Cyprus Parliament Narrowly Votes To Accept Bailout

Amid all the stuff going on closer to home, this mess in Cyprus still bears watching:

Cyprus moved a step closer on Tuesday to receiving much-needed aid when its parliament narrowly endorsed a bailout deal drafted amid unprecedented acrimony and calls for the island to exit the eurozone.

In a nail-biting ballot, following hours of heated debate, Nicosia's 56-member House approved the €10bn rescue package with a majority of two votes. Among officials who had warned of a "chaotic default" the result was met with visible relief.

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Highlighting the furore that the agreement has unleashed, however, the deal was wholeheartedly rejected by the island's anti-austerity opposition parties, Akel and Edek. Several lawmakers predicted that its impact on a country that until recently was better known for its robust offshore financial services, would be "far worse" than the devastating invasion it suffered at the hands of an invading Turkish army in 1974.

With the EU-IMF sponsored rescue programme forcing the government to dismantle the banking sector – and forcing depositors, for the first time, to foot the cost of recapitalising banks exposed to debt-stricken Greece – many MPs have virulently denounced the package as containing the seeds of the country's economic destruction.

Indicative of the concerns that the measure might not be passed, the beleaguered president of Cyprus, Nicos Anastasiades, issued a last-minute appeal calling on politicians to think of the island's "greater good".

With bankruptcy looming, the governing coalition warned of "chaotic scenes", with public sector salaries and pensions going unpaid if the programme was voted down.

"Our country is passing through a critical time that calls for a sense of national responsibility and conduct in a manner which is consistent with the greater good," said Anastasiades, a British-trained barrister who assumed power barely two months ago.

In a replay of the scenes that have haunted Greece, protesters demonstrated outside parliament as the vote took place. Many hurled abuse at politicians now widely blamed for the island's economic decline. The Cypriot economy, once one of the most vibrant in the EU, is set to contract by 13% over the next year.

The prospect of the island being pushed into prolonged recession has given way to mounting speculation that perhaps it would be better if it left the eurozone altogether. In the runup to the vote, Akel ratcheted up the pressure by calling for a referendum on the issue.

"We know leaving the euro is an equally painful option, but reinstating a national currency could offer prospects for growth in the future," the party's general secretary, Andros Kyprianou, said.
Increasingly, the island's business elite has embraced the idea that the country would fare better if it dumped the single currency and returned to the Cyprus pound.

Calls for the island to leave the bloc have mounted as the knowledge has also sunk in that the price of international rescue funds will now be €13bn in budget cuts.

Maybe Randi Weingarten can issue a meaningless and useless call for the end to austerity measures?

Thousands Of High School Students Protest Bailout Deal In Cyprus

From Reuters:

(Reuters) - Cypriots vented anger in the streets on Tuesday and were desperate to learn what would happen to their savings, with the government yet to reveal details of controls it will impose to prevent a run when banks reopen after a painful bailout.

A special administrator was appointed to run the country's biggest bank, which will take over accounts from the second biggest bank as part of the restructuring package designed to bail out and rein in the oversized financial sector.

Cyprus's banks were ordered to remain closed until Thursday, and even then will operate under as-yet-undisclosed capital controls imposed to prevent depositors from emptying the vaults.

The Central Bank governor said the controls would be "loose" and would apply to all banks in the country. The restrictions would be "temporary" but he would not say what form they would take or how long they would last. Earlier, the finance minister said they could be in place for weeks.

Cyprus had faced bankruptcy and potential ejection from the European single currency without a rescue deal with international lending bodies. Now that the deal has been struck, it faces job losses and economic contraction.

Reuters journalists estimated up to 3,000 high school students protested outside parliament, the first major expression of popular anger after Cyprus agreed the 10 billion euro ($13 billion) bailout with the European Union.

"They've just gotten rid of all our dreams, everything we've worked for, everything we've achieved up until now, what our parents have achieved," said a student who gave his name as Thomas.

 Let me repeat two sentences from that excerpt from the Reuters article:

Cyprus had faced bankruptcy and potential ejection from the European single currency without a rescue deal with international lending bodies. Now that the deal has been struck, it faces job losses and economic contraction.

Gee, so glad a deal was reached.

One way or the other, working people, students and old people were going to be screwed by the bailout deal.

Young people the world over are awake to this.

The oligarchs and the media think since they knocked off Occupy, nothing else will spring up to take its place to oppose the New World Feudal Order.

But you can still see signs of unrest the world over.

You cannot keep screwing people time and time again, stealing more and more each time you rob them, sticking them with more and more of the bills and expect them to stay submissive forever.

Cyprus Is Increasingly Isolated

The screws are tightened:

(Reuters) - Russia rebuffed Cypriot entreaties for aid on Friday, leaving the island's increasingly isolated leaders scrambling to strike a bailout deal with the European Union by next week or face the collapse of its financial system.

In Nicosia, the country's biggest bank urged politicians to make haste and cut a deal with their EU partners as parliament considered proposals to nationalize pension funds, pool state assets and split the country's second-largest bank in a desperate effort to satisfy those exasperated European allies.

 

The governor of the Central Bank, Panicos Demetriades, warned political leaders the country would face a disorderly bankruptcy on Tuesday unless they approved the bills, an official present at the talks said.

"The next few hours will determine the future of the country," government spokesman Christos Stylianides said before the parliamentary debate. "We must all assume our share of the responsibility."

Even if the measures are approved, there was no confirmation they would raise the 5.8 billion euros demanded by the EU in return for a 10 billion euro ($12.9 billion) bailout to avoid a default.

The biggest local bank, the Bank of Cyprus, urged the government to go back and make a deal from the European Union, under which larger deposits over 100,000 euros, would be taxed. It was preferable, it said, to a collapse of the system and a return to the Cypriot pound which would wipe out assets.

"There must be no further delay," the bank said

The oligarchs will have their way no matter what.

Cyprus Update

Not good:

Cyprus ordered its banks to remain closed until next week as the cabinet held emergency talks on Wednesday in an effort to strike a deal with the EU or Russia to avert financial meltdown and stave off bankruptcy.

After the country's parliament rejected a plan to provide €5.8bn (£5bn) by seizing a portion of bank deposits from anyone with a bank account, Cyprus is struggling to come up with a plan that will let it access an EU bailout to stop its banks failing.

The country's eurozone partners and the International Monetary Fund (IMF) are ready to provide €10bn in an emergency bailout if Cyprus comes up with an extra €7bn itself. Most of the bailout money is needed to shore up the country's oversized banking sector, with the rest for government finances.

No clear "plan B" had emerged after meetings between politicians and representatives of European partners and the IMF. The Cypriot cabinet was said to be discussing ideas including the nationalisation of pension funds of semi-government corporations, which hold €2bn-€3bn, and another form of levy on deposits.

Another option debated may have been natural gas bonds linked to hydrocarbon reserves discovered off Cyprus, which remain uncertain and will not be exported until at least 2019.

The nationalization of the pension plans will not be accepted:

International creditors were set to reject an alternative bailout plan Cyprus cobbled together a day after the government's divisive tax on bank deposits died a quick death, two officials with knowledge of the situation said on Wednesday.

Experts from the troika—the European Commission, the European Central Bank and the International Monetary Fund—were briefed Wednesday on Nicosia's Plan B to secure a €10 billion ($12.93 billion) bailout after Parliament resoundingly rejected the deposit-levy plan attached to the original agreement.

Cypriot authorities proposed turning pension-fund assets into government bonds in a bid to raise about €4.2 billion of the €5.8 billion the deposit tax would have raised.
But troika officials weren't convinced this would be a viable option, the officials said. While the plan would bring money into state coffers, it would be in the form of debt, making the country's already heavy load unsustainable, they said.

 On it goes...

A Demonstration

Reuters describes the scene in Nicosia:

(Reuters) - Cyprus's parliament overwhelmingly rejected a proposed levy on savings in banks as a condition for a European bailout on Tuesday, throwing international efforts to rescue the latest casualty of the euro zone debt crisis into disarray.

The vote in the tiny legislature was a stunning setback for the 17-nation bloc; lawmakers in Greece, Portugal, Ireland, Spain and Italy have all accepted unpopular austerity measures over the last three years to secure European aid.

With hundreds of demonstrators facing riot police outside parliament and chanting "They're drinking our blood", the ruling party abstained and 36 other lawmakers voted unanimously to reject the bill, bringing the Mediterranean island, one of the smallest European states, to the brink of financial meltdown.

EU countries said before the vote that they would withhold 10 billion euros ($12.9 billion) in bailout loans unless depositors in Cyprus, including small savers, shared the cost of the rescue; the European Central Bank had threatened to end emergency lending assistance for teetering Cypriot banks, which were hard hit by the financial crisis in neighboring Greece.

The demonstrators were unbowed: "This is a great decision for Cyprus," said Andreas Miltiadou, a 65-year-old pensioner among the crowd. "The voice of the people was heard."

Make no mistake, the road ahead is difficult.

The Cypriots may be crushed.

But telling the IMF, the ECB, the EC and most especially Germany that they will NOT stand by placidly while the powerful devour them was an important message to send to those in the corridors of power.

And some of them may be getting a little of that message.

Reuters describes the euro zone finance ministers as "stunned" by the backlash against the bailout.

They thought that they could push the 6.75%/9.9% levy through and no one would say or do anything much to stop them.

Instead that move initiated a firestorm.

Felix Salmon lays out two ways this could go:

The best-case scenario here is that the vote by the Cypriot parliament is a “phoney war”, in Dan Davies’s words: “A vote on which the government abstains is like opening with two hearts at bridge. It’s a bidding convention, not a serious plan.” Cyprus and the EU will go back for another round of negotiations, with Cyprus trying to front that it has a great offer from the Russians, and the two sides will come to a compromise which doesn’t involve taxing insured depositors. The banks will then reopen, the Russians will pull a large chunk of their remaining money out of the country, the ECB will provide all the liquidity that the Cypriot banks need, and Cyprus will muddle through in an austere kind of way.

The worst-case scenario — call it #CypriOut — is that talks just break down entirely, with no plan acceptable to both the Eurogroup and the Cypriot parliament, while the Russians ultimately decide that they don’t want to throw good money after bad. In that event, Cyprus ends up with a chaotic default and devaluation — think Argentina 2002, only on an island which is already fractured along intractable ethnic lines.

The cost of CypriOut to the ECB and to Europe as a whole would be substantial, both in euros and in precedent. If you think that taxing deposits is a bad precedent, just wait until you see what happens when the world learns that a country can leave the eurozone after all. So a lot of people are going to spend a lot of effort trying to avoid it. And judging by recent European history, some last-minute deal will manage to get cobbled together somehow. But this whole situation is horribly messy — it reminds me of the Argentine political chaos in March 2001, a few months before the country finally defaulted.

Salmon says they probably will get the last minute deal here that staves off chaos, but unfortunately for the EU, this seems to be the only way they can do things and it isn't going to work forever.

There are only so many last minute, cobbled-together solutions they can pull off before they finally CAN'T pull one off and the shit REALLY hits.

Cyprus Says No To ECB/IMF Screw Job

A resounding no on this vote:

The Cypriot parliament rejected a planned levy on bank deposits on Tuesday, throwing a European bailout plan for the tiny economy into disarray.

The vote was overwhelming, 36 with against and 19 abstentions, and brings Cyprus to the brink of financial collapse.

Shortly after the vote, the euro fell 0.8 of a cent to $1.2874, its lowest level for three months. The euro has been on the slide since it became clear that even the government's own party would not stand behind the deal.

News that MPs had resoundingly rejected the bailout was greeted with applause and cries of "bravo" from the crowds outside the Cyprus parliament, according to those at the scene.

MPs in the main government party abstained, and most of the other members of the tiny legislature else voted against. There were no votes in favour of the deal.

There was not much of a reaction on the American markets this afternoon to this vote:

No market panic in America tonight, where the Dow Jones industrial average just closed up a measly 3.8 points at 14455.

Bloomberg TV is asking whether the financial markets are 'tiring' of the latest developments in Europe. A Wall Street trader, though, flags up that volatility in the markets is rising.

And Jonathan Golub, chief US Market Strategist at UBS, reckons investors have been ignoring 'tail risks', and that markets will be around 8% lower by the end of the year.

But there was a celebration in Cyprus:

I just spoke to Yiannis Mouzakis in Cyprus, who tells me that the mood in Nicosia was "celebratory" after MPs sensationally voted down the bailout in the face of public anger.

Judging by the singing, there was a sense of pride...
But people understand it will not be easy - and that the days ahead will be difficult.

Yiannis confirmed that the mood of the crowds was very different from the protests we've seen in Athens, with "a lot of singing, and a bit of chanting". Slogans included "It will not pass"; "Cyprus belongs to the people" and "The people united will never be defeated".

I heard they're flying Randi Weingarten in to re-negotiate the deal for a second vote...

Cypriot Officials Make Like The UFT Leadership

The IMF, the EC and the ECB supposedly don't care how the brackets are done - they just want depositors to pay for the bail out of Cyprus' banks.

So now we get word of this:

NICOSIA, Cyprus--Cyprus and its prospective international lenders are considering altering brackets on a one-off deposit levy agreed to as part of a bailout deal reached Saturday that will see savers suffer losses in exchange for the country's EUR10 billion bailout, an official with knowledge of the situation said Sunday. 

The plan that is currently under consideration will leave the target revenue of the extraordinary levy unchanged at EUR5.8B but will seek to protect smaller depositors. 

According to the official a new plan would see deposits up to EUR100,000 taking a loss of under 5%; of EUR100,000 to EUR500,000 under 10%; and over EUR500,000 of about 13%. 

The original deal that Cyprus struck with its euro-zone peers and the troika of the European Central Bank, the European Commission and the International Monetary Fund is to impose a one-off levy of 6.75% to all deposits up to EUR100,000 and of 9.9% to those above. 

While there was no indication that a new, more nuanced plan to cushion the pain for smaller depositors would be eventually agreed to, one senior European Union official said that it was feasible to change the original plan in cooperation with the Cypriot authorities. 

Cypriot president Nicos Anastasiades in a televised address to the nation Sunday evening hinted that talks on a new plan were underway. 

""I continue to fight so that the eurogroup's decisions are differentiated in coming hours so that the consequences can be limited, particularly for small savers," he said," Mr. Anastasiades said.

So first they announce the 6.75% on $130,000 and below, 9.9% on $130,000 and above, then they say:

"Okay, we hear your pain.

We'll change it to less than 5% for under $130,000, less than 10% for $130,000- $710,000 and 13% above $710,000.

This deal is the best we could do considering the circumstances, and really, compared to the deal Bloomberg and Klein, er, Germany and the IMF really wanted, it scrapes the skies it's so good!"

Yeah, I've seen this kind of thing before.

The reality is, the deal scrapes the dogshit off the street and hands it to everybody for dinner no matter what they change it to.

Shit sandwich anyone?