Full-court Cyprus

First, news update. Cyprus’s parliament was supposed to vote on the “confiscate insured deposits” plan on Sunday, but they have delayed the vote until Monday afternoon.

A little bit of background:

Cyprus state broadcaster CyBC reported that German Finance Minister Wolfgang Schäuble had proposed Cypriots lose 40 percent of their bank accounts

I concede this is pure speculation on my part… But I suspect Mr. Schäuble did not actually mean to suggest insured deposits — did I mention they are confiscating insured deposits? — should be seized. Yes, Germans are crazy, but not in that way.

What happened, I think, is that Germans love “organized” but are not so hot on “crime”. Put another way, the only thing worse than transferring German wealth to deadbeat Greeks would be transferring German wealth to money-laundering Russian oligarchs. To a German finance minister, extracting all of the needed funds from uninsured accounts over €100,000 would make perfect sense. (With a partial EU bailout an acceptable compromise.)

But in Cyprus, the financial sector is multiples of GDP… precisely due to those money-laundering Russian oligarchs. And Cyprus wants to keep it that way. So to avoid burdening Russian organized crime by double-digits, Cyprus decided to make insured depositors — did I mention they are insured? — share in the fun.

In short, my guess is that the (dangerous) haircut on deposits was the EU’s idea, while the (utterly insane) haircut on insured deposits was Cyprus’s alone.

I tried to say all this in 140 characters but I am not sure I succeeded.

[Update]

Cyprus has decided that Tuesday should also be a bank holiday.

I cannot decide whether my tears are from laughter, sadness, or fear.

[Update 2]

Regarding the ways in which Germans are crazy, I could be wrong.

[Update 3]

From the comments (thanks “if”):

“But we would obviously have respected the deposit guarantee for accounts up to 100,000,” he said. “But those who did not want a bail-in were the Cypriot government, also the European Commission and the ECB, they decided on this solution and they now must explain this to the Cypriot people.”

Germany would have protected insured deposits: Schäuble

4 comments to Full-court Cyprus

  • The latest idea — having Greece’s banks absorb some Cyprus banks — should make those tears of ironic laughter. How bad does a bank have to be to make merging with a Greek bank look like a good deal?

    Given all this, why is Cyprus determined to stay in the eurozone? Oh, wait, that’s right — the Russians need a nice stable exchange rate to prevent devaluation of their heavily washed funds.

  • chancypants

    I have to stand and applaud the brass cojones the EU and IMF have in the schoolyard bully theft of Cyprus lunch money. What are you gonna do about it Cyprus, cry?

    The flagrant lies from all levels of Western crony governments, the end of private property, infinite monetezation from all central banks, and daily records in the US stock “market” all blend into the perfect corruption flavored smoothie. Yum!

  • RichL

    What was Intrade’s market on a Cyprus default?

  • if

    http://www.reuters.com/article/2013/03/17/us-eurozone-cyprus-germany-idUSBRE92G0HP20130317

    “It was the position of the German government and the International Monetary Fund that we must get a considerable part of the funds that are necessary for restructuring the banks from the banks owners and creditors – that means the investors,” German Finance Minister Wolfgang Schaeuble told public broadcaster ARD in an interview. “But we would obviously have respected the deposit guarantee for accounts up to 100,000,” he said. “But those who did not want a bail-in were the Cypriot government, also the European Commission and the ECB, they decided on this solution and they now must explain this to the Cypriot people.”

    If in doubt, blame the Germans.

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