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Now that sounds plausible:

>Merkel's Finance Minister Wolfgang Schaeuble had gone to Brussels with a firm mandate from Berlin: «no bail-in, no bailout», said a member of her government. That meant: unless depositors took a hit, there would be no agreement and Germany would not contribute towards a package for Cyprus.<

And then it gets inexplicable:

>European officials set on a figure of 5.8 billion euros to come from depositors, and refused to budge. What they had not decided in advance was how much of that should come from big, uninsured depositors, and how much from ordinary savers.<

Still why 5.8 billion? Why not 4.8 billion or whatever?

>Under a promise which still appears on the website of the Central Bank of Cyprus, deposits in its banks are insured up to 100,000 euros. Cyprus has about 30 billion euros in insured deposits, a large amount for a country of just 1 million people.

But because of its status as an offshore financial hub for foreigners - including large numbers of rich Russians - it also has 38 billion euros in uninsured deposits in bigger accounts.<

So the cypriot government had agency:

>Cyprus could have offered full protection to those with insured deposits up to 100,000 euros and still reached the 5.8 billion euro target by taxing uninsured deposits at a rate above 15 percent.<

by IM on Mon Mar 18th, 2013 at 06:40:12 PM EST
[ Parent ]
So the cypriot government had agency:

I'm not particularly surprised that Anastasiades wanted to keep his racket running. Nonetheless our great leaders hardly get to pretend that the Cypriots did it all on their own. The ECB is already supposed to have threatened to let the banks fail if Cyprus doesn't come up with an arbitrary amount of money. Yet in the face of this blatant sophistry trying to get around explicit guarantees they throw up their hands?

by generic on Tue Mar 19th, 2013 at 02:20:26 AM EST
[ Parent ]
Telegraph [UK]: Cyprus bailout - as it happened: March 18, 2013
Our Brussels correspondent Bruno Waterfield reports that EU Commissioner for the single market, Michel Barnier, believes that big depositors should have taken the hit on the Cypriot "levy" on savings, according to sources close to the French EU official.

That is code from the French European Commissioner for the Russian depositors who have substantial holdings in Cypriot banks rather than the British expats whose savings are caught up in the crisis.

"Barnier would like the one-off levy to be weighted so the burden is on large depositors," said the source.

As commissioner for the single market, Mr Barnier is the watchdog over the EU's "deposit guarantee scheme", legislation which protects up to €100,000 of savings if a bank goes bust but in the Cyprus case, say sources close to him, it does not apply.

Officials are billing the Cypriot hit on savers as a "fiscal measure" rather than a bail-in, haircut or loss inflicted on depositors in order to wriggle around the EU deposit guarantee law.

The point is made that Cypriot banks are deposit based, meaning that depositors are the only people to go to for a cash raid, given that the sovereign state in Cyprus cannot underwrite its banks.

Cypriot banks account for 55 per cent of the economy, their debts run to 800 per cent of Cyprus' GDP - this is a risk unlike any other eurozone country, officials argue.

If the two main banks in Cyprus go bust then the state goes bust too, meaning depositors would lose everything anyway is the case made in Brussels.



guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Mar 19th, 2013 at 02:57:15 AM EST
[ Parent ]
>I'm not particularly surprised that Anastasiades wanted to keep his racket running.<

To put in a word for him: He inherited this racket from his "communist" predecessor.

by IM on Tue Mar 19th, 2013 at 05:45:57 AM EST
[ Parent ]
Yeah, we knew that: European Salon de News, Discussion et Klatsch - 28 July 2011
The effort to transform Cyprus into a global hedge fund and asset management epicenter has been in the works for over 5 years, with the aim of providing access to key markets such as the Middle East, the Eastern European region, Asia and Russia. Some of the top hedge funds globally have already established a footprint in Cyprus in an effort to adapt to international standards. As an accesspoint to the EU, Cyprus works for the Pan/European hedge fund model, with worldwide offices and execution from the island.


guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Mar 19th, 2013 at 06:47:34 AM EST
[ Parent ]
Still why 5.8 billion? Why not 4.8 billion or whatever?

They had to come up with a figure. Negotiation 101: When you are the more powerful party to a negotiation, when the other side's alternative to negotiated settlement is sufficiently poor, and when you have no fair, objective or even explicable model by which to determine what figure to arrive at, come up with a nonsense and stick to it.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 19th, 2013 at 02:35:06 AM EST
[ Parent ]
They asked for EUR 10 bn to come from Cyprus, and agreed to count towards that some privatisation receipts, and future income from the increase in corporate taxes. The 5.8bn is the gap remaining.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Tue Mar 19th, 2013 at 05:00:21 AM EST
[ Parent ]
Yes, but then you could just demand 13.5 or 14.5% corporation tax rate, calculate higher future income and accept a lower contribution from the depositors.

>They had to come up with a figure.<

But that is my point: If the figure is somewhat arbitrary anyway, why not change it?

And regarding the art of the negotiations: If you are the more powerful party anyway, you have more not less room for flexibility.

by IM on Tue Mar 19th, 2013 at 05:40:55 AM EST
[ Parent ]
Not if your demands are off-the-wall insane and flatly illegitimate by any conceivable objective standard.

Such as attaching conditionalities to the central bank doing its job.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 19th, 2013 at 12:47:34 PM EST
[ Parent ]
If the figure is somewhat arbitrary anyway, why not change it?

Because you have to pretend you know what you're doing?

by gk (gk (gk quattro due due sette @gmail.com)) on Tue Mar 19th, 2013 at 01:34:33 PM EST
[ Parent ]

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