Cyprus Runs Up The White Flag To Bankers



Cyprus' new national flag
Cyprus’ new national flag

On Feb. 25, conservative lawyer Nicos Anastasiades, promising Cypriots he would never allow foreign entities to steal money out of their bank accounts to pay for mistakes the banks made, was easily elected the island’s new President.

On March 25 – Independence Day in Greece and now Surrender Day in Cyprus – someone dressed like Anastasiades, because it surely couldn’t have been the same man who said he would stand by his compatriots, rolled over with his tail between his legs and said he would allow foreign entities to steal 30-100 percent out of Cypriot bank accounts over 100,000 euros ($130,000) so that Cyprus could get a 10 billion euros ($13 billion) bailout from them.

He didn’t put up an ounce of resistance, beyond a fake threat to resign if pushed too far by officials of the European Union and International Monetary Fund because a whipped dog never bites. He even colluded with the enemy by getting around his Parliament, which had voted 36-0 to reject demands to confiscate bank accounts, by sliding through another bill that dealt with the resolution of the state banks, leaving out the lawmakers who had handed him a defeat even more humiliating than suffered by Greek leaders, the Yes Men for the Troika of the EU-IMF-European Central Bank.

Cyprus was on the verge of a bank and economic collapse because its banks had a stack of bad loans to Greek businesses who went belly-up in their country’s crushing economic crisis and holdings in Greek bonds that were devalued 74 percent, bringing 4.5 billion euros ($5.82 billion) in losses. So instead of going after the people who defaulted on the loans, the government is going to steal 5.8 billion euros ($7.5 billion) from the accounts of people who had saved and put their money in the bank.

This is the point where apologists for this legalized bank robbery, who don’t have their money in Cypriot banks and can preach from afar, will say that Cyprus had no alternative and was facing default and that the confiscation will hit Russian oligarchs and mobsters who use the island’s banks to launder money.

That accounts for about 30 percent of the uninsured deposits over 100,000 euros, which means 70 percent of them, including many belonging to legitimate Cypriot businesses will be wiped out, the government admitted, acknowledging that it intends to seize up to 100 percent of the money, including from Cypriot business owners who aren’t Russian oligarchs or mobsters and now will lose so much of their money they could lose their businesses too.

GET A FREE TOASTER

Almost as soon as the deal was done, German and Dutch banks were offering the rich on Cyprus bank accounts that could be opened in an hour. The EU went after Cyprus for being a money-laundering engine but doesn’t object to banks in Switzerland, Luxembourg, Lichtenstein and London letting people have secret bank accounts to evade taxes.

Everybody loves dumping on the rich, especially Russians who party-hardy on Cyprus and show off their wealth in a garish way, but it was their $26 billion in deposits that allowed Cypriot banks to make loans for cars, homes, business start-ups and other legitimate uses that now will be lost.

Cyprus put “capital controls” on banks, which is short hand to mean people couldn’t take all their money out when the banks were to reopen as the government feared a run on the banks, and if anybody had anything left in a Cypriot bank and didn’t take it out when they could then they deserve to be fleeced. And here’s the killer: it’s not the withdrawals that the banks have to worry about so much as trying to get new deposits, the lifeblood of any lender because no one’s going to put money in a bank that steals it.

The Troika obviously wanted to punish Cyprus after the Parliament voted  to reject the initial plan that would have seized 6.75 percent of INSURED bank accounts that were allegedly guaranteed by the government against loss, and they rubbed Anastasiades’ face in the dirt to make him pay for his Parliament’s intransigence.

THE PRICE OF BETRAYAL

Some analysts said that because of what he did, Cypriots face years of economic hardship without eliminating the prospect the country could yet be forced out of the Eurozone. Almost immediately – after an inevitable run on the banks once frozen accounts are released again – there will be food and medicine shortages because businesses, unable to access their money, won’t be able to buy goods for markets and even gasoline stations. That’s what capital controls do.

Cyprus then will be hit with at least two years of a deep recession and soaring unemployment as Russians and other foreign investors move what’s left of their money to countries that don’t steal it to pay for other people’s mistakes, and as the EU moves toward a business model of using other people’s money to cover the errors of its members.

Fiona Mullen, an economist specializing in Cyprus, told Agence-France-Presse that while the deal had prevented an overnight exit from the euro that many Cypriots would wonder if it would be better off leaving anyway. “They feel very betrayed by an awful lot of countries in this and I think that there are going to be longer term implications,” she said. And wouldn’t you love to know where Anastasiades’ and his like keep their money, which is undoubtedly a lot more than 100,000 euros.

The plan calls for Cyprus’ second biggest lender Laiki (Popular Bank) to be closed overnight – tossing a lot of people out of work after Anastasiades vowed to protect their jobs, and investors looked set to lose all unsecured deposits of over 100,000 euros. The Bank of Cyprus, the island’s No.1 lender, will survive but the government said uninsured depositors will lose at least 30 percent more.

The ink wasn’t even dry on the deal when the head of the Eurozone, Dutch Finance Minister Jeroen Dijsselbloem, said the Rubicon has now been crossed and that lenders are eying going after bank depositors in other countries to make them pay.

In the background is the heavy hand of German Chancellor Angela “The Iron Dominatrix” Merkel, who loves austerity and punishing people, and you know the Rhine will never be crossed unless we can bring General Patton back from the dead to take a leak in in it.

“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?’ Dijsselbloem told Reuters. “If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders,” he said.

The insured depositors are next, but here’s a tip: don’t put more than 99,999 euros in any European banks, take out any interest when it goes up, and if you can, use credit unions instead. Anyone who has any money in banks in Greece, Portugal, Italy, Spain and other countries with economic crises should take it out before the Troika does. They have a clerk named Anastasiades ready to fleece you and he came cheap.