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Guest Post: How Big Is The 'Bailout' Of Cyprus (Hint: Trick Question)

Tyler Durden's picture




 

Authored by Antonis Polemitis and Andreas Kitsios, originally posted at Cyprus.com,

Most publications talk about the 10B or 17B Cyprus bailout.   Let’s take a pop quiz on the right answer:

(a) 17B Euros (89% of GDP)

(b) 10B Euros (52% of GDP)

(c) 2.5B Euros (13% of GDP)

(d) -3.0B Euros (-15% of GDP)

(e) -7.5B Euros (-39% of GDP)

Now let’s work through the answers, in steps:

 

(a)  The 17B figure was calculated assuming the bailout would provide 7B for the banks.    The final number provided not a single Euro for the banks who were asked, against the approach taken in the last 147 banking crises worldwide tracked by the IMF, to find the whole 7B out of their depositor base.   So, part (a) is wrong.


(b) The remaining 10B is described as a bailout of the government.  Of this 10B however, 7.5B is being used to refinance maturing debt.

This debt, I would guess, is mostly at this point beneficially held by ECB.   This is just an assumption, but we know that 75% of it was held domestically, largely by the banks.   This was probably the first collateral pledged by the banks via the ELA, so ultimately if the Central Bank and the government default it will ultimately fall on the ECB’s balance sheet.   The 25% is probably traded internationally and, again outside of Cyprus hands.

So, the 7.5B is being lent to Cyprus in order to be paid right back to Europe.   That is not charity, that is ‘hiding their embarrassing losses until later when someone else is in office’.    If moral hazard requires clueless Cypriot retail depositors to pay for their banks’ decision to lend to the insolvent Greek government, then presumably it also applies to the financial wizards at ECB that lent to the insolvent Laiki, despite having full access to their financial information.

That leaves 2.5B of fresh financing for the government which I will concede is new money, though until we see the Memorandum and the terms under which we receive this money, I am not too excited about it.    Cyprus could raise this amount domestically so long as it did not have to do it overnight (which it does not – it is to fund deficits over the next few years).

 

(c) Does that mean that 2.5B is the right answer?  Not really, see below.

 

(d) At least 5.5B of the ELA taken by the banks (I suspect it is more) was for losses in the Greek branches of the Cyprus banks.    These branches have 15B of deposits that presumably could have also been haircut, along with the Cyprus-based deposits, to make up for the losses. Yet, under tremendous time pressure, they were sold to a Greek bank (very suspicious), while the liabilities (the ELA) stayed in Cyprus and are now, beyond all logic, is being transferred to the Bank of Cyprus.

We can call this: “Cyprus Contribution To Recapitalization of Greece, Part II”.    And since Greece is insolvent and illiquid without EU assistance, it is really assistance to the EU.

Given that, it is perfectly fair to subtract it from the EU’s assistance back to Cyprus.   That takes us to -3B

 

(e) The Greek PSI (write off of Greek government debt, implemented by the EU) impacted Cyprus, as Greece’s neighbor, in a wildly disproportionate manner.   Cyprus banks took 4.5B in losses there.

One could have imagined a solution at the time that partially compensated Cyprus for these losses.  In any case, it was a contribution by Cyprus in reducing Greek public debt and given Greece is backstopped by the EU, it reduces the EU debt load, so that is how we get to -7.5B.

Cyprus has certainly contributed to Greece’s bailout on a per-capita basis at a level vastly exceeding any of the nations that are putatively suffering from “bailout fatigue”.   Cyprus, voluntarily or not, has contributed around 5% of the Greek public and private debt reduction, despite being 0.2% of the European economy, so a rate of 25x the European average, plus or minus.

 

The apparent “thank you” from the EU, is to try to talk down the main basis of the Cyprus economy (financial services) and aim to destroy the rest of the otherwise fairly healthy Cyprus economy by sucking all liquidity out of the system, literally overnight.

I would grade (d) or (e) as correct answers.    But I don’t see any version of the numbers where Cyprus is not a net creditor to the EU bailout regime, as opposed to a net beneficiary.  Cyprus should be fighting to block the ELA transfer to Bank of Cyprus at this stage...

 

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Sun, 03/31/2013 - 18:50 | 3394336 Everyman
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They should get an Army together, because the EU declared WAR on Cyprus.

Sun, 03/31/2013 - 19:20 | 3394408 gmrpeabody
gmrpeabody's picture

Actually...., declaring war on the USA and putting together some type of attack may be the best solution for their future. It has worked wonders for many a nation over the years.

Sun, 03/31/2013 - 20:10 | 3394505 toys for tits
toys for tits's picture

It's apparent that current economists and bankers are products of the new math.

Mon, 04/01/2013 - 15:59 | 3395177 Boris Alatovkrap
Boris Alatovkrap's picture

Beat shell game is not require math, but skeptical participant.

Sun, 03/31/2013 - 20:53 | 3394610 booboo
booboo's picture

That would be in the butt... bob

Sun, 03/31/2013 - 21:27 | 3394695 Tabarnaque
Tabarnaque's picture

This will in time fire back on the Banksters. Anti-Euro politicians like Grillo in Italy will gain influence from events like this. The whole Eurozone castle sits on sandy foundations.  

Sun, 03/31/2013 - 18:51 | 3394340 kaiserhoff
kaiserhoff's picture

ZH GOES OMG

Kaiserhoff converts from hedonism to Judaism..., for the hot babes.
Bruce Krasting blames the banksters.
George Washington abandons the government tit, and gets a real job.
ilene denounces Marx and Gloria Steinem, leaves Manhattan for Montana, and her new life as a hunting guide.

Der erste April in Munchen, Hundin;)

Sun, 03/31/2013 - 18:51 | 3394341 Sudden Debt
Sudden Debt's picture

It doesn't matter anymore...
They are under control of the Goldmanites.
The land is theirs, it don't matter how much fiat they have or own...

Sun, 03/31/2013 - 19:11 | 3394396 knukles
knukles's picture

Aren't the Goldmanites from the lost Biblical area of the Sodomites?

Mon, 04/01/2013 - 09:27 | 3395565 falak pema
falak pema's picture

Midas meets scultimidonus pathicus! 

Homosexuality in ancient Rome - Wikipedia, the free encyclopedia

Julius Caesar, the greatest conqueror : every woman's husband and every man's wife? 

Sun, 03/31/2013 - 18:59 | 3394364 dbarrett
dbarrett's picture

Wow, she is a babe. Think about her covered in fiat currency lying in bed....or would you prefer...?

http://www.gold-price-girls.com/#!prettyPhoto

Mon, 04/01/2013 - 07:23 | 3395359 Rakshas
Rakshas's picture

GEEZ MAN!!!! 

YOU GOT ME WITH MY MOUTHFUL OF MORNING COFFEE, NOW I HAVE TO TYPE THIS ON AN IPAD.....

 

Sun, 03/31/2013 - 19:02 | 3394353 besnook
besnook's picture

so the eu used cyprus to get the russians to effectively finance 5% of the greek bailout then tried to get the russians to bail out cyprus because the greek debt crushed the cyprus banks. so now cyprus is crushed and the israelis will be given the rights to the gas under cyprus waters as another eu guilt payment for the holocaust so cyprus can be bailed out. makes sense. i am still waiting to see reports of horses missing their heads as the russian oligarchs roll out the new 21st century lead guillotine..

Sun, 03/31/2013 - 19:23 | 3394356 dbarrett
dbarrett's picture

But if I was the Germans, I wouldn't lend them any money either. Of course, they should have just let the banks completely fail and that would send the proper signal to all depositors worldwide to actually think about the risks with banks.

And its just one more reason why one should hold some sort of hard asset, preferably portable. Gold is moving higher.....I just checked the price on my all time favorite gold price site. Gold Price Girls

Mon, 04/01/2013 - 01:09 | 3395159 Assetman
Assetman's picture

Should have.

But German banks had bad debts in Greece, so bailout money from the EU had to be funneled to the German banks from the Greece government to make them whole.

Cypriot debt are essentially bad Greek assets as well... but who in the EU power structure really gives 2shitz about Cypriot banks?

 

Sun, 03/31/2013 - 19:02 | 3394363 newengland
newengland's picture

F. For failure, ruined for the failure of fiat money changers.

Cruxified, so that others bow down before the might of money grubbers who care nothing for anything, least of all sound money, sound economics, sound communities.

Ethics is knowing the difference between right and wrong. Morality is living it. 

The people of Cyprus deserve our understanding. We are next.

In the small print of the Dodd Frank Bill of 2010, there is the legalese that will apply the final solution to the U.S. and U.K. - all to save the nazionist biggest banks.

'First they came...' 

Sun, 03/31/2013 - 19:01 | 3394368 Gunga
Gunga's picture

The people of a country should not be held liable for the debt contracted between corrupt politicians and criminal bankers.
The Icelandic people gathered around their parliament with lit road flares until their "representatives" understood their deals would have repercussions.

Sun, 03/31/2013 - 19:05 | 3394376 newengland
newengland's picture

And painted red the houses of collaborators.

Valhalla awaits the brave. Hear the echo of ancestors.

Sun, 03/31/2013 - 19:50 | 3394469 Totentänzerlied
Totentänzerlied's picture

"The people of a country should not be held liable for the debt contracted between corrupt politicians and criminal bankers."

Perhaps if they didn't receive a benefit they might have some kind of claim. I don't know of anyone who doesn't receive some kind of benefit. That's what happens in a democracy, everyone's on the take, or has been, or wants to be.

Sun, 03/31/2013 - 19:57 | 3394483 newengland
newengland's picture

Incorrect, liebchen.

There is an awkward thing called law, whereby transparency is paramount. The law says that bond holders and shareholders lose their money before depositors do.

Somewhat awkward for nazionists, ja? As in the German, French, British, and U.S. banks who are insolvent, unless they can find a way to get innocents to pay for their follies: one quadrillion unregulated otc derivates, says the BIS.

Sun, 03/31/2013 - 20:21 | 3394523 disabledvet
disabledvet's picture

Actually there is a term in law called "odious debt" which if applied to Cyprus would give thee leaders some backbone if they thought this through. Nay, veerily "I've got my euro loot" and that's that. Not a day goes by where what has been done here appears more like a desperate act...BRAVADO as it were...in the face of an outcome that appears more and more certain by the day. We shall see of course...the markets are now open in Asia so that's your primer. We here in the USA have been going toe to toe with that thirty years running now. Good luck going full on capital controls and making it work...

Sun, 03/31/2013 - 20:23 | 3394530 hooligan2009
hooligan2009's picture

oops...there you go...^5 beat me by seconds!

Sun, 03/31/2013 - 20:24 | 3394533 New_Meat
New_Meat's picture

NE: but, since Ruth b Ginzberg invalidated the GM and Christler bondz, we don't do no stinkin' lawz no more.  Then Robertz, so there is nothing embarrasing nor awkward goin' on.

Sun, 03/31/2013 - 20:22 | 3394528 hooligan2009
hooligan2009's picture

correct

its called odious debt and has some basis in law

http://www.imf.org/external/pubs/ft/fandd/2002/06/kremer.htm

yeah yeah i know its the imf!! heh

Sun, 03/31/2013 - 19:06 | 3394378 Ribeye
Ribeye's picture

Evening my American friends,

Ribser is back to provide an update from Dublin,

I assume you guys have seen the naked photo of Angie leaked last night by the KGB, now that's what I call a warning,

The Cyprus robbery has caused a big shift here in Ireland, even the most placid non-political people have been awoken,

And they're fckn angry, even my mam is calling for Barrosso's head,

Liberty is rising in Europe boyos, make no mistake, UKIP, Grillo, AfD in Germany, and DDI in Ireland,

The Euro, and the EU are already dead fellas,

We're not all Euroweenies ye know:)

- Ribeye Out -

Sun, 03/31/2013 - 19:08 | 3394388 little buddy bu...
little buddy buys the dips's picture

yeah, but calling for someone's head and going to get it are two different things.

Sun, 03/31/2013 - 19:18 | 3394403 newengland
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Putin has been the enemy of the oligarchs who raped and robbed Mother Russia. Seven out of 8 of them are the kosher nostra. Germany sent Lenin et al to ruin Russia, and keep it out of the war then, so it didn't have to fight on two fronts.

Putin, father of the FSB, is a patriot, right or wrong.

Politicians talk. Soldiers do. Voters whine.

A patriot loves his/her country, right or wrong. You can do honest business with a patriot, and only a fool trusts internationalsts, globalists, nazionists.

Zionism, socialism, communism, internationalis, globalism, nazism = all the same thing. 

F, for failure. Fiat for the wicked moneychangers who ought to be thrown out of the temple of civilisation.

Meanwhile, go Iceland. Valhalla.

Sun, 03/31/2013 - 19:29 | 3394428 gmrpeabody
gmrpeabody's picture

You know, Ribeye, many here are wondering just what your steak is in all of this?

;-)

Sun, 03/31/2013 - 19:17 | 3394406 Ribeye
Ribeye's picture

You haven't seen my mam wielding a sweeping brush have ye?

Sun, 03/31/2013 - 19:51 | 3394464 newengland
newengland's picture

She who rocks the cradle rules the world and loves her child beyond all reason.

This petty thing of the past 30 years is dying. No more surrender to the new feudalists, and their hateful one quadrillion unregulated otc derivatives equal to more than the world's gdp because silly boys in board rooms played with numbers, algorithms, and bought politicians. 

I guess they are orphans or have anger issues with their failed nazionism.

Sun, 03/31/2013 - 19:10 | 3394389 newengland
newengland's picture

With you, pal. The Irish have a very big say in New England. Perhaps that's why corrupt central government bought by biggest banks want to disarm honest patriots.

Same as it ever was.

Sun, 03/31/2013 - 20:39 | 3394573 New_Meat
New_Meat's picture

NE:

"The Irish have a very big say in New England."

Go into Southie* and visit Marine Park.  There was a time when half of the Marine Corps came from South of the Mason-Dixon line, and the other half were Irish from South Boston.  There was a time when entire sections of Havhad (before becoming the "World's Most Perfect University"TM ) volunteered for the war that we were "too proud to fight."  Until we weren't.

Yep, Irish have a big say, although a) with Jimmy in the slamma' and Billy suckin' on the tit, that is a bit reduced, but b) Mumblez retiring will open the field and leave us humour-challenged.

- Ned

*That would be South Bahsten, for all y'all.

Sun, 03/31/2013 - 20:06 | 3394501 Tijuana Donkey Show
Tijuana Donkey Show's picture

The naked photo of Angie is blackmail for the rest of us. She could care less, she is german. If you had a photo of her shitting on a glass coffee table with some other eurocrat, maybe you could blackmail the eurocrat. 

Sun, 03/31/2013 - 20:40 | 3394580 New_Meat
New_Meat's picture

doesn't rise to the level of a donkey show, let alone the red-yellow-green ping-pong balls.

Sun, 03/31/2013 - 19:07 | 3394382 Van Halen
Van Halen's picture

I'm going to guess...

A GOOGLE EUROS!

SUCCESS!!

Sun, 03/31/2013 - 19:25 | 3394419 unununium
unununium's picture

In this context, it's spelled googol.

1 googol = 10^100

Apropos of nothing.

 

Sun, 03/31/2013 - 19:33 | 3394436 Van Halen
Van Halen's picture

Good Lord, it's been so long since I've seen the REAL word used that I completely forgot! Correction appreciated!

One...GOOGOL DOLLARS!

Sun, 03/31/2013 - 20:48 | 3394601 New_Meat
New_Meat's picture

seemed so quaint at the time:

http://www.youtube.com/watch?v=cKKHSAE1gIs

Sun, 03/31/2013 - 19:08 | 3394386 q99x2
q99x2's picture

It is as much as can be run up in the time it takes to calculate it...all.added together, whatever that is and then some.

Sun, 03/31/2013 - 19:15 | 3394402 NoWayJose
NoWayJose's picture

The real 'trick' to the question is that the answer is zero. None of the bailout goes to Cyprus, it goes to big EU banks. Only the IOU goes to the people of Cyprus.

Sun, 03/31/2013 - 19:20 | 3394414 newengland
newengland's picture

Yep.

F, for failure.

Sun, 03/31/2013 - 19:22 | 3394416 Van Halen
Van Halen's picture

I hope this isn't a thread jacker, it's not meant to be. It's kind of along the "How we're all getting screwed", theme...

 

http://www.infowars.com/department-of-homeland-security-can-seize-gold-s...

Sun, 03/31/2013 - 20:09 | 3394504 Tijuana Donkey Show
Tijuana Donkey Show's picture

I kept all three on my boat, but lost them all in an accident. I should have put them in the bank for safekeeping, but I wasn't as smart as everyone else.

Sun, 03/31/2013 - 20:14 | 3394513 newengland
newengland's picture

Boating accidents are an honorable tradition for ZHers :-)

Memo to self: be a better sailor.

Sun, 03/31/2013 - 19:39 | 3394423 newengland
newengland's picture

For the few brave and their kith and kin, see the words whispered by Norsemen before battle, and may your God go with you:

Lo, there I see my father, 
Lo, there I see my mother 
And my sisters and my brothers. 
Lo, there I see the line of my ancestors 
Back to the beginning, 
Lo, they do call to me 
They bid me take my place among them 

 

In the halls of Valhalla 
Where the brave may live forever...

Simply defeat your enemy, then show magnanimity.

Sun, 03/31/2013 - 19:40 | 3394451 Ribeye
Ribeye's picture

It appears some of you haven't seen the KGB message to our dear leader Angie,

WARNING - GRAPIC IMAGE

http://yfrog.com/ndjdn7j:iphone

?? ???? ????????????? ????

- Ribeye Out -

Sun, 03/31/2013 - 19:42 | 3394453 Ribeye
Ribeye's picture

Do the Tyler's replace Russian with ??????

Lol:)

Sun, 03/31/2013 - 21:24 | 3394686 MeelionDollerBogus
MeelionDollerBogus's picture

unicode, yes. Also I couldn't open your link

Sun, 03/31/2013 - 19:50 | 3394470 hooligan2009
hooligan2009's picture

smoke and mirrors...money made from ignorance..punish the weak and the stupid...the handling of the cyprus bank robbery was

1) win/lose (smart/stupid)

2) lose/lose (stupid/stupid)

3) win/win (smart/smart)

my answer rhymes with poo

Sun, 03/31/2013 - 19:51 | 3394473 dognamedabu
dognamedabu's picture

If it was such a bad deal, why did your elected leaders go for it? Oh right.. Politics are the enforcement wing of our beloved banks. And people keep voting for their enslavement thinking only if my guy won itd have been different. 

Sun, 03/31/2013 - 20:10 | 3394502 Marco
Marco's picture

"(b) The remaining 10B is described as a bailout of the government.  Of this 10B however, 7.5B is being used to refinance maturing debt."

So? These are still liabilities ... they couldn't just default on them leave the Euro and be better off. A lot of their bank assets are tied to the EU as well, if they tried to default on debts to the EU and then sell assets within the EU to repay depositors guess what would happen. They would not be better off.

Sun, 03/31/2013 - 20:28 | 3394520 hooligan2009
hooligan2009's picture

the us government has only grown; it has rolled over its debt since forever, here is the last 13 years. the same is true for every western government...why should cyprus have to pay its debt back and western governments not?

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

a leap of the odd ten trillion (interest on this increase @2% = US$20 billion a year)

Mon, 04/01/2013 - 01:34 | 3395179 Camlon
Camlon's picture

The point is, it is not a bailout of the government. It is just a bailout to make sure Cyprus pays it public debt. Most people would think that money goes to the bank, while only 2.5B do so. 

Also, they would be better of if they left the euro and defaulted on it. Because Germany is not giving them free money. They are giving them a loan, that has to be paid back with interest. 

Sun, 03/31/2013 - 20:12 | 3394507 newengland
newengland's picture

Merkel is a Communist promoted by her bankster friends, a true nazionist. 

Bare chested or not. She is a water pistol shooting at a canon in this world betrayed by nazionists of her sort.

The 2010 Dodd Frank bill gives Big Brother the same right to steal from Americans, all for the Internationale, the Trilateral Commission, the nazionists who are insolvent due to their one quadrillion unregulated otc derivatives.

Focus on here and now...not that failed freak euro/EU crypto communist nazionist.

Sun, 03/31/2013 - 21:59 | 3394775 DirkDiggler11
DirkDiggler11's picture

New England:
How about switching to decaf? Everyone has a right to post and for their opinion to be heard, but you are wearing that fucking "right" out about now.
I've got it, and your 59 posted references to the obscure passage in Dodd Frank. I also fucking get that about everyone you run across is some kind of fucking "nazionist".

Don't you have a fifth of vodka to slog down and your cats to feed ?

GOOD NIGHT

Sun, 03/31/2013 - 20:41 | 3394581 Northeaster
Northeaster's picture

This was posted by Yves (Susan) over 24 hours ago...

Sun, 03/31/2013 - 23:28 | 3395002 GoldenTool
GoldenTool's picture

Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going

 

"et fasta est lux"

Mon, 04/01/2013 - 00:13 | 3395077 Unpopular Truth
Unpopular Truth's picture

So sorry, Cypriots. Your just happen to be the first ones. Lypamai poly. Buy bitcoins maybe?

Mon, 04/01/2013 - 09:29 | 3395572 falak pema
falak pema's picture

So the poor Cypriots are all scultimidonus pathicus? 

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