Archbishop Calls for Resignation of Finance Minister Sarris

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Archbishop Chrysostomos II of Cyprus

Following an injunction granted to the church, Archbishop Chrysostomos II criticized the restructuring of the Bank of Cyprus, of which the church holds 11.6 million shares, and called for the resignation of Finance Minister Sarris.

Yesterday the court granted the church an injunction on the restructuring of bank shares until the matter is judicially reviewed. The church claims that stripping of it shares without compensation is unconstitutional.

Court Injunction Granted to Church Delays Bank Restructuring
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Archbishop Chrysostomos II of Cyprus

Under the terms of the Cypriot bailout agreement the shareholders in the Bank of Cyprus will be stripped of their shares which will be transferred to the bank's largest depositors as compensation for the levy or "haircut" on deposits of over 100,000 euros. The Cyprus Orthodox Church, which has vast business interests in Cyprus and is believed to be the island nation's largest landowner, holds 11.6 million shares in the Bank of Cyprus.

The church requests that its shares be treated similarily to deposits that were levied and converted to shares and that the church should be granted shares in the new entity as compensation. The church claims that it is unconstitutional for the state to confiscate its property without compensation. Legal experts have stated that it may be possible to increase the number of shares in the Bank of Cyprus in order to compensate existing shareholders.

Bank restructuring is pending a hearing before court on the matter.

Cyprus Announces Unprecedented Capital Controls

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Bank of Cyprus customers wait to be helped as banks reopened today after nearly two weeks

Cyprus becomes the first member state in the history of the EU to impose capital controls.  The Minister of Finance and the Governor of the Central Bank of Cyprus announced that in consideration the exceptional circumstance, capital restrictions will be imposed as temporary measures to regulate the flow of capital within and out of Cyprus in order to safeguard the stability of the system.

Each customer will be able to withdraw €300 in cash per day from each bank in which they have an account;

Businesses will be able to carry out transactions up to €5.000 per day, per account and pay staff salaries;

Payments and or transfers outside the Republic, via debit and or credit and or prepaid cards are permitted up to €5.000 per month, per person in each credit institution;

Cyprus Popular Bank (Laiki) has been placed into administration and all insured deposits have been transferred to the Bank of Cyprus.

To restore the health of the Bank of Cyprus, the bank has been recapitalised to 9% based on the adverse scenario by PIMCO. Insured deposits have been fully protected, uninsured deposits will be partly retained as cash and partly converted into shares in the Bank of Cyprus.  The Bank of Cyprus will be privately owned by its large depositors.

http://www.moi.gov.cy/MOI/pio/pio.nsf/All/56A9FDE907F39914C2257B3C00227018?OpenDocument

Academic Institutions, Municipalities to be Spared Haircut

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Will bank accounts of charitable organizations such as the Cyprus Red Cross Society be sparred?

It has just been announced that the bank accounts of academic institutions and municipalities, including funding from EU co-financed development projects, will not be subject to levy. This news causes much relief, however there has been no announcement as to whether non-governmental charitable organizations will also be sparred.

The Cabinet also decided to reduce the salary of members of the Cabinet by 20%, including the 13th salary. The President has already authorized the Accountant General of the Republic to make a 25% reduction of his own salary.

WWW.sigmalive.com

University of Cyprus Among Casualties of ”Haircut”

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The University of Cyprus banked with Cyprus Popular Bank (Laiki) and Bank of Cyprus and has therefore lost most of its money, including grants held by its researchers. The chancellor stated in an internal email that the university has put maintaining the health insurance of its employees and replacement of the funds of European grants in top priority. It is not known whether grants attained from other sources will be replaced or whether employees or services providers will be paid.

Anxiety runs high as the university community faces the real possibility of no salaries and a complete loss of funds earned by its researchers.

 It is not known whether the University of Cyprus will receive any funding from the government bailout package to replace those lost by the haircut.

Cash Delivered to Cyprus, Tight Security as Banks Set to Reopen at Noon Today

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Armed police guard containers believed to contain cash delivered to the Central Bank on Wednesday evening

Five million euros were delivered by plane to Cyprus to recapitalize the banks as banks planned to reopen today under tight security.  Banks have been closed for nearly two weeks causing cash flow to dry up, resulting great hardship to people and businesses.

Bank Workers Union Threaten Strike to Prevent Banks Reopening Tomorrow

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The workers’ union for bank employees threaten to strike just 24 hours before the banks are due to re-open after having been closed for nearly two weeks.  The union has stated that its members are prepared to cause branch closures as soon as the banks resume for business on Thursday.

See BBC Report and video: http://www.bbc.co.uk/news/business-21950913

Cyprus Television Media Goes to Sleep While Cyprus’ Future Being Negotiated

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The television news media went off-air at 1:00 in the morning, reverting to regular programming, even though economic bailout negotiations were still in session. The President of the Parliament, who remained here in Cyprus, made an announcement at 2:00 in the morning regarding updates on negotiations and it was not televised, nor was the exit of Cypriot leaders as negotiations were concluded in Brussels.

Cyprus television media apparently went home to sleep during the most critical moment in Cyprus’ history since the invasion by Turkey in 1974. Astounding.

President Anastasiadis from Brussels: "We have agreement in the interest of the people of Cyprus and the EU" 

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At 3:00 this morning the finance ministers of the 17 eurozone countries endorsed an agreement for EU financial assistance for Cyprus. The details of the agreement have not yet been announced however it is believed that several sticking points have been resolved as follows,  no restructuring of Bank of Cyprus, 30% levy on bank accounts over 100,000 in Bank of Cyprus, and no either no  levy on bank accounts other than Laiki and Bank of Cyprus, or possibly a small levy on accounts in other banks to cover pensions lost in Laiki and Bank of Cyprus.

Cyprus Opens its Eyes, Begins to Consider the Concept of Accountability

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While Cyprus waits to hear whether it will be bailed out by the EU or be swept up by disorganized bankruptcy, discussions of responsibility and accountability of its decisions-makers dominate the media for the first time.

Are the Cypriot people on the verge of demanding accountability?

 Shock, Outrage that Solidarity Plan Dated Over a Year Ago

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Shock and outrage spread through parliament last night as it was discovered that the sixty-one page memorandum to raise 5.8 billion euros was not drafted this week as assumed, but over a year ago during the administration of Christofias, who exited office last month. The date of 15 January 2012 was the tip-off. The memorandum included bank restructuring.

This is solid evidence that the Christofias administration had full knowledge that its economy would collapse if such measures were not taken, and failed to act, failed to inform, burying the document, therefore driving Cyprus to the brink of a Eurozone exit,  resulting in reversion to the Cyprus pound and disorganized bankruptcy.

Now we know why Troika is acting so harshly with Cyprus. 

Cyprus Heads to Brussels Today in Hopes to Secure 11^th Hour Bailout

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Republic of Cyprus President Nicos Anastasiades

Cyprus will leave the Eurozone and enter disorganized bankruptcy within 24 hours if its leaders fail to secure a bailout for the beleaguered Mediterranean island nation. Anastasaides met with Troika officials in Cyprus yesterday and then with party leaders in talks that went into the early Sunday morning to hammer out the remaining issue of a bank levy or “haircut.”

 As a condition to receiving EU financial assistance, Cyprus must raise 5.8 billion euros and a levy is its only option for doing.  The levy is expected to be 20-25% on Bank of Cyprus accounts over 100,000 euros and possibly  a 4-5% levy on accounts in all other banks in Cyprus over 100,000 euros. It is not clear if the tax will be applied to pension funds as well.

"It is essential that an agreement is reached by the eurogroup on Sunday night," stated Olli Rehn,  EU economy and euro commissioner, adding "Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available. There are only hard choices left."  

Merkel Promotes EU Member State Discord, Needs to Back Off

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Merkel

Since the Cypriot Government (lead by former President Christofias, left party) requested a bailout from the European Financial Stability Mechanism last June, we have heard a constant stream of statements from Cypriots like “Europe is out to get Cyprus,”  “Europe wants to destroy Cyprus,” “Protect our sovereignty,” “Merkel get out.” Clearly, Cyprus gave up a certain amount of sovereignty when it requested a financial bailout, but is there a grain of truth in these comments?

Reuters stated “Chancellor Angela Merkel stuck to the hard line Berlin has been pushing for weeks, telling lawmakers that while she wanted to keep Cyprus in the euro zone, the country must first recognise it had no future as an offshore financial centre for wealthy Russians and Britons.” (1) It is comments like these that offend and infuriate Cypriots.

Most Cypriots understand that Cyprus has made mistakes, particularly with its over-confident, yet high risk investment in Greek bonds and arguably inept previous administration. Cyprus is a small economy, an island nation with few natural resources or industry.  The economy consists of family-owned businesses, a tourist industry, and the financial and corporate services sector based on low corporate taxes. Because it’s a small economy Cyprus is vulnerable and less-able to recover from investment mistakes.

Cyprus developed its financial and corporate services sector in an attempt to create an industry based on people, its main resource, rather than natural resources or products, of which it has little. Cyprus developed its financial and corporate services sector legally and within in full view of all of Europe and the world. Therefore Merkel has absolutely no right to inform Cyprus that it must “recognise it had no future as an offshore financial centre for wealthy Russians and Britons.”

 Cyprus understands that its main industry has taken a huge hit and is beyond repair in the near future. Thousands of people will be without jobs and no other industry to turn to. This is a source of high stress and concern for those employed in the industry, and their families, facing the choice of leaving the island for another country. For a nation with strong families, this is particularly sad; and where to? Merkel’s statement pours salt on fresh wounds.

Merkel’s statement also promotes discord among EU member states by creating a small state verses big state polarization, particularly dangerous in a time of systemic financial instability. Her statement also betrays ulterior motives. Germany wants Luxembourg to absorb the investments in Cyprus.

Cyprus has a right, within the terms of its bailout, to attempt to preserve its financial and corporate services sector as much as possible, and work towards building it back up.

Cyprus made mistakes, but is Germany a country without mistakes in its history?

1.    1.   http://www.reuters.com/article/2013/03/22/eurozone-cyprus-germany-idUSL6N0CE1F820130322

Cyprus Mostly Approves Plan to Raise 5.8 billion

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Collective sigh of relief as parliament votes in favor of plan, with the exception of the measure for a levy on Bank of Cyprus accounts as Cyprus waits for Troika to advise the amount to be cut. Vote on final measure will occur tomorrow. It is expected to pass. 

Meanwhile, it is said that Russia is creating its own offshore financial center on an island somewhere (not sure where) to take over for the Cyprus companies.

Cyprus Votes in New Plan

The sound on live broadcast was momentarily lost. Now we are afraid to miss something!

The lights just went out in parliament adding to the drama. Back on after a few seconds.

Parliament Members Speak Against Plan, Abstain From Vote

Left party member speaking against the plan, claims Europe is out to get Cyprus. Does not propose an alternative plan or course of action, states he will abstain from voting in order not to show to Europe that they are against President of Cyprus. Does not offer any political guidance or clarity.

Green party member (there is only one in parliament) is against Troika, against the plan, and states that he will also abstain from voting.

Abstaining from voting on such an issue is really quite selfish for parliament members in this case.  They don’t want to take responsibility for the outcome. When the results hurt (all of the possible outcomes will involve suffering for the people of Cyprus) abstainers can claim that it is not their fault and blame those who actually took responsibility that the people have granted them and lead the way.  By abstaining from voting today, these parliament members are trying to preserve their political futures by banking on the Cypriot people being foolish enough to think that abstaining from the vote without offering any solution means that such politicians would have created a better outcome had they been in power and then will put these abstainers in power.

A center party member just said some unclear, unfocused things and then claims he will not be in the room when the vote occurs.

Years of failing to offer solutions, failing to take responsibility, failing to have the strength to make unpopular decisions and failing to act is what drove Cyprus into its current state of bankruptcy and chaos. 

Parliament Voting Now on New Plan, 10:36 pm

New Development: Bank Restructuring

Banks restructuring taking shape as follows:

Cyprus Popular Bank (Laiki): Scenario as described in previous post Closer to a Solution.

Bank of Cyprus: deposits up to 100,000 would be insured and untouched, deposits over 100,000 would be subject to levy or “haircut” of 15-20% -- though it just came in that Troikia insists on 25%.

All other banks in Cyprus: balances over 100,000 would be subject to levy/haircut of 5%

Economists state that this is fairest possible scenario, protects small depositors, distributes losses based on bank health and is much better than Troika's widely criticized flat levy on all deposits.

Outside parliament Laiki Bank employees are demonstrating against the measure. Others are not sure why. Their jobs would exist for five more years and account losses minimal relative to other scenarios. The Central Bank has declared that it will not support floundering Cypriot banks beyond Monday if Cyprus does not come up with a Troika-approved solution. Their jobs and a lot more money would be lost, and Cyprus would likely exit the Eurozone and face disorderly bankruptcy.

If Troika approves this plan Cyprus should take it.

Closer to a Solution

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Outside Parliament Today

Protests continue outside parliament asTroika rejects measure to national pension funds; but seems open to bank restructuring. The  plan contains a measure that would split Laiki Bank into two banks, so-called good and bad versions. All deposits in Laiki of 100,000 and below would be guaranteed be transferred to the good Laiki, which would also take all the outstanding loans that are current. Deposits over 100,000 would be shaved or possibly forfeit. The bad Laiki would take the loans that are behind in payment, try to collect and foreclose and sell properties, and would be closed within five years, preserving jobs until then. The good Laiki would continue as a healthy bank. A levy may be imposed on deposits over 100,000 in Bank of Cyprus as well.

Only Way Out is Back to the Beginning

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Germany holds a hard line with Cyprus rejecting a plan to nationalize pension funds as its leaders struggle to come to a consensus and agree on an alternative plan to raise 5.8 billion euros. (1) The problem is, Troika is looking increasingly less likely to approve any plan that does not include Troika's levy. Is Cyprus wasting valuable minutes to come up with a plan that Troika is waiting to reject?

Merkel also told Cyprus that in order to stay in the Eurozone Cyprus has to first accept that it has no future as an offshore financial center. Cyprus' corporate services sector is one of its largest economic contributors. (1)

The sand storm has given way to rain.

1. http://www.reuters.com/article/2013/03/22/eurozone-cyprus-germany-idUSL6N0CE1F820130322

Sand Storm Descends on Cyprus as Parliament Votes on Future

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Cyprus Engulfed in Sand Storm

As parliament decides on the future of the island nation we are now engulfed in a sand storm which has blown in from the Sahara Desert. We sit under grey-brown skies and breathe gritty air as we wait for our future to be told.

 What is next -- swarm of locusts?

Russia Says No, and Then No, and Then No Again

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Cypriot Finance Minister Michalis Sarris Leaves Moscow

With the following statement Russian Finance Minister Anton Silouanov officially stated to reporters that Russia will not offer aid to Cyprus:  “Talks between Russia and Cyprus for a possible package of financial assistance have been completed without success.” He went on to clarify “Russians investors were not interested in the marine reserves of natural gas.” And just to be super clear "Talks ended on the Russian side."  

Cypriot Finance Minister Michalis Sarris has returned to Cyprus with empty hands, as two days of critical talks in Moscow failed to yield.

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German Finance Minister Schäuble to Cyprus: There Can Be No Solution Without a Haircut

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German Finance Minister Schäuble

10:45 am

Cyprus parliament is now meeting to vote on the current plan to raise 5.8 billion euros so that it can be granted EU assistance. The plan was formulated and drafted last night after Parliament rejected Troika’s conditions that that a “haircut” be imposed skimming funds from all bank accounts in Cyprus. Troika was forwarded the 61 page plan last night, however it is not yet known whether Troika will approve the latest plan. Cyprus has until Monday to come up with a Troika-approved plan the raise 5.8 billion euros.

After Cyprus, the smallest nation to request EU assistance, became the first to reject Troika’s conditions for assistance, the future of the island nation is unclear. In response to a question whether Troika is still willing to extend financial assistance to Cyprus Schaeuble answered in the affirmative, going on to say that the problem must be addressed at the root, "In Cyprus, it is the bloated and partially bankrupt banking sector. It must find a solution. The notion that this problem can only be solved by the taxpayers in the Eurozone, without participation of major creditors of banks in Cyprus cannot be passed to the citizens of Europe. Cyprus seems to have been a misunderstanding. This is not a contribution to the Cypriot savers to make in Europe. Challenge is not to lift another weight taxpayers-and-Cypriots, but to bear part of the creditors of the banks. They invested in the banks. Received large returns. By analogy, they should take the risk, like the bondholders in Greece-in order to find a way to Cyprus, as before, and Greece, to gain perspective on the markets return.”

By this statement Cyprus seems to have been a misunderstanding.This is not a contribution to the Cypriot savers to make in Europe Schaeuble seems to suggest that there was a misunderstanding regarding the “haircut” or levy on all bank accounts in Cyprus, which has been highly criticised on an international lever, implying that Cypriots believe that they are being asked to contribute financially to Europe. I have not heard this being stated once. No one in Cyprus thinks that Cyprus is being asked to contribute financially to Europe. This is not the issue and Schaeuble knows it.

In the wake of the international backlash against the levy Troika has been playing a blame-game with respect to whose idea the levy was, claiming that it was not Troika’s condition, but a measure Anastasiades decided himself to impose on the Cypriot people. In his address to the people last weekend when he announced that the levy was going to parliament, Anastasiades stated that Troika actually wanted a higher levy and that he negotiated it down to the terms that were submitted. Further, the levy was recognized as a possible condition the EU assistance before Anastasiades was even elected president.

In conclusion on the issue of the levy, it was Troika’s idea, and there is no misunderstanding as to what the levy was for.

No we wait to see whether the new plan is approved by parliament and then whether the new plan contains enough a of "haircut" for Troika. 

Parliament to Vote on New Plan Tomorrow Morning

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Cyprus Parliament

10:55 pm

Cyprus forwarded a 61 page plan to Troika who has stated that Cyprus is to vote and on the plan and Troika will consider it only if approved. Cyprus was hoping for some comments by Troika before putting plan to vote in order to save time, given that Cyprus must come up with a plan by Monday or face disorganized bankruptcy and subsequent probable Eurozone exit. Parliament will convene to vote in the morning.

Cyprus Bailout Landscape Changes by the Minute

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10:06 pm

Demonstrations Outside Cypriot Parliament Tonight

Just in from Russia: no financial assistance in the form of a new loan, no lowering of interest rate on current loan, slight extension of repayment date of current loan (not clear what the new date is). Cyprus had expected Russia to at minimum lower the interest rate and repayment date to closer to the date of repayment of financial assistance from Europe, which would be a start date of 2023. This is a disappointment.

Now in Nicosia: What was a unanimous agreement between the parties on the new plan to raise 5.8 billion disintegrated into a fight over restructuring of the banks. Laiki was to close but after the opposition party refused to agree, an new plan has formed to keep Laiki open with capital limitations in an effort to preserve around 8,000 jobs.

Expected from Brussels:  It is now believed that Troika may not accept the new plan.

With Troika deadest against Russian assistance, rejecting Cypriot Orthodox Church help on the grounds the it was undesirable “internal funding” and now the pending rejection of the current plan, one can’t help but wonder whether Troika will only accept the levy it first imposed.

MPs Arrive to Vote on Future Cyprus' Future; Russia Not out of the Picture Yet
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21st March 2013, 7:25 pm

Parliament members arrived moments ago to vote on measures to raise 5.8 billion euros amidst protests and chaos. Earlier today it was reported that party leaders had agreed unanimously on a new plan, yet this evening a point of contention has surfaced regarding restructuring of the banks, specifically with respect to closing of Cyprus Popular Bank (Laiki). It seems that balances under 100,000 euros in Laiki would be transferred to Bank of Cyprus, and it is not clear how balances in excess of 100,000 in Laiki would be treated. Laiki employees are among the protestors and it is said that the opposition government is in disagreement with the bank restructuring.

Cyprus finance minister remains in Russia, presumably negotiating ease of terms of current loan. Some sources report that a new loan to Cyprus to assist with raising the 5.8 billion has not been dismissed. It is assumed that Russia is interested in natural gas and oil reserves recently discovered in Cyprus' EEZ.

New Plan Formulated, Being Drafted for Presentation

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Cypriot government and central bank officials held emergency talks today. 

21^st March 2013

In a written statement the government has announced that party leaders have unanimously agreed to create an Investment Solidarity Fund to raise 5.8 billion euros which is at this moment being drafted by the Law Office of the Republic. The details of the fund have not been made public, however it is believed to contain provisions to protect smaller bank deposits and draw funds from several internal sources such as those described in my earlier post today Parliament Meeting to Continue Talks of Last Night; Hash Out New Plan. The Investment Solidarity Fund is expected to be voted upon later this evening. The plan must be approved by Troika.

The Central Bank has given Cyprus a deadline of Monday to come up with a plan to raise the 5.8 billion euros otherwise its banks will no longer be supported, bankruptcy will ensue and Cyprus will likely leave the Eurozone and revert to the Cyprus pound. As a reminder, during its bailout out negotiations, Greece was perennially on the verge of leaving the Eurozone and returning to the Drachma. 

Run on Diapers, Baby Food, Increase in Robberies

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21^st March 2013

As the cash strapped island nation faces the real possibility of being cut-off from supplies, Cypriots and other residents flock to stores to stock up on necessities, with the shelves of diapers, baby formula and other baby products emptying first.

ATMs are working, but with bank activity frozen in its tracks for over five days now the economy has screeched to a halt. Without commerce, businesses are beginning to cease to function as service providers are not being paid. Those who are employed continue to go to work (unless they worked for banks) but without bank transfers, those with little or no savings, who depend on monthly pay checks, begin to face the inability to buy food and pay rent/mortgages and other monthly expenses.

Additionally, as people empty their bank accounts in fear of losing their money, storing cash in their homes, house robberies have risen. Cyprus has enjoyed little crime but since the onset of the global economic crises it has seen a rise in robberies, and is now experiencing a greater increase in such crimes.

Parliament Meeting to Continue Talks of Last Night; Hash Out New Plan

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21^st March 2013

With Russia declining further financial assistance (which Troika was expected to decline anyway, stating that solutions must be found within the Eurozone) and Troika’s rejection of “inside funding” by the Cypriot Orthodox Church, Cyprus takes a second look at bank levies in combination with alternative fund sources. The plan that is said to be taking shape now possibly involves the following:

Levy on deposits of over 200,000 euros  

This would protect small depositors while skimming larger balances including those held by foreign investors. This is in keeping with the basic banking concept that deposits under 100,000 euros are insured. However, this would further damage Cyprus’ corporate services industry, one of the largest contributors to Cyprus economy, though it may have been irreparably damaged already.

Closure of Cyprus Popular Bank (Laiki Bank)

Presumably deposits would be insured up to 100,000 euros (at least one would hope so) but amounts beyond that would be lost, as would thousands of jobs. The rumor circulating yesterday the Russian energy giant Gazprom had taken over the bank, seems to have been just that, a rumor.

Nationalising the pension funds and provident funds of the state employees

 This measure would be expected to raise 2 billion to 3 billion euros.

Marios Mavrides, a government MP and former finance minister has stated that if Cyprus does not come up with the 5.8 billion euros within a few days, it may have to revert to the Cyprus pound, being the first member state to leave the Eurozone. The same was said about Greece while it was in the throes of its bailout.

 Many Cypriots and residents feel that exit from the Eurozone and disorderly bankruptcy is preferable to a bank levy in the original form which would have appropriated a percentage of all bank accounts. There are just as many who would have taken the levy in its original form, wrong as it was, and the consequences that would follow, in order to move on and repair the country. 

Now we wait.