While Anastasiades Fiddled, Money Fled Cyprus



Money-fled-Cyprus

Delays and indecision by newly-elected Cypriot President Nicos Anastasiades’ government allowed a huge outflow of cash from the island’s banks even though they were closed and limits were placed on most withdrawals, the news agency Reuters reported.

In banknotes at ATM’s and exceptional transfers for “humanitarian supplies,” large amounts of euros fled the country before the Parliament voted 36-0 to reject an initial plan to confiscate part of even government guaranteed deposits, and after a bailout deal was secured with international lenders to secure the release of 10 billion euros ($13 billion) to prevent a collapse of the banks and economy.

European Union negotiators said they knew something was wrong when the Central Bank of Cyprus requested more banknotes from the European Central Bank than the withdrawals it was reporting to Frankfurt implied were needed, an EU source familiar with the process said. “The amount the Cypriots mentioned … on a daily basis was much less than it was in reality,” the source said.

Reuters said that confusion over just how much money was pulled out of Cyprus’ banks showed how frantic Cyprus’ negotiation with international lenders were, and which led the government not to deal with the cash outflow. The state banks, except for Laiki which is being liquidated, are due to open again on March 26 but depositors over 100,000 euros will have 40 percent of their money seized by the government and capital controls preventing them from withdrawing the rest.

No one knows exactly how much money has left Cyprus’ banks, or where it has gone. The two banks at the center of the crisis – Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus – have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia’s Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks’ largest depositors.

While ordinary Cypriots queued at ATM machines to withdraw a daily limit of 100 euros ($130) and credit card transactions stopped, other depositors used an array of techniques to access their money. Companies that had to meet margin calls to avoid defaulting on deals were granted funds. Transfers for trade in humanitarian products, medicines and jet fuel were allowed.

WHERE’S THE MONEY?

Chris Pavlou, who was Vice Chairman of Laiki until last week, told Reuters that while some money was withdrawn over a period of several days it was in the order of millions of euros, not billions. German Finance Minister Wolfgang Schaeuble said the bank closure had limited capital flight but that the ECB was looking closely at the issue. He declined to provide figures.

Big depositors, including wealthy Russians and Britons, whom the Cypriot president had sought to shield from a levy of any more than 10 percent on their holdings, will end up being far more severely burned – if their money is still there as the government admitted bondholders could lose everything.  Under the bailout deal, Cyprus will have to shut its second largest bank and inflict heavy losses on large account holders.

Deposits over 100,000 euros in both will be frozen and used to resolve the debts of the defunct Laiki and recapitalize Bank of Cyprus. Both banks were hurt by their exposure to Greek sovereign debt when bondholders were forced to take write-downs last year. By March 24, one participant in the talks told Reuters, Laiki Bank was just about empty of money although Pavlou disputed and said there was still about 2.5 billion euros ($3.21 billion) in the till. The bank’s market value in November of 2007 was 8.1 billion euros ($10.42 billion)

No figure was announced for the scale of the “haircut” on big depositors, but it will be nearer to 50 percent than to the 15 percent that Anastasiades rejected on March 15, participants in the negotiations said, speaking on condition of anonymity. Anastasiades, who broke his month-old campaign vow not to confiscate bank depositors money, at one point threatened to resign because the pressure was so much, it was reported.

But he then relented to the demands from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) after they called his bluff, saying that if he quit they would continue negotiations with the speaker of the Cypriot Parliament, next in line constitutionally, a participant in the talks said.

The confiscation was not exactly news as it had been talked about for months with Anastasiades’ predecessor, the Communist Demetris Christofias, who did not run for re-election and who had refused to implement the plan. “Christofias didn’t want to be the President who had signed a bailout with the troika,” an EU official said.

German Finance Minister Wolfgang Schaeuble said his government, which had put a boot on Anastasiades’ neck, got all that it wanted from him. “This is bitter for Cyprus but we now have the result that the (German) government always stood out for,” he said. An EU source though said the IMF and Germany had initially wanted to shut down the national Bank of Cyprus as well, leaving only one state financial institution Hellenic Bank.

European politicians, anxious to deflect criticism for having been party to an initial deal 10 days ago that would have imposed a levy on all small savers in Cyprus, rushed to say that Nicosia had only itself to blame. “To all those who say that we are strangling an entire people … Cyprus is a casino economy that was on the brink of bankruptcy,” French Finance Minister Pierre Moscovici said.

He said he had always opposed taxing deposits smaller than 100,000 euros, which are subject to an EU guarantee but only from bankruptcy, not from seizure by governments, it was said. Yet neither he nor other ministers or European Commission officials spoke out against the idea at the March 15 meeting, participants said.

Reuters said Cyprus’ biggest blunder was turning to Russia to be a savior, to restructure a 2.5 billion euros ($3.2 billion) loan granted in 2011 and put up more funds. The Russians, despite their fury that many wealthy Russians would lose billions, didn’t bite, even at the prospect of getting potential gas reserves that are under exploration off the island’s coast.

The European Commission and the ECB had quietly told the Russian Finance Ministry and central bank that any further loan from Moscow would just add to Cypriot debt and undermine the basis for an EU-IMF bailout, sources with knowledge of the exchange said.

Russian Prime Minister Dmitri Medvedev accused the EU of handling the Cyprus crisis “like a bull in a china shop.”. He and President Vladimir Putin complained to visiting European Commission President Jose Manuel Barroso that Moscow should have been consulted before the decision to impose a levy on depositors.

“It took more time for the Cypriots and the Cypriot authorities to fully understand what their options were and how deep the crisis was,” Jeroen Dijsselbloem, the Dutch chairman of Eurozone finance ministers, told Reuters in an interview.

“It’s hard for me to say what made the penny drop, I think it was probably because it was five to midnight, literally it was five to midnight, and we were not making much progress and we simply said to the Cypriots: ‘Look, we’re ready to help you, there’s 10 billion available, but you have to realize what the present situation is. You have to act now. Political choices have run out.’ There was a deadline. And that worked.”


26 COMMENTS

  1. More FRAUD & FARCE by the criminals at the IMF, ECB & EU Commission…
    The Euro zone is in its death throes and soon finished!

  2. Dumb article obviously just intended to push Andy’s leftist politics. The irony is that Andy is still ranting when its rich people picking up the tab (Andy thinks just rich people are to blame for all our economic ills) and Cypriot banking was of the offshore variety. (something Andy claims to be against).

    The timing was inappropriate but no Cypriot government would have had much of a choice. It was either see banks go on a run this way but at least have smaller investors money better protected or have ECB funding cut off and have the banks go on a run in a much harsher way where nearly every depositor takes big loses. (with the latter option meaning a possible exit from the Euro that would further complicated matter) . The Cypriot banking sector was finished either way.

  3. You make no sense World farts. Aren’t you the one ranting about rich people all the time? Rich people are picking up the tab. If you were remotely logically consistent in your own view, rather than ranter against our government trying to push communist Syriza into power, you would be thrilled about this.

  4. or they can follow the law and take down various classes according to the capital structure of the bank. in this case, bondholders should have been taken down before depositors. obviously this was not the case. but heaven forbid bondholders (read Banks) ever take any losses.

  5. Cypriot banks are taking loses. Huge loses. The net result of this new bank tax will be the Cypriot banking system will eventually be a fraction of its current size in a few years. (just enough to serve the tiny local economy and little more).

    If our leftists were being logically consistent they should be thrilled our banks are being destroyed and rich people are the ones chiefly paying to fix the Cypriot liquidity problem but they are still whining… and whining.. .and whining. Doers will do. Whiners whine. Whining will not fix our economy. Socialist money redistribution scams will not fix our economy either. It will just result in equal distribution of nothing.

    The number one way to improve our economy is by increasing worker productivity to increase industrial output. The best way to do that is through leveraging technology and science. Anyone looking for a quick fix or thinking the same-old same-old of low skilled tourism and selling olives will improve our standard of living is living in a commie fantasyland.

    Fixing our economy to match western standards will take decades of effort to achieve. We need to take a focused no-nonsense Spartan approach to business not be out in the streets wasting our time rioting like shameless savages.

  6. Freedom for Arvanitia from these corrupt LIERS and CHEATERS.
    Criminal politics on the expense of the blood of Arvanit freedom fighters.

  7. if the rich are the ones paying, then how come they have already pulled out all their money from cyprus even when the banks were closed? fascist money redistribution scams (in the form of “bailouts”) certainly do not work either

  8. nope. the events of today prove otherwise. why can’t u address the increase in emergency liquidity funding. define wealthy too please. Now that all the Russian money is gone, the only question remains just how big the capital shortfall will be – earlier we learned that it will be at least EUR2.5-3 billion.

  9. Nope. You have no evidence to back your claim *ALL* the wealth money has left. You are just making up “facts” based on exaggeration of the facts and speculation. Even a shortfall you claim still doesn’t add up to evidence to your claim *ALL* the wealthy money has left.

    As for definition of wealthy, the definition varies person to person and there are degrees of it. So its not an exact figure. Its a relative arbitrary amount that moves with time. That said, by the standards of most those with over 1M in cash in the bank would be considered wealthy. There is no reason to believe the still isn’t mountains of money like that left in Cypriot banks and that is the money that’s going to take the biggest hit.

    Resorting to hysteria and fabricating facts doesn’t help the situation.

  10. Nope. You repeating yourself will not make your hyperbole claim that *ALL* the wealthy money has left Cypriot banks is true.

  11. You have no objectivity in reporting the facts. This was made evident when you made the ridiculous suggestion that banks didn’t take a hit. When the dust settles Cypriot banks will be a fraction of their former size.

  12. Yes we would like to know the truth Worldarts.

    Start with why were you trying to manipulate Greek posters here by swapping handles? Why do one day support Syriza and next friendly with XA supporters? And why have you repeatedly endorsed terrorism against a democratically elected government?

  13. i gave you the most important fact that is the tell all sign for the amount of $ that has left the system in the last week ie the emergency liquidity funding increase to the cyprus central bank TODAY and the general increase in the size of the bailout over the last week, the reason being that the deposit side of the bank balance sheets have gotten killed with these stealth withdrawals. PLEASE ADDRESS THE 3 BLN INCREASE TODAY COUPLED WITH GERMAN 2 YR YIELDS GOING NEGATIVE AND THE RUBBLE AT 2013 HIGHS (REPATRIATION) i wasn’t referring to the cypriot banks, i was referring to the banks that hold cypriot bank bonds ie foreign banks (mainly german) that will not take hits proportionate to their position in the capital structure. in a normal asset grab, depositors should be the last to go after cascading through the rest of the capital structure from equity all the way to bondholders. this isn’t hyperbole, this is looking at what is happening in the actual markets

  14. Absolutely disgusting what the europeans did to Cyprus…
    No respect..The eurpeans are strangling the Greece and Cyprus with harsh terms so in the future any potential gas reserves are taken by the europeans for absolutely nothing..
    Great partners…

  15. What do you expect when both were continuously governned byfinancial morons over the years since the demise of the fascist junta and Cypriot invasion in 74!

    The fact that imbeciles like Papandreou, Karamanlis, Simitis, and Samaras to name a few, were well aware of our country’s financial rollover system and all the risk that that type of borrowing behaviour entails but didn’t lift a finger when it was but absolutely necessary tells you a lot about incompetency.

    Yet, you’ll have the goldendawn fascist pigs and their conservative right wingers and left wing extremists screaming at each other over who’s fault it all is!

    Worse case scenario declare bankruptcy and let the fascist pigs and lefty extremists eat each other, and perhaps get rid of a lot of these shameful Greek crap while they’re at it! .

  16. The whole Euro zone system is utterly corrupt & rotten to the core and must be brought down to the ground. The EU Commission is run by gangsters with no moral conscience.

  17. PASOK & ND are responsible for all, the governments have been and still are run by Criminals for 37 years they collaborated in a secret cabal to hold power.

  18. Alex… I wish you’d get a life and stop embarrassing yourself on this site.
    We know people like you don’t grow on trees, they simply swing from them!

  19. Right. Everyone that isn’t lefwing is a “fascist”.

    Previously you tried to manipulatively pretend you were right wing then go on to support illegal immigration into Greece? You suggest Turkey should attack Greece?
    You aren’t Greek. You are just one more troll manipulatively pretending to be Greek. It is anti-Greek ultra nationalsit manipulators like you that are fascist.

  20. Ridiculous. Are you smoking crack between your rants? There is no 37 year “cabal” between socialists and conservatives. You are waste of space and a liar.

  21. So during the 8 months that Castrofias f….d about nothing left Cyprus eh? Why do think he delayed, remember he is a communist, so best help his comrades!!

  22. Good theory, but as the diasporic fascists here would have it, they prefer that they are squeaky clean of anything, just like their ancestors in the fascist junta and their ultra pusti-fascist metaxas!

  23. It will be a good day when the domestic goldendawn fascist pigs get roasted in syntagma by some hungry Albanian Greek citizens and we can sit back and hear their squealing cries in the background of Papazoglou!
    And as for you diasporic fascist pigs, we can let your hosts in your multicultural societies provide for you poor starving parasitic immigrants!
    Don’t worry just like your fascist ancestors got a good Turkish Delight up their behinds in 74 so to would all the goldendawn fascist pigs be the first the Turk machine would impale in syntagama right up through their arses so that all the rest of us moderate Greeks can see what the expressions on the faces of the domestic fascist pigs look like!