Last Updated : 25 March 2013 at 14:00 IST
The financial reality show that is Cyprus has finished the curtain raiser episode; the rest awaits. As Indians say, that which is in store, never waits for turn; it just arrives. Cyprus, as the Financial Times said, was a stupid ideas whose time had come.
Cyprus has clinched the much needed 10 billion Euros bailout deal with the troika compromising of European Central Bank (ECB), International Monetary Fund (IMF) and the European Commission (EC). Anastasiades signed the deal with his blood and he said he was content of which I am clueless. Why and how on earth can he be content?
May be because of this: Cyprus is an exceptional example of robbery of black money in plain day light overnight. (That also includes some legitimate money, but let me leave that to lawyers and Cypriot judiciary of which we have heard nothing as of now, except for, from the words of Cypriot Archbishop wherein he threatened suing those who are responsible for the mess of Cyprus.)
Cyprus has been a dirty washing machine as far as Russians are concerned and they channeled not only money but also weapons to Syria. When the din of the machine got so loud that Cyprus in effect began to froth and fume, nations like Germany decided enough was enough.
They said Cyprus should shoulder the yoke of bailout and will not be granted the luxury of the amphitheater where Euros would arrive a neat stream providing liquidity to distressed banks. 'We are not gonna bail out the Russian plutocrats' was the stand of Berlin and Brussels.
Then came the big bang. If Cypriots were to get the 15.8 billion Euros it needed to stay afloat, the lenders or the troika would supply only 10 billion Euros and the rest will have to be footed by selling family jewels of Cypriots. In terms of finance, it meant the Cypriots would be slapped a 6.75% levy on their deposits below 100,000 Euros and 9.9% levy on figures above that. This would be a one-time levy, but was rubbished by the Cypriot Parliament.
This measure was akin to rubbing the troika the wrong way: and they declared the ultimatum. Find the 5.8 billion Euros or perish. Gather the money or see the liquidity assistance programme cut off, pay the ventilator charges or see the oxygen pipes pipped...you have time until Monday night; the troika said last week.
Swallowing the pride, the Cypriots went cap in arms to Russia and Russians treated them exactly the same way much to the consternation of the unfortunate Cypriot officials ( 'they treated us like we were there to beg', one Cypriot official said.)
Russia which was against the 9.9% levy as that would have seen some Russians lose their illegitimate possessions, sent the poor Cypriot finance minister back empty handed. We don't need your gas, said Russia. Ultimately, that was what the Cypriots had to offer, a few trillion cubic feet of gas.
With Russia turning its back on Cyprus, the orphan nation decided to go the extra mile and passed a few bills in the Parliament that would restructure their banks into two: good bank would hold all the insured deposits that are below the 100,000 Euros and a bad bank would hold assets above the same as well as some toxic assets.
Capital control laws were also enacted so as to prevent flights of money from the banking sector as and when they reopen.
Capital control laws were also enacted so as to prevent flights of money from the banking sector as and when they reopen.
Following this, Cyprus leader Anastasiades travelled to Brussels to extract the 10 billion Euros required to fund the banks and avoid a default. The negotiations prolonged as if it would last an eternity and Brussels agreed to a deal in sessions marked by heated exchange of words and even threatening sounds of resignation by the Cyprus leader.
This was the deal in a nutshell
--Depositors who hold less than 100000 Euros will be spared of any levies.
--Depositors who hold more than 100000 Euros would see their money transferred to Laiki and would see it wiped away in a process of liquidation. Laiki would be closed for ever.
Now, that was a recap.
Consequences
We know, Cyprus holds tons of Russian black money. The depositors who hold money above the threshold would see their savings used for raising the 5.8 billion Euros that Cypriots need to stay afloat. This means, so many Russian oligarchs stand to lose. What is this if not robbery of black money in plain day light?
And it would be stupid to believe that Russian oligarchs, many of them close to Putin would see their money slip away.
The troika, it seems, believes that since a majority of the cash heap is laundered, the robbery would not be challenged in a court of law. But as has been said before, if Russians know how to steal, they also know how to stand.
Chances galore that Russia would go clandestine about the revenge. They may not cut the gas supplies to Europe for fear of international backlash and isolation. But the nation whose leadership culture is centered around the personal whims and fancies of rulers would see to it that Russia would have its revenge, one way or other. And of course, Europeans know it very well. At some point in time this rivalry would surface in a pronounced manner and then we may have the word for it: War.
Another thing pertains to the capital control. If capital controls are exercised in letter and spirit by the Cypriot authorities, it would see Euro unbecoming.
A horrible scenario it would be as portrayed by Frances Coppola. It is real! I cannot resist but quote her in entirety the scenario as she has envisioned it.
You can put money into your bank, but you can't get it out again. At least you can, through ATMs, but only in very small amounts.
If you have money on deposit, you can't take the money out and close the account. And if it's a time deposit, when it reaches the end of its life, you can't have the money to spend. You have to roll it over into a new deposit.
You can't cash a cheque in a high street bank. You can't pay bills in a high street bank, either. And no high street bank is lending any money, so if you want a loan, forget it. In fact high street banks are not much use.
Your employer pays you in cash, because there are no electronic payments. Which is just as well, really, because you need cash. There are no automated payments such as direct debits, so you pay all your household bills in cash. Credit and debit cards are no longer accepted anywhere, so you buy all your shopping and petrol for your car with cash. You can't make phone or internet purchases.
If you have more than one account, you can't transfer money between your accounts. If only one of your accounts has ATM access, once that account is empty, you are stuck with no money.
You can't go on holiday abroad because you can't take any money out of the country. Your employer won't send you abroad on business, either, because you might not come back.....
All the local shopkeepers will only accept cash, not cheques. That's because they have to pay suppliers in cash, and once you put money in a bank, you can't get it out again.....But all small businesses are having a very hard time. Shops are closing, businesses going bust, people losing their jobs. You're not sure how much longer you will keep yours. You've taken a pay cut already, even though it means you struggle to pay your mortgage.
It would really help if lots of tourists would visit your beautiful sunny country. But the place is deserted. Tourists are unwilling to come here now....it's very cheap, but they can only bring cash with them and whatever they bring must stay here - and if they run out of cash they can't get any more.
And you think, this would go down well with the people? Mass is a mess; mob messier
Brussels has also bypassed the Parliament saying that since it is not a levy that is being charged, it does not require the approval of Cypriot people. Then where else should the approval be taken from? Russian Duma?
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