Cyprus Presents "Plan C" - The Solidarity Fund

Tyler Durden's picture

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?)


Via ekathimerini,

Political leaders in Cyprus have agreed that their country should form an investment fund to raise the capital needed to agree a bailout with the eurozone and International Monetary Fund and avert a collapse of its banking system.




“We will find a solution,” said Neofytou. “We have no other choice. We are making a united effort to avoid our country’s bankruptcy and I think we will succeed.”


Nicosia plans to create a fund collateralized by state assets, possibly including natural gas revenues, church property and social security fund reserves. A proposal is due to be submitted to the House of Representatives on Thursday evening.


A government official who declined to be named told Bloomberg that some kind of deposit tax was not being ruled out.




"We are asking for help clearly, but something that would make also economic sense for Russia,” Sarris told reporters earlier.


Cyprus is also asking Moscow to extend the maturity of an existing 2.5-billion-euro loan. Sarris said that Russia was unable to provide Cyprus with a new loan.


Neofytou said that Cyprus would welcome Russian assistance but still needed to balance this against the requirements of remaining in the eurozone.


"We cannot reject any form of help but we are in the euros and we need the continue support of the ECB for liquidity," he said. "Any support is welcome but we should not forget that we are in Europe and we need European institutions to stabilize our economy."


Earlier, the ECB warned Cyprus on Thursday morning that the island’s banks might not qualify for emergency lending when they reopen next week.


“The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013,” it said in a statement.


“Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks.”


It is thought Cyprus Popular Bank (Laiki) – the island’s largest lender - would not be eligible for emergency funding under the ELA terms as it would be deemed insolvent.




Speaking to a European Parliament committee, Eurogroup chief Jeroen Djisselbloem said he felt a solution including some kind of deposit levy would be found.




In the present situation I think there is definitely a systemic risk and I think the unrest of the last couple of days has proven this, unfortunately," he said

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sunnydays's picture

They will give away the country? Those poor people!  

redpill's picture

They just became renters in their own home. Sad.

Thing is that it doesn't really matter what they do now, they can't stop the bank run.

ihedgemyhedges's picture

How about "The Human Fund"?  I'll call Costanza......

aint no fortunate son's picture

I daytrade triple short etf's thru ETrade, just luvvvvv that little baby... where can I buy some of these CCO's for my IRA?

redpill's picture

Interesting thought experiment: if you hold up a bank just to get your own money out, how can it be robbery?

Fukushima Sam's picture

Wow, Cyprus, just cut your losses and default. You will be better off in the mid-to-long term.

Son of Loki's picture

<<This fund will be collateralized by state assets, possibly including natural gas revenues, church property, and social security fund reserves.>>




This fund will be collateralized by state assets, possibly including natural gas revenues, church property, and social security fund reserves...and human organ donations.

NoDebt's picture

This is definitely their best stupid idea so far.  Amazing how creative people can be with a gun to their head.  Even politicians and bankers (I want to make that clear since politicians and bankers are typically not considered 'people', nor should they be).

Verdict:  It'll probably work, God help us all.


GolfHatesMe's picture

Spring Festivus     for the rest of us

AlaricBalth's picture

The current situation in Cyprus reminds me of Shakespeare's The Merchant of Venice. The ECB (Shylock) is demanding its "pound of flesh" from the people of Cyprus (Antonio). The Bank of Cypress (Bassanio) courts Russia (Portia) in order to pay off the evil moneylender, who out of spite, declines the repayment of a loan and insists on his pound of flesh, as a warning to other borrowers.

" There I have another bad match: a bankrupt, a prodigal, who dare scarce show his head on the Rialto; a beggar, that was used to come so smug upon the mart; let him look to his bond. he was wont to call me usurer; let him look to his bond." Shylock

Karlus's picture

Even as a kid when I first read this, I can't understand why Shylock is though of as a villian....I kinda always thought Antonio was the bad guy in this.

Even thought its been explained to me, I still don't agree...

Cursive's picture


For the same reason that credit card companies refer to people who pay off the monthly balance and incur no interest as "Deadbeats."

Karlus's picture

Who cares what they call you.


My thought is if you borrow a bunch of money or get over your skis in speculation mode then you might just want to have a spare pound of flesh in your chest cavity.


Its a stretch asking me to feel bad for Antonio "aka flip that shipment" trash talking Skylock and getting his daughter deflowered. Antonio was a braggart, gambler and did not know proper respect and decorum. Spitting on Shylock was a dick move. F Antonio

Cursive's picture


Agreed, all things being equal.  The pereption of the characters is cultural, though.  Europe and the UK being remnants of the Holy Roman Empire, lending was considered on a par with prostitution in Medieval Times.  That's the reason Shylock chaffes at the mention of "userer."  Shylock is seen here engaging in disrespectful trade and compounds that sin by not relenting.  Also, look at the hell that children of debtors suffered in England, even after the Middle Ages.  Debtors prisons, most notably the Marshalsea of Dickens fame in "Little Dorrit."  The system would force these people into debt for the profit of a few.  If you are conditioned in the American lending system with easy bankruptcy laws, these concepts are difficult to understand.

earleflorida's picture

'the wind leaves no shadow of guilt, whereas it's fickle maelstrom presence can shelter many an oppressive doubt from the light of justice... whence these shylock's count their faustian inequities of guiltless avarice treasure-- conscious tyme'd only by a heavy eyelid in a flesh-den of twilight, forever hense... forevermoar-- as satan rewards their greedy-lust,... what is, that of many an innocents forlorn'd existence-- whilst the heathen dines on their children's children naivety again... and again... forevermoar'

Banksters's picture

Yep.  The bank run is on, and within a hundred or so people, the bank will say they don't have any more paper fiatscos.   The people will cry whaaat? But that is how the 'system' works.  Being willfully ignorant is not an excuse...

McMolotov's picture

I keep thinking of the "shaaaaaaaare the loooooooooad" scene from Lord of the Rings.

There's no homoeroticism involved in what's happening to poor Cyprus, though. It's straight-up rape.

Captain Willard's picture

At the end, the Weimar Republic tried to back its Marks with farmland too. We know how that turned out.

Captain Willard's picture

At the end, the Weimar Republic tried to back its Marks with farmland too. We know how that turned out.

azzhatter's picture

Why are these people so afraid to leave the EU? A little freedom from tyranny is a good thing. Punching Barrosso in the face is priceless

Sofa King's picture

I don't think they're afraid of leaving the Euro, I think they are afraid of the big depositors. 350Billion Euros in depositor money went somewhere and the kind of people depositing there don't take very kindly to being robbed.

Stoploss's picture

So, the first thing they do is seize accounts, then after the fact turn around and say " oh wait, we mean solidarity "!

That's like deep frying a chicken, then, trying to un-fry the chicken after it's done,.


Yep, that's gonna work..



astoriajoe's picture

Unfry a chicken.

Thanks. I hope you don't mind if I use that. I never liked the toothpaste/tube analogy.

Buck Johnson's picture

This won't work either, NEXT.

dick cheneys ghost's picture

Bankers are the root of all EVIL

Strider52's picture

I watched a neat program last night, where they smashed two protons together at light speed, and out popped a Higgs Boson.

Made me wonder what would happen if you slammed two banker's heads together at 186,282 MPH. Maybe you would find the elusive "Evil Boson".


Karlus's picture

Umm, you would have no one to lend to you? Look, if you have the stones to fund everything out of your cash pile, you da man.

Banking serves a valuable function on the time money exchange equation.

Now, I would agree that banking today is not really original banking, but please dont slam the trade.

economessed's picture

Proceed to Plan D:  Bake sale.

TeamDepends's picture

Then plan E:  Let the ho's of Nicosia run things for a while.  Why not?


(Then plan E:  Let the ho's of Nicosia run things for a while.  Why not?(

I'll bet they would be better money managers!

Plus, you would get something for your money that's really worth something.

Dr. Richard Head's picture

CDO's and derivatives got us into this trouble, so more of it should surely help.

dick cheneys ghost's picture

America: The Arsenal of Innovative Financial Products

Spastica Rex's picture

"C?" You got a "F."

Cursive's picture

@Spastica Rex


It's like they are Sears, waiting for Eddie Lampert to buy them for the "real estate" value.  Just think, Buffy or Billy Gates could buy the whole island right now.  Plan "C" is the Dear Daddy Warbucks letter from Lil Cypriot Annie.

morning's picture

Germany says Nein through Hinze.

Cognitive Dissonance's picture

I can't wait until Goldman creates a market in these and feeds 'em to their muppets.

<Can you say Stolper?>

Karlus's picture

If the Russians turned their backs on them, then its pretty much over.

I am guessing the Cypriots didnt have the natty to trade they thought they did.

bank guy in Brussels's picture

The Russian game here would be very, very complex

Russians probably encouraging, maybe even scripting, what the Cypriots will do or say (including things like 'the Russians won't help us')

One goal might be to buy a little more time inside the euro-zone, milk the ECB and Target2 for a few more billion euros, so all of Putin's friends can get their money transfers completed

Great article today with terrific detail, on the extent to which Russian banks and companies are intertwined with Cyprus ... by Russian economy expert John Helmer in Asia Times Online

'Putin Has Med Opportunity':

Karlus's picture

Well thats the question is it not? It might be a Russian game to see if they can get the ECB to bite, but I kinda thought they were getting down with the actual assets like the offshore drilling. If there is not enough to bridge then wait and pick it up for a fire sale. The gas rights are in play, its just horsetrading and all over except the shouting.

I can tell you that the average Russian oligarch would greatly prefer real-estate in Miami as opposed to Cyprus

Matt's picture

Man defaults on a loan from the Russians:

(NSFW: swearing and violence)

Cursive's picture

In Cyprus, hedge fund own you.

Debugas's picture

depositor deal - when you will come to the bank to withdraw your deposit you will be kindly asked to transfer part of your money to the Solidarity Fund.

The more you sacrifice there the faster your deposit will be returned to you

Racer's picture

1000% Mortgage on the future of the country, why ever not, the banksters cry

CunnyFunt's picture

Precursor of sorts ...
Patriot bonds are coming to these shores, soon.

Vashta Nerada's picture

I would be willing to bet that government union contract and pension cuts are not on the table, so what is the point? They sell out their resources in return for a few more years of what they have now.

Karlus's picture

"I would be willing to bet that government union contract and pension cuts are not on the table"


I think we are prob past that. They are now arguing over scrap value.

Think of a racehorse at the horsemeat auction. What is your flesh worth, not what you know or can do

Rustysilver's picture

A very simple question?  The elites should be very smart people. Show me some action or a plan for the last 10 years in Euro or US that this is the fact.  The latest fvck up, Cyprus, guided by Merkel or her lieutenants reinforces that idea.

TPTB_r_TBTF's picture

Someone was smart enough to steal all the money in Cyprus.

The money is not "gone".  Someone has it.  That guy is pretty smart.