Political Fallout Begins: Former Cyprus President Named In Loan Write-Offs Leading To Banking Insolvency

Tyler Durden's picture

A few days ago, when news hit that Cyprus has begun investigating who the people were who had managed to pull cash out of nation's insolvent banks, both during the capital control "blackout" period and previously, we asked "how much longer will the rule of law remain in Cyprus once full blown class warfare is unleashed, and the 99% are generously handed the list of the 1% who were "informed" enough to pull their money from the flaming sovereign equivalent of Bernie Madoff, while every other uninsured depositor is facing losses of up to 80%, and soon 100%?" We may get the answer much sooner than expected, as the first iteration of this list: one naming the beneficiaries of millions of loans written off by the now insolvent Cyprus banks and therefore indirectly responsible for the "impairment" of the banks' depositors, was released yesterday by Greece's daily Ethnos newspaper. But what virtually assures substantial political fallout is that among the people listed is Cyprus' former president, George Vassiliou.

Kathimerini summarized the situation as follows:

A list of Cypriot companies and politicians that allegedly had millions of euros in loans written off by the three Cypriot lenders at a center of an unprecedented banking crisis on the Mediterranean island has been forward to Cyprus's parliamentary ethics committee after its publication in Greece's daily Ethnos newspaper.


According to the revelations, Bank of Cyprus, Cyprus Popular Bank (Laiki) and Hellenic Bank -- which were earlier this week acquired by Greece's Piraeus Bank -- has forgiven companies, MPs and local authority officials millions of euros in loans over the past five years. The list reportedly features the names of politicians from all Cypriot parties except Social Democracy (EDEK) and the Social Ecology Movement (KKO).

Readers may or may not be shocked to learn that corruption and cronyism, in broad terms, was alive and well in Cyprus in the months and years leading to the failure of the local banking system with its publicly elected politicians at the very forefront:

According to Ethnos, Bank of Cyprus wrote off the 2.8-million-euro loan of a hotel with ties to the communist-rooted Progressive Party (AKEL) and forgave significant portions of many other loans. For instance a national labor union is said to have been forgiven 193,000 euros of a 554,000-euro loan. An unnamed company was forgiven 110,000 euros from a 1.83-million-euro loan, a prominent deputy of the centrist Democratic Rally (DISY) party saw 101,000 euros of a 168,000-euro loan written off and a company owned by the brother of a former minister of the conservative Democratic Party (DIKO) had 1.28 million euros of a 1.59-million-euro loan written off.

The list refers to several other MPs and the mayor of large city who allegedly had significant portions of their loans forgiven by Bank of Cyprus. Companies linked to a member of the bank's board, to the daughter-in-law of a DIKO deputy and several others also appear to have been offered significant loan relief by the Bank of Cyprus.


As for Laiki Bank, it is said to have written off several loans taken out by MPs of AKEL and DISY. The bank also appears to have written off 5.8 million US dollars in debt from a company whose majority shareholder is said to be a well-known Cypriot politician. The ex wife of a senior ministry official and a company owned by a local ambassador also appear to have been facilitated.

Today, as the fallout avalanche from the release of the list begins to accelerate, we get even more information courtesy of Cyprus-Mail, which names none other than a company majority-owned by the former president, as being a direct beneficiary of the broke banks' depositor-funded generosity:

The government yesterday reaffirmed its intention to fully investigate the banking sector, as a list surfaced with names of current and former state officials who allegedly had their loans written off by banks.


The list, published in Greece, contains the names of former and current MPs as well as other prominent individuals, including former president George Vassiliou. According to the report, Vassiliou held a 51 per cent stake in a company that agreed to have $5.8 million written off.

And now that Cyprus is broke and facing a depression it is probably a good time to do some serious Monday Morning quater-bailouting:

The government said the matter would be investigated as part of a wider probe into what caused the collapse of the island’s economy and banking system.


Three former Supreme Court judges were appointed on Thursday to look into the debacle.


Their mandate includes the investigation of the “the events and decisions relating to the provision or write off or reduction of loans or the removal of guarantees or banks affording other concessions, in Cyprus and abroad.”


The government said it would handle the matter with full transparency and would not hesitate to hold anyone accountable as long as any improprieties were substantiated.

Sure enough, in order to avoid being held "accountable" the explanations have begun. Enter the former president:

Former president Vassillou said his stake in the company, which was operated by his former son-in-law, was acquired after he provided guarantees against its large obligations.


The company, ERE (Middle East) Ltd owed Laiki $23,988,542 and €1,081,672, including interest, the former president said in a written statement.


The amounts had been also guaranteed by four other people who eventually refused to honour their obligations and were taken to court.


Vassiliou said that despite his share being much smaller, he agreed to pay Laiki $21 million and settle the debt.


Based on the agreement, Vassiliou paid $15 million while the balance was going to be settled in two instalments of €3 million in 2012 and 2014.


In return, Laiki was to relieve me of the old interest, something that is a usual and long-standing practice,” Vassiliou said.


Because the 2012 instalment was linked to the return of a guarantee as soon as a – still pending -- project was completed in Qatar, it had been agreed for the payment to be pushed back until then, Vassiliou said.


The former president said he would wait for the findings of the attorney-general.

Other politicians have decided that the best defense is a strong offense:

DISY MP Prodromos Prodromou, whose name was also on the list, said he was suing the media outlets responsible, and the Central Bank of Cyprus.


Prodromou denied ever having a loan written off, saying the case in question concerned a forgery on his bank account.


“The person responsible for the forgery was brought before court and convicted,” Prodromou said. “The bank recognised part of the responsibility for the charges through forgery and agreed to share the loss.”


AKEL-linked trade union PEO was also included in the list over a €3.0 million loan.

Needless to say, everyone else on the list is also coming up with a bevy of excuses:

Former DISY MP Sofoklis Hadjiyiannis said his case concerned interest and other charges that were added on illegally after he settled his debt to the bank.


AKEL MP Nicos Katsourides was also caught up in the affair after he was linked with a company that allegedly had a debt written off. Katsourides said neither he nor any family member had any relation with the company’s share structure although his son had been employed by the outfit at some point in the past.


Katsourides said he had contacted the attorney-general and asked him to hand the list over to the investigating commission looking into the economic debacle.


DISY MP Soteris Sampson also denied the allegations, saying he would make public his bank transactions as soon as they were provided by the bank.


Former agriculture minister Timis Efthymiou said his obligations to the Bank of Cyprus stemming from him being a shareholder in a company “have been met by paying off a loan within the framework of a legal settlement with the bank in 2008.”

And so on. What the common theme here is that the very same Members of Parliament who were so vocal in rejecting the insured depositors' impairment just to save their skins from a public mutiny (but so quick to sacrifice the wealthier citizens and small and medium corporations to a haircut that may be as deposit large as 100%), did everything in their power to avoid a vote on the final bank "resolution" which effectively handed over the country's sovereignty into the hands of the Troika and its liquidators, but not before they themselves were among the key beneficiaries of the impairments on the banking system's asset side.

It is these bad assets and impaired losses, as well as investing money in Greek bonds, and other worthless "assets", that ultimately ended up forcing the restructuring of the bank and the cram up of the liability side up to and including the unsecured loans known as deposits.

Perhaps if the Cypriot public wants to find a scapegoat to its troubles, it should focus its anger not only at the Russian Oligarchs and the Troika, but to those who were most complicit in betraying the public's trust: the same politicians who were elected to protect their citizens and the country's constitution (flagrantly abused as per yesterday's revelations), including the very president of the nation. That is, of course, if the local apathetic population has not been zombified too much to even care about why billions in wealth was just confiscated from it. Because if that is indeed the case, they, and everyone else who just sits idly by and does nothing as the global banking syndicate appropriates ever more middle-class wealth, deserves everything coming their way.

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sunnydays's picture


Pinto Currency's picture


Unsubstantiated - but material - word has it that the seized deposits are also being used to pay-down senior bond holders in the banks.


Careless Whisper's picture

Bankers = Criminals

This isn't complicated. Now excuse me while I go plant some gold in the back 40.


Sabibaby's picture

- Some men rob you with a six gun, others with a fountain pen.

Bunga Bunga's picture

Good bank is needed for taking deposits from honest people, bad bank is needed for hiding the corruption. It's plain and simple robbery by white collar criminals.

SafelyGraze's picture

as I keep trying to splain to the grandkids, it isn't theft

theft is when
property Pt is acquired by
person T (the thief), and
property Pv is lost by 
person V (the victim),
where Pt and Pv are the same.

an orderly unwinding of a bank balance sheet is when the bank forgives
loans totaling Pt issued to
persons T, and bails-in
deposits totaling Pv from
persons V,
where Pt and Pv are the same.

totally and completely different concepts


Bunga Bunga's picture

Slavery was completely legal too.

Just Ice's picture

Safely Graze's post was most assuredly tongue-in-cheek

jeff montanye's picture

would love to see the equivalent u.s. documents.  there was a time when this country investigated wrong doing, at least on occasion: http://en.wikipedia.org/wiki/Pecora_Commission

Bananamerican's picture

Safely Graze's post was most assuredly tongue-in-cheek....

and chock full of functions...

"Death to Safely Graze' post"

kliguy38's picture

its a barbarous relic......go plant some USD instead then dig it up in 20 years.......should be good for starting fires

Irelevant's picture

Bank notes tend to rot much faster, so in 20 years you will find a empty box. If you deposit said cash with a Cyprus bank, well that is another story.

CheapBastard's picture

Pleeeeze !  You zh'ers sometimes amaze me. 

These guys are innocent until proven guilty. However, MY recommndation is the tried and true method of guilt/innocence by buring them at the stake.

If the accused screams, you may consider him guilty.

If he remains silent during the roasting, we may thus conclude he is innocent.

It's a fool-proof, time-tested determination of guilt or innococence.

ILLILLILLI's picture

Sometimes the old ways are better...

Hobbleknee's picture

wonder which way Jon Corzine prefers

jeff montanye's picture

whichever way, he's guilty.

was reminded of Lesson 14: Some countries see firewalls as adequate. So they are now prepared to “burn” stakeholders who were previously protected;

ebear's picture



If he burns..... ?

he's made of wood!

and therefore?

wiebern's picture

A duck!



A Witch

hooligan2009's picture

pinocchio!!! land of the long noses! and getting longer

Woodyg's picture

The rule of law is Already dead - why is it considered good business practises or savvy decisions when the .01% engage in crony capitalism and rule breaking taking home 90+% of new gdp but when the 99% FINALLY get pissed off enough to begin to complain and suddenly its

Class Warfare -

At what point does the 99% get to fight back? After the knifes been drawn across our throats?

Jreb's picture

"The rule of law is Already dead"

This is a true statement for those at the top and those at the bottom. Those of us caught in the middle however are very aware that for us the rule of law still applies with dire consequences for breaking it...

I spoke with a very good customer of mine who is RCMP here in Canukistan - he tells me that the average depot dude is very aware of what we on ZH see going on around us. They are some of the biggest "preppers" we know as they see the rule of law being tossed out the window around them. They are scared to the point where they have had internal postngs warning them to be ready to personally to take care of their families and themselves for extended periods of time without help of any kind.

Anyways - this cop tells me he is well diverisified. He has cash, silver, gold and lead. LOL. I laugh at him and tell him to be careful. Big brother is listening. :-)

One day soon the middle class wil begin to wake up.... they will realize that Heinlein was right:


"I am free because I know that I alone am morally responsible for everything I do. I am free, no matter what rules surround me. If I find them tolerable, I tolerate them; if I find them too obnoxious, I break them. I am free because I know that I alone am morally responsible for everything I do."

The system we have now is not a system of law but rather a system of rules and regulations meant not to govern us but rather to heard and control us. They are demeaning and insulting. Indeed,  law is simple - do not steal, do not murder, do not assault your fellow man and honour your contracts.

When people begin to realize this - and cases like Cyprus cause us to take pause and examine these things - then they will draw the line in the sand Sam Adams style - they will begin to relaize that life is a risk and some will risk it all by betting on freedom:

“If you love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that you were our countrymen.”

Many are about to care very little about what their sleeping neighbours think of them. They will act out individually at first. They will be persecuted. Those in the wings watching but aware will get angry. They will organize - fingers will be pointed - names of important people will be named as the middle class realizes they are nothing more than just men with titles. Neigbour will turn on neighbour and the corrupt and powerful will scramble to hide from the faceless anger of a society bent on their downfall.

by Rudyard Kipling

It was not part of their blood,
It came to them very late,
With long arrears to make good,
When the Saxon began to hate.

They were not easily moved,
They were icy -- willing to wait
Till every count should be proved,
Ere the Saxon began to hate.

Their voices were even and low.
Their eyes were level and straight.
There was neither sign nor show
When the Saxon began to hate.

It was not preached to the crowd.
It was not taught by the state.
No man spoke it aloud
When the Saxon began to hate.

It was not suddently bred.
It will not swiftly abate.
Through the chilled years ahead,
When Time shall count from the date
That the Saxon began to hate.



Of course I could be comletely wrong about all of this..... time will tell.

Peace and wisdom and happy Easter all.

Bananamerican's picture

"It was not suddently bred.

It will not swiftly abate.
Through the chilled years ahead,
When Time shall count from the date
That the Saxon began to hate."

What you mean, "we," Kemo Sabe?' -Dream Act-er

shutdown's picture

Oh, let's hope the level of depravity and corruption reaches a depth low enough to awaken the people of Cyprus from their stupor.

olto's picture

"Oh, let's hope the level of depravity and corruption reaches a depth low enough to awaken the people of-- the US--from their stupor."

Things that go bump's picture

So that they too can beat on pots and pans in bootless protest like the Argentinians? That is what happens when you lose the right to bear arms. 

StychoKiller's picture

I'm told a baseball bat leaves a sizeable dent in craniums...

jeff montanye's picture

i wouldn't mind some pots and pans here; it would break the wooly-headed silence over much of the land. for all of the u.s.'s extensive gun ownership, the last decade's bipartisan plunge into the police state has met with little opposition.  of course this may change.

the top of the list of per capita civilian gun ownership is a motley but interesting group:


Buck Johnson's picture

Of course they are, that was  the point.  Those uninsured deposits are being used and are never being replaced.

hooligan2009's picture

that would be illegal

even though the deposits are uninsured, they still rank pari passu with other unsecured creditors..like bonds...junior means junior to unsecured senior bonds and unsecured deposits 

mind you..there is no rule of law in a failed nation state like cyprus - just a bunch of people who can still afford to be polite (for now)

Triple A's picture

When there is nothing left to do.....rise.

freewolf7's picture

When we stop seeing ourselves as separate
from those who live in Cyprus,
from those who live in Detroit,
from those who live next door,
then we might take action.

hooligan2009's picture

dont forget its not the 99% and the 1%...its the 50% then the 49% being paid by the government, then the 1%

how many government workers are going to want to get off the teat and return to the private sector (land of milk and honey?)

Anonymous peon's picture

Domesticated animals don't fight back.

Goldilocks's picture

And God spake all these words, saying,

I am the Lord thy God, which have brought thee out of the land of Egypt, out of the house of bondage.

1. Thou shalt have no other gods before me.

2. Thou shalt not make unto thee any graven image, or any likeness of any thing that is in heaven above, or that is in the earth beneath, or that is in the water under the earth. Thou shalt not bow down thyself to them, nor serve them: for I the Lord thy God am a jealous God, visiting the iniquity of the fathers upon the children unto the third and fourth generation of them that hate me; And shewing mercy unto thousands of them that love me, and keep my commandments.

3. Thou shalt not take the name of the Lord thy God in vain; for the Lord will not hold him guiltless that taketh his name in vain.

4. Remember the sabbath day, to keep it holy. Six days shalt thou labour, and do all thy work: But the seventh day is the sabbath of the Lord thy God: in it thou shalt not do any work, thou, nor thy son, nor thy daughter, thy manservant, nor thy maidservant, nor thy cattle, nor thy stranger that is within thy gates: For in six days the Lord made heaven and earth, the sea, and all that in them is, and rested the seventh day: wherefore the Lord blessed the sabbath day, and hallowed it.

5. Honour thy father and thy mother: that thy days may be long upon the land which the Lord thy God giveth thee.

6. Thou shalt not kill.

7. Thou shalt not commit adultery.

8. Thou shalt not steal.

9. Thou shalt not bear false witness against thy neighbour.

10. Thou shalt not covet thy neighbour's house, thou shalt not covet thy neighbour's wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbour's.

Radical Marijuana's picture

Goldilocks, you appear to have lost your balance in the middle. Your list of impossible ideals always backfires and causes the opposite to happen in the real world. Futhermore, even that list was intended to only apply to the "in" group, while not to anyone outside of that group. Those commandments were just old-fashioned bullshit, promoted by big bullies. They enabled those with a weapon in one hand to operate with those commandments in the other hand. The Bible is a small part of the data base, demonstrating the general pattern that human realities are always organized lies, operating organized robberies, while those doing that typically tend to assert that "God" said so.

Anglo Hondo's picture

I don't covet my neighbor's ass. Now his wife's ass is another thing, which is where #7 comes in.

And it is (almost) Sunday, so I gotta rest.

Shit, they got me comin' and goin'.


itstippy's picture

Get thee to a nunnery, Goldilocks; remove thyself from the Zero Hedge crowd of sinners.

Or just fuck off.  Whatever.

Goldilocks's picture

"Life is nothing but a competition to be the criminal rather than the victim." - Bertrand Russell, British author, mathematician, & philosopher (1872 - 1970)  

"Life is a God-damned, stinking, treacherous game and nine hundred and ninety-nine men out of a thousand are bastards." - Theodore Dreiser, quoting an unnamed newspaper editor

Radical Marijuana's picture

Goldilocks, it is NOT "nine hundred and ninety-nine men out of a thousand are bastards."

It is 1,000 in 1,000. There are no people who do not eat and shit. Everyone participates in the same sorts of energy systems. We need to start thinking in the opposite ways to what we do now. There is nobody who does not survive by operating some system of organized lies, operating organized robbery. There is nobody whose food just jumps into their mouth!

Life is the flow of energy, without beginning or end. Our experience of life is always in the middle. We have been brainwashed to think about entropy backwards. Therefore, the ways that we understand ALL energy systems is backwards! That is a main reason why we constantly have runaway triumphant organized crime controlling the whole world, with the vast majority of people paying for a tiny minorty to skim the cream from the system. The vast majority of people are brainwashed that they should be good sheep, serving as bricks in the wall ... while their backwards ways of thinking allow the real systems to runaway doing more and more of the opposite things, without any effective resistance:


The Tax Free Tour (VPRO, Marije Meerman)

53 minute documentary of tax havens, which channel astonishing amounts of money through their usual operations. Nobody accounts for the accountants, the same as nobody guards the guardians. The accountants have basically taken control of the global organized crime operations. That accounting is BACKWARDS, because the vast majority of people have been brainwashed to think about everything backwards!

Bananamerican's picture

The Bible beat Bert and Ted to the punch:

For there is not a just man upon the earth, that doeth good, and sinneth not.

Ecclesiastes 7:20

ebear's picture

you know, I'm pretty sure there's a copyright violation here.

hooligan2009's picture

heh....but the original probably had "it shall be a sin for your leaders to take money from a bank account directly or indirectly via inflation"!

must have run out of chisels

imaginalis's picture

11. Thou shalt not charge compound interest

americanspirit's picture

Really AP? You might want to drop by and kick any one of my domesticated dogs just to test your theory. Ordinarily if anyone kicked any of my dogs I would probably shoot them but in your case - just testing a theory and all - I would probably just let my little pack deal with you themselves.