International Monetary Fund

Mounds of cold, hard, indisputable evidence not found ANYWHERE else! Damn, you thought Cyprus was newsworthy? Ireland already Troika'd & they're bigger than Cyprus. Depositor recap of banks looks inevitable if this research is right!

It begins here: Introduction of cold, hard evidence of bank shenanigans (with complete documentation) that A) should be prosecuted & B) cause enough concern to make you worry about your bank's integrity. 

Suddenly it should be dawning on a lot of Europeans that deposit-guarantee limits matter. In Slovenia, the maximum is 100,000 euros per depositor, the same as in Cyprus. (Deposit- insurance programs vary among the 17 countries that use the euro.) For a few days last week, it looked as if customers at Laiki and Bank of Cyprus would lose even some of their insured deposits, which would have been a sacrilege. That plan was scrapped, but could resurface elsewhere for all we know should some genius at the German Finance Ministry insist upon it. The one constant among bailouts of euro-area countries is that there is no rhyme or reason, much less fairness, in the way many details get worked out... So far, there have been no signs of a mass exodus in countries such as Italy or Spain. But deposit migrations can happen slowly, with lots of time passing before they appear in official statistics. Or maybe little will change and most bank customers will go on believing “it can’t happen here,” until one day it does.

Investors take note: a major development is at hand. As bankrupt nations and banks continue to spiral downward there will be more and more desperate attempts to plug the holes in their balance sheets by any means necessary.  And it will be a LOT more than they claim,

Moments ago Cyprus banks reopened, under heavy guard, without signs of a stampede. However, since as was made clear yesterday, all bank branches will serve merely as glorified ATMs, allowing for a maximum €300 cash withdrawal and practically no outbound cash transactions allowed, there has been no stampede, and no lines as the bulk of services provided legally are merely what one can find at an automated teller machine. The question is whether the five shipping container full of ECB cash delivered last night into the country will be enough to cover the cash-strapped public's demands, and for how long.

Back in December 2011, Europe swooned and bond yields soared when it was shocked, shocked, to learn that Spain had been lying about its budget deficit all year, a number which was subsequently hiked several more times. Then in 2012, to keep up with the pretense that things are better, Spain once again did what it does best: fudged numbers, this time desperate to make it appear that its actual government deficit was better than expected because one had to 'obviously' exclude all those items that are not part of the government spending... like payments for its broke provinces, or indirect funding for its broke banks. Now it turns out that in addition to fudging the definition of "budget", Spain was, surprise surprise, lying once again. From Bloomberg: "The Spanish government said its 2012 budget deficit will be bigger than first estimated after the European Union requested changes in how tax claims are computed. The budget shortfall excluding aid to the banking sector was 6.98 percent of gross domestic product last year, more than the 6.74 percent predicted on Feb. 28, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid today. That compares with 8.96 percent in 2011."

• Cyprus Salvaged After EU Deal Shuts Bank to Get $13B (BBG)
• Last-minute Cyprus deal to close bank, force losses (Reuters)
• Anxious, angry Cypriots face uncertain future (Reuters)
• Spain Brings the Pain to Bank Investors (WSJ)
• First Switzerland now... U.S. Seeks Answers in Liechtenstein on Tax Cheats (BBG)
• Rebel Free Syrian Army founder loses leg in Syria blast (Reuters)
• European Stocks Rise on Cyprus Deal as Italian Bonds, Crude Gain (BBG)
• Michael Dell Likely to Sweeten Buyout Bid to Save Legacy (BBG)
• Bankers’ pay premium is narrowing (FT)
• Surgery Restoring Penis After Prostate Cancer Increasing (BBG)
• Silent or supportive, conservatives give gay marriage momentum (Reuters)

All eyes should remain focused on Cyprus today, especially since there is no data being reported elsewhere. Financial markets closed Friday on a positive note, as an agreement on Cyprus appeared to be taking shape and a minor relief rally across most asset classes overnight vindicated hopes of a positive outcome as details of the detail were announced overnight. More clarity is still required on some aspects of the agreement (deposit and bondholders) but the fact that the national parliament does not need to vote again should stop the deal from unravelling as it did last week. Whether this is enough to restore confidence and prevent a possible cautionary deposit flight from Cyprus remains to be seen.

A week of closed banks, depositor angst, and economic malaise is creating an increasingly vicious circle for Cyprus (and implicitly the European Union). As Die Welt notes, because the economic data of the tiny 'irrelevant' island could be considerably worse than previously thought (or forecast by Troika) thanks to the distortions created this week by bank closings, several people around the Troika said the exact amount of the bailout remains uncertain and could amount to EUR2bn more than expected. With the Troika capping their handout at EUR10bn of the current EUR17bn needed (and the deposit levy reportedly filling EUR6bn of that EUR7bn hole), the need for a bigger bailout - which seems increasingly likely - will fall on Cyprus banks' depositors (or taxpayers) leading to a hard-to-beat downward spiral. Simply put, the more deposits are pulled, the more deposits need to be confiscated; and with retailer stocks running low ("will last another 2-3 days") and cash-on-delivery demanded, the real economy will "have a problem if this is not resolved by next week."

As has been made abundantly clear on these pages since the breakout of the latest Cyprus crisis, the Russian policy vis-a-vis its now former Mediterranean offshore deposit haven-cum-soon to be naval base, has been a simple one: let the country implode on the heels of the Eurozone's latest humiliating policy faux pas, so that Putin can swoop in, pick up assets (including those of a gaseous nature, much to Turkey's chagrin) for free, while being welcome like the victorious Russian red army saving Cyprus from its slavedriving European overlords (a strategy whose culmination Merkel has very generously assisted with). Curiously there had been some confusion about Russia's "noble" motives in Cyprus (seemingly forgetting that in Realpolitik, as in love and war, all is fair). We hope all such confusion can now be put to rest following the clarification by Jorgo Hatzimarkakis, the German Euro deputy of Greek origin, who told Skai television on Sunday morning that Russia did not want Cyprus to stay in the eurozone.

A few moments ago, no bailout proposal in hand, no parliamentary discussion having taken place, and certainly no votes having been cast, the Eurogroup sat down with Cyprus' president Anastasiades, in order to preserve the "democratic" theatrical facade of European decisionmaking. Here, to keep up appearances that  Cyprus' opinion is even remotely relevant, Europea's unelected leaders will do what they does best - make a closed door decision affecting the lives of millions of people, which ultimately have one purpose: to preserve the crumbling edifice of the Eurozone project (so carefully preserved in the past few months with superglue, scotch tape and empty promises) and of course the jobs and livelihoods of a few unelected EUrocrats. A preview of this elaborate song and dance ritual is below from Kathimerini. It will be next followed by an even more elaborate song and dance from the Eurozone finance ministers, which will then finally go back to Cyprus, where a decision will likely have to be reached ahead of the Asian FX market open, or all that late Friday "Cyprus is saved" enthusiasm will evaporate in a GETCO millisecond.

While GETCO's algos were poised to set off a buying tsunami yesterday the millisecond a flashing red headline hit Bloomberg with even the hint or suggestion that Cyprus is fixed, we said to sit back and relax because Cyprus "will get no resolution today, or tomorrow, and may at best be resolved on Sunday night following yet another coordinated global bailout, (although our money is on a last, last minute resolution some time on Monday when Cyprus is closed but the European markets are widely open)." As it turns out, we were right, following reports by major newswires that the vote on the deposit levy will only take place (if at all) on Sunday night, after the Eurozone finance ministers' meeting on Sunday. The reason for the delay? Deciding how to best bring the news to Russian, and other wealthy depositors, that not only will they not have access to their funds for a long, long time, the ultimate haircut on what they thought was safe, easily accessible cash as recently as a week ago, may be a stunning 70%!

Yesterday, when we described the latest Cyprus bailout proposal being (belatedly) debated by the Cyprus parliament and soon to be voted, we wondered how long before the Troika rejects it outright.  After all the "Solidarity Bailout" Plan C (or whatever it is) did not do what Germany more than anything wanted to accomplish - punish Russian depositors as this entire farce has been nothing but a political gambit dictated by Germany from the onset. And so while GETCO's entire army of algos awaits the flashing red headline with a touch of optimism to unleash robotic buying of ES and EURUSD, we fast forward to the inevitable denouement, which is, not surprisingly, bad news for Cyprus, because as the FT reports, confirming our initial skepticism, "European officials rejected Cyprus’ plans for an alternative package to save its banking sector and remain in the euro, starting a fresh round of talks with the island nation’s government on Friday."

Given the public unrest of the last few days, it would appear that the Cypriot government, having tried and failed with Plan A (wealth tax versions 1 and 2) and Plan B (beg the Russians directly), they have decided to go with Plan C (Collateralized Cypriot Obligations). The current proposal, ekathimerini reports, to theoretically be voted on in a few hours (about to be in cabinet), is that Cyprus will form an investment fund to raise the capital needed to payoff their EU overlords. This fund will be collateralized by state assets, possibly including natural gas revenues, church property, and social security fund reserves. Though some form of deposit tax was 'apparently' not ruled out, it seems the next last best hope for Cyprus is begging the Russians to extend a loan and begging the world to fund more debt from a nation about to see huge capital outflows. The approach is, it appears, a 'solidarity' approach - rather than tax the current wealth of depositors (and hand it over to Troika), 'tax' the future possibility of wealth creation and sell that to the next greater fool sovereign wealth fund (or will the ECB decide that these CCOs are acceptable collateral?)

As reported yesterday, Cyprus banks are now expected to reopen next Tuesday. We would boldly go ahead and take the under following overnight news that the ECB has once more escalated its political interventions (remember the lies about "apolitical, independent" Central Banks - good times...), and following a Reuters report yesterday that the ECB is prepared to let Cyprus go, the FT now has doubled down on the propaganda, reporting (in an article with no less than five authors) that the ECB has issued an ultimatum to Cyprus to agree to a bailout by Monday (which is a holiday), or the free liquidity ends. "The European Central Bank raised the stakes in the Cyprus crisis on Thursday, telling Nicosia it had until Monday to agree a bailout with the EU and International Monetary Fund or it would cut off emergency liquidity provision to the country’s banks. The hardline stance from the ECB sets a clear deadline for Cyprus to agree to a plan after its parliament rejected a bailout negotiated at the weekend that would have taxed the deposits of account holders in the country’s banks." Which means yet another weekend of ad hoc choices and spontaneous decisions awaits, only this time with a key non-Euro actor involved in the face of Russia, whose interest just in case there is any confusion, is to see Cyprus crushed, so it can swoop in later and "acquire" the assets on the cheap, or preferably free, while the local population welcome the second coming of the glorious Red Army with open arms, delighted to be free of European slavery. Well played Putin.