * Restrictions on daily withdrawals, * A ban on premature termination and compulsory renewal of all time savings deposits upon maturity, * The conversion of current accounts to time deposits and restrictions on use of debit, * Credit or prepaid debit cards and on cashing in checks.

In addition, the legislation provides for the implementation of any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety.

The deal leaves the government of Cyprus with an impossibly high debt burden, about 140% of GDP. One immediate consequence is that individuals and businesses across Europe will split up their savings into smaller accounts or move some of their money to other countries. If depositors withdraw cash from the weakest banks in those countries, (including Ireland), Europe could have another crisis on its hands.

Sources:

Cyprus bailout: Who messed up? Gavin Hewitt, Europe Editor, BBC News, 19th March 2013 – http://www.bbc.co.uk/news/world-europe-21842036

Cyprus to face savage cuts and economic dictatorship – by  Jordan Shilton and Chris Marsden, World Socialist Website, 23rd March 2013 – http://www.wsws.org/en/articles/2013/03/23/cypr-m23.html

Cypriot president faces difficult task to save economy, Reuters, March 24th 2013 – http://www.reuters.com/article/2013/03/24/eurozone-cyprus-president-idUSL5N0CG09220130324?feedType=RSS&amp

Cypriot president in Brussels for showdown talks with troika, Irish Times, March 24th 2013 – http://www.irishtimes.com/news/world/cypriot-president-faces-difficult-task-to-save-economy-1.1336944

Cyprus MPs pass banking reforms by Gavin Hewitt, Europe editor, BBC News, 22nd March 2013 - http://www.bbc.co.uk/news/world-europe-21907022

‘Emotional rollercoaster’: Cypriot students protest amid bailout furor, Russia Today, March 26th, 2013 – http://rt.com/news/cyprus-bailout-protests-banks-848/

European Union imposes bank bailout on Cyprus, by Jordan Shilton and Chris Marsden, World Socialist Website, 26th March 2013 – http://www.wsws.org/en/articles/2013/03/26/cypr-m26.html

For Cyprus, a Better Bad Deal, New York Times, March 25th, 2013 -

http://www.nytimes.com/2013/03/26/opinion/for-cyprus-a-better-bad-banking-deal.html?hp&_r=0

*Image (Wikipedia) – Flag of Cyprus.svg Author: UserVzb – http://commons.wikimedia.org/wiki/User:Vzb83 - http://en.wikipedia.org/wiki/File:Flag_of_Cyprus.svg

Note: Highlighting an interesting article, by Canadian author Linda Mcquaig, on Hugo Chavez and his legacy, not just for Latin America, but wider afield, particularly in relation to oil and gas resources:

Linda McQuaig: Had Hugo Chavez followed the pattern of many Third World leaders and concentrated on siphoning off his nation’s wealth for personal gain, he would have attracted little attention or animosity in the West.

Instead, he did virtually the opposite – redirecting vast sums of national wealth to the swollen ranks of Venezuela’s poor, along with free health care and education.  No wonder he alienated local elites, who are used to being first in line at the national trough.

Full Article: Chavez depicted as tyrant for challenging Western oil domination – Venezuela’s Robin Hood championed rising up of Third World, March 11, 2013 – http://www.lindamcquaig.com/Columns/ViewColumn.cfm?REF=175

Also: CMM Alert: A Classic Case of Projection: The Autocratic Press Denounces Hugo Chavez, by Joe Emersberger – http://canuckmediamonitor.org/forums/index.php?showtopic=38808

Note: An interesting article by the Awaken Ireland movement, on Minister Shatter’s deployment of troops to Mali in contravention of the Irish Constitution.  The announcement was made in the presence of the Secretary-General of NATO and was made before been voted on by the Oireachtas. The deployment is another example of deepening integration into NATO.

Of particular interest, and concern, is the fact that Tánaiste and Minister for Foreign Affairs, Eamon Gilmore has openly declared support for sanctions against Iran as well as Syria, (of course, Syria is an allay of Iran).

In the light of barrack and police station closures in Ireland, it seems that there are plenty of funds for expensive (and open-ended) military operations abroad.

The opening paragraph of the article, posted on News Beacon Ireland is given:

“On the 13th of March it was reported that Defence Minister Alan Shatter confirmed eight Irish soldiers and 18 from the UK will travel to Mali with the Royal Irish Regiment.

During the campaigns leading up to the referendum on the Lisbon Treaty, No-campaigners warned of the possible loss of  Irish neutrality and the militarization of the EU -  they were ignored.  Now the government is deploying Irish soldiers to a war zone, not on a peace keeping mission but in a mission led by the EU to train military units.

This step is one in a long line of government decisions in blatant disregard of the Irish constitution, which states in article 29:

INTERNATIONAL RELATIONS

1.    Ireland affirms its devotion to the ideal of peace and friendly co-operation amongst nations founded on international justice and morality.

2.    Ireland affirms its adherence to the principle of the pacific settlement of international disputes by international arbitration or judicial determination.

3.    Ireland accepts the generally recognised principles of international law as its rule of conduct in its relations with other States.

The deployment of Irish soldiers to train the Malian army contravenes the constitution especially article 29.2.”

Article in Full:

Irish soldiers deploy to Mali – The permanent disregard of the constitution by the Irish government, by R. Teichmann, March 18th 2013, News Beacon Ireland – http://news-beacon-ireland.info/?p=11893

R.I.P. Hugo Chavez, 28th July 1954 – 5th March 2013

Photo: (Wikipedia) – Português do Brasil: Luiz Inácio Lula da Silva e Hugo Chávez, 27 June 2008, Author: Marcello Casal Jr./Abr -http://en.wikipedia.org/wiki/File:Hugo_Ch%C3%A1vez_crop.jpg

Video Feed: (Live), Russia Television – Venezuela: Chavez body departure – http://rt.com/on-air/venezuela-chavez-body-departure/

In the Dail, (parliament) the Taoiseach Enda Kenny declared that the IBRC/NAMA merger would reduce state borrowing by €20 billion over the next decade. Also,

the agreement has reduced Ireland’s vulnerability from the huge debts taken on by Irish taxpayers as a result of the cost of rescuing failed private banks.

In response to the debt claims, here are some relevant points from Bondwatch Ireland: a blog tracking Ireland’s bank bonds run by journalist Diarmuid O’Flynn:

*

The proclaimed €20bn bond ‘savings’ over the next ten years is a fallacy – we don’t now have to issue those bonds only because we’ve already issued them!

* The €1bn annual interest ‘savings’ is

also false; in the first instance the actual interest we’re paying to the ECB remains the same, at just under 1%;

Ireland is paying the bulk of the interest in the original Promissory Notes, in a circular process, and is now also paying the interest on the new bonds,

(for the moment anyway, as long as the Irish Central Bank holds those bonds), everything else is just an accounting exercise, a book savings.

Bondwatch Ireland also made two additional points – there are the outstanding bonds to be paid to the IBRC bondholders, and there will be the wind-up costs, the legal fees and redundancies etc. These costs will be very extensive. Also, there over €4 billion of IBRC bonds are still outstanding.

As to any slowing of the austerity measures, Central Bank governor Patrick Hanohan has ruled this out:

I certainly did not have in mind any sort of budgetary consequences,

Honohan said when asked about the government’s pledge that the deal would cut 1 billion from Ireland’s budgetary adjustments for the next two years.

The budgetary pressures are there. They come from a lot of sources, not just this promissory note. This is an important element of the budgetary pressure that has been relieved but there is still a lot of fiscal adjustment to be done and we will be in discussion on budgetary strategy.

The implication of this remark is that the Central Bank, and by extension, the European Central Bank, (ECB), are directly involved in the planning and implementation of the austerity measures, or perhaps it was just an off-the-cuff remark.

Alan Barrett of the Irish Fiscal Advisory Council also stated that easing off on austerity was unacceptable, politicians would continue with

plan A

They will have people like the Fiscal Council to answer to; the European Commission will have an input; and the Council has been arguing that our debt sustainability, even with this, is far from secured,

he warned. In point of fact:

There may be an argument for using some of the extra billion to accelerate the pace of adjustment.

So there.

The Sources:

Kenny says ECB deal could cut borrowing by €20 billion, Thursday, February 7, 2013 – http://www.irishtimes.com/newspaper/breaking/2013/0207/breaking1.html

WHAT HAPPENS TO THE REMAINING IBRC BONDS? – Bondwatch Ireland, February 13th, 2013 –

http://bondwatchireland.blogspot.ie/2013/02/what-happens-to-remaining-ibrc-bonds.html

Prof. Terrence McDonough on the Irish Promissory Note Deal, Galway, by Conor McCabe, 12th Feb 2013 –

http://dublinopinion.com/2013/02/12/prof-terrence-mcdonough-on-the-irish-promissory-note-deal-galway-12-feb-2013/

Irish debt deal means decades of austerity to cover bank bailout
By Jordan Shilton
13 February 2013 http://www.wsws.org/en/articles/2013/02/13/irel-f13.html

Please Bookmark Bondwatch Ireland: http://bondwatchireland.blogspot.ie/

Ireland’s budgetary pressures despite debt deal – central bank, Reuters, Feb 8th, 2013 – http://www.reuters.com/article/2013/02/08/ireland-cbank-idUSL5N0B8FTL20130208

“This week, 99.8% state-owned Allied Irish Banks sold €400m of assets – loans secured on property in Spain – and there wasn’t even a mention of it in the Irish media or at least an online search in the past seven days of the Irish Times, Irish Independent, Irish Examiner and RTE reveals nothing. There’s not even a statement on the AIB website.”
The British commercial property portal CoStar reports that the loans are understood to have made 80c in the euro and AIB will walk away with €320m. The buyers are not explicitly named but are reported to be a group of hedge funds. The loans are ultimately secured on 1,186 branches of Banco Santander in Spain.”

Source & Article in Full at:

Whilst you were otherwise distracted this week – State sold €400m of your assets, February 9th, 2013 – http://namawinelake.wordpress.com/2013/02/09/whilst-you-were-otherwise-distracted-this-week-state-sold-e400m-of-your-assets/

From Wikipedia: “The National Asset Management Agency (NAMA; Irish: Gníomhaireacht Náisiúnta um Bhainistíocht Sócmhainní) is a body created by the Government of Ireland in late 2009, in response to the Irish financial crisis and the deflation of the Irish property bubble.

NAMA functions as a bad bank, acquiring property development loans from Irish banks in return for government bonds, primarily with a view to improving the availability of credit in the Irish economy.”

NAMA Statement:

“In conjunction with the arrangements announced today by the Minister for Finance for the appointment of a Special Liquidator to IBRC, NAMA has been directed to establish a special purpose vehicle (National Asset Resolution Ltd. – NARL) to acquire a floating charge over certain IBRC assets. These assets are currently used as collateral by IBRC as part of its existing repo arrangements with the Central Bank of Ireland. As consideration for the floating charge, NAMA will issue to the Central Bank new Senior Bonds which are guaranteed by the Minister.

In the period to mid-2013, the Special Liquidator will seek to value and sell the secured underlying assets subject to the floating charge. After the sales process conducted by the Special Liquidator has been completed later in the year, NAMA will acquire the unsold loans in the IBRC loan portfolio in addition to the proceeds of any asset sales conducted by the Special Liquidator during the sales process.

Speaking on behalf of the NAMA Board, Chairman of NAMA, Mr. Frank Daly, stated: “NAMA is fully committed to managing the new responsibilities which have been delegated to it by the Minister and to realising the maximum possible return for the taxpayer from the portfolio that it is due to acquire later in the year”.

The Source:

NAMA (National Assets Management Agency) Statement, Dublin, 7th February 2013:

http://www.nama.ie/news/nama-statement/

The Minister for Social Protection Joan Burton stated that the Irish people can be “optimistic” the agreement reached with the ECB would lead to a “better budget.”

Minister for Jobs, Enterprise and Innovation, Richard Bruton said that budget decisions would be carried out “in consultation with the troika”, indicating no change in budgetary policy.

In the Dail, Tánaiste Eamon Gilmore, described the “deal” as a great day for Ireland and an opportunity for the economy. “This package of measures will make a marked difference to Ireland’s debt sustainability,” he said.Ireland’s borrowing requirement would be reduced by €20 billion over the next 10 years.

Fianna Fáil leader Micheál Martin welcomed the IBRC-NAMA merger, noting that Ireland was adhering to the bailout programme agreed by the Fianna Fáil-led government in 2009.Martin also asserted that it would improve cashflow and Ireland’s funding position.

Sinn Féin finance spokesman Pearse Doherty said that the Government is replacing a promissory note with a sovereign bond of €28 billion with no write-down of the debt.In the course of last night’s debate, Independent TD Mattie McGrath said that the chief executive officer of IBRC, Mike Aynsley, and chairperson, Alan Dukes, estimated in 2012 that the projected cost of winding up IBRC would be in the region of €25 billion. (Previously the estimate had been in the order of €29 to €34 billion).

“It was a complicated operation, and doctors have been in constant communication with us and his family,” he added. The operation lasted six hours.

Maduro went to the Bolivar Square in Caracas, and told the hundreds of people gathered in support and in prayer, “We can say that [president] Chavez has overcome the first obstacle”.

Venezuela Analysis commented that some members of the Venezuelan opposition have also expressed delight at, and made fun of the president’s health.

Maduro called on the opposition to “cease your hate and poison against Chavez, respect the pain of a dignified people.”

Prior to the surgery, Ecuadorian president Rafael Correa visited Chavez in Cuba, and described the procedure as “very delicate”.