Cyprus "Capital Control / Solidarity Fund" Plan 'C' Vote Tomorrow After Rumor Russia Rejects All Proposals

Tyler Durden's picture

Rumors and news continue to play but some slight weakness after-hours (Treasuries at session highs) suggest fears might have legs. While the Cypriot government submits its bank restructuring (good-bank / bad-bank and capital controls) and Solidarity Fund (CCOs), there will be no vote until tomorrow morning Europe time.


All of this after rumors of a 'rejection of all Cyprus government proposals' by Russia was the talk on desks and that more than a few Cyprus MPs believe the bank bill is too strict and needs more discussion. The ECB/ELA deadline looms with the path/hurdles now "Cyprus discussion" - "Cyprus vote" - "Troika analysis" - "ECB / EU Agreement" - and theoretically find a (non-Russian) funder for the CCO - before Tuesday's European open. Stay long Brussels and Nicosia caterers.

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idea_hamster's picture

They should just hire Aubrey McClendon from Chesapeake to farm out their natgas -- he'll have the whole country all Norway'd up in no time -- or perhaps Iceland'd, we'd have to see.  

As long as he gets his corporate jet, I'm sure he'd be great.

Spider's picture

Also, go long Russian hitmen...

NotApplicable's picture

Can someone remind me again... what is a "law" exactly?

redpill's picture

The only one that matters right now is gravity, cuz this bitch is going down.

camaro68ss's picture

is this what it looks like when SHTF?

redpill's picture

Nope not yet.  This was just a teensy little fart drifting in the general direction of the fan.  Everyone will start to smell the stink but still have no idea what's coming.

bigkahuna's picture

Sad thing is that you're right. People in general are going to be wondering what happened.

Vampyroteuthis infernalis's picture

I wonder when the Russian mob shows up at the front doors of the Cyprus' MPs. "You did what to our money bitch....." Bodies will then float in the Mediterranean.

StychoKiller's picture

Must be the Russian translation of "Chum" :>D

Groundhog Day's picture

This bitch is going down 2% then it's back to the races.  Bernanke's got our back, new paradigm, bla bla bla

StychoKiller's picture

And RedPill knocks one outa da park!  :>D

max2205's picture

You have to follow but the makers dont

Cathartes Aura's picture


what is a "law" exactly?

a "law" is merely words created to justify whatever they currently have in mind for you.

always subject to change via "new laws" of course - see "amrka" for examples, and subsequent punitive actions.

of course, I realise you know this,  *nods*

Dr Paul Krugman's picture
Cyprus: The Sum of All FUBAR


At this point the Cyprus situation is pretty clear — and clarity does not bring reassurance. In fact, it looks as if Cyprus has managed to combine in one place everything that has gone wrong elsewhere.

1. Runaway banking. Cyprus has a huge banking system — assets around 8 times GDP — based on a business model of attracting offshore money with high rates and good opportunities for tax avoidance/evasion.

I’ve done some asking around, and cleared up something that was puzzling me. Officially, only about 40 percent of the deposits in Cypriot banks are from nonresidents, which would imply resident deposits of almost 500 percent of GDP, which is crazy. But the answer is that I do not think that word “resident” means what you think it means. Some of the money is from wealthy expats living in Cyprus; much of it is from rich people who have resident status without, you know, actually living there. So we should think of Cypriot deposits as mainly coming from non-Cypriots, attracted by that business model.

And the business model only works until there’s a big loss somewhere; since Cypriot banks were investing in Greece and in their own domestic real estate bubble, doom was inevitable. Which brings me to:

2. Big domestic real estate bubble, Spain or Ireland-sized. Not yet fully deflated, which means lots more losses to come. And the combination of the real estate bubble and the income from dodgy banking also led to:

3. Massive overvaluation, with Cypriot prices and costs having risen much more than in the rest of the euro area. In 2008 the current account deficit was more than 15 percent of GDP!

What can be done? First off, Cypriot banks cannot honor their debts, which unfortunately overwhelmingly take the form of deposits. So a default on deposits is inevitable.

As I now understand it, the initial screwup was a joint error of the Europeans and the Cypriots. Europe didn’t want an explicit bank resolution, which would among other things have given clear seniority to small insured deposits; instead, it wanted this essentially fictitious tax scheme. Meanwhile, the Cypriot government still has the illusion that its banking model can survive, and wanted to limit the hit to the big overseas depositors. Hence the debacle of the small-deposit tax.

In the end this probably comes, in some version, to what it should have been from the start — a big haircut on deposits over 100,000.

But even then the situation is by no means under control. There’s still a real estate bubble to implode, there’s still a huge problem of competitiveness (made worse because one major export industry, banking, has just gone to meet its maker), and the bailout will leave Cyprus with Greek-level sovereign debt.

So then what? As a number of people have pointed out, Cyprus is arguably better positioned than Iceland to do an Iceland, because devaluing a reintroduced Cypriot currency could bring in a lot of tourism. But will the Cypriots — who haven’t even reconciled themselves to the end of their round-tripping business — be willing to go there?

Truly awesome stuff.

toys for tits's picture

Thanks Captain Obvious for nothing.

They could also lock in the over 100,000 into 5 and 10 year CDs and give them some of the nat gas investments.

camaro68ss's picture

for once you write something slightly ok Dr.

Dr Paul Krugman's picture

Thank you.  I too believe the most rational solution is a big haircut on deposits over 100,000 so to alleviate the burden of the financial system.

camaro68ss's picture

no thats not what needs to be done and thank you for putting words in my mouth when im slightly Complementing you

Dr Paul Krugman's picture

Did you even read my article?

In the end this probably comes, in some version, to what it should have been from the start — a big haircut on deposits over 100,000.

But even then the situation is by no means under control.

falak pema's picture

YOu're just repeating the BCG meme; 29%.

slightlyskeptical's picture

Shareholders, then debt holders lose all before any depositor lose a penny. This is the only way.  As such i think it is premature to be talking about depositor haircuts.  See what liquidation brings. if you don't keep the hierarchy of debt in place there will be no trust in the system. 

knukles's picture

He does that all the time.  Either incapable of consideration or insecure and immature responses similar to adolescent children.
Did the same thing to me the other day.  I repeated one of his assertions proceeded by an "if" as in as he'd suggested, drew a diametrically opposed conclusion and he turned around and stated he was glad I agreed.

Then as in all such cases, he'll ignore the comments and proceed ahead as if all's in perfect agreement.

Not worth the effort.

edit:  I actually think he just wants attention He's lonely.  And the petulant child is the only means by which he knows to garner such....

akak's picture

Funny how you statists have SO many euphemistic terms for theft --- "haircut", "levy", "surcharge", (unavoidable) "fee", anything prefaced by "mandatory", and of course, the all-time favorite, "tax".

One wonders why you do not have the honesty, or integrity, to call a spade a spade. 

Much like the curious after-hours bank closures and "holidays" that oh-so-coincidentally always manage to come on a Friday. 

toys for tits's picture

Can we retire the word "haircut", especially since it doesn't grow back, and call this shit what it is, which is a "scalping"?  

That way we can get the Indians involved as well.

shovelhead's picture

Doesn't it make perfect sense to grab Joe the Grocers money?

After all, he must be the guy who bought billions worth of crap Greek paper.


There will be no credit events...ever. Let's kill Joe instead.

nmewn's picture

Ya know akak, I'm giving serious consideration to this anarchism thing. If rules & law don't apply to them, it doesn't apply to us.

And that would apply to ALL rules & law mandated by them.

RichardP's picture

Whose guns are bigger?

Mine Is Bigger's picture

Can they just break all the windows and boost GDP instead?

earleflorida's picture

@ Dr. Paul Krugman

i'll give ya a high-five if you post that comment in tommorows NYT...

perplex'd in florida?

akak's picture

First to junk!

Didn't even need to read the drivel --- I mean, it is Krudman, after all.


EDIT: You're slipping, Paulie --- this post was not nearly as insane as most of yours have been here.  Almost rational, even.  I smell an imposter.

Dr Paul Krugman's picture

You are an ignoramus, pirate.

fonzannoon's picture

and you are a mosquito on the ass of society.

p.s Akak are we cool now about the "safety deposit box" incident?

akak's picture

I don't even remember the incident, fonz, so I guess so!

fonzannoon's picture

you are on the list of people I don't piss off. So I am glad to hear that!

akak's picture

Fonzannoon, you have me curious about this now.  I honestly don't ever remember getting into any kind of argument or heated debate over safe deposit boxes.

akak's picture

Who are you, and what have you done with the crazy and dishonest Krudman that we all know and have come to loathe?

Dr Paul Krugman's picture

Like I have stated many times on this blog:  you all and I agree more than you know.  What we don't agree on is how to resolve the problems; yet we can find agreement if people understand what it takes to supply growth to an economy.

camaro68ss's picture

And that starts by not QE'ing the economy to death right?

Or is it we need to break hella windows?

Dr Paul Krugman's picture

Obviously, if the ECB could implement the measures the Fed has taken they should have, but there is too much interest in austerity to do so; so a haircut on deposits over 100,000 will have to do for now.

knukles's picture

Well that's sure a fucking expansive policy...

nmewn's picture

Sheer Keynesian brilliance.

Apparently in Cyprus 100k is rich, while here its somewhere north of clearly this gives every right for government to break its own laws and everyone below that level can breathe a "collective" sgh of relief for now.

Until next year...or the year everyone can see, government has its own interests clutched firmly to its heart...its the Keynesian

fonzannoon's picture

Let's start with a debt jubilee, then we can talk about growth.

Dr Paul Krugman's picture

A big haircut on all deposits over 100,000 will help here, but more will need to be done to fix the problem.

ziggy59's picture

Based on very flawed, it wont work.
The banks need to be closed down after the citizens get their money out.
The people that created and keep this disaster going need to be justiced, and not Just us..

akak's picture

I agree that our economy can not more forward until aliens invade the earth, and after our unsuccessful war against them, march on all six of their legs to the the Bureau of Engraving and Printing (after breaking all of its windows) and fire up those printing presses at Warp 8 speed.

slightlyskeptical's picture

Nah. We need aliens to come to show us how to properly advance our society. i would imagine profit based economics is not very high on their list. Just so we are clear, profit is not the same of incentive based compensation.

slightlyskeptical's picture

I agree we agree on some points. I am ok with printing our way out of this. i think we should just print our govt funding every year.  Print to pay off the national debt.  We need to cut the whole interest expense out of the govt equation.

 We also need to print to buy out the mortgage market. Refinance with all, freeing up a few hundred dollars per family each month. This can be done without costing the govt a dime over time. This will immediately stimulate demand, jobs, etc.

Then let social security and govt pension funds take control of the mortgage origination market. Book entry the current SS debt to the Fed which after the above, has simply become an accounting entity. This would relieve taxpayers from having to provide SS's interest income as well.

The banks, at this point who cares? We would have the government pumping in more money each year to provide growth. They can return to being custodians rather than hedge funds. Those that fail will just be paying the price of doing poor business.

We need a reset that rids of us of fractional reserve banking and debt based money, then we can worry about growth.