As was reported in the previously presented Cypriot Debt Sustainability Analysis [4], which among other things had this stunner [5]inside of it, things in Cyprus have gone from bad to worse in the brief span of a month. 35% worse to be exact, because this is how much the total bailout of Cyprus has grown by in a few shorts weeks, from €17 to €23 billion, which happened because just as we predicted the stealth outflow from banks was much worse (read bigger) than previously reported, leaving banks with a far bigger hole to plug. This is problematic because at least previously the bailout as a percentage of GDP was in the double digits. No longer so, as the latest (and soon to be re-revised higher) bailout figure now stands at over 120% of the country's €18.8 billion GDP (which itself is about to tumble following the collapse of the economy).
From the Guardian [6]:
Crisis-hit Cyprus will be forced to find an extra €6bn (£5.1bn) to contribute to its own bailout under leaked updated plans for the rescue.
In total, the bill for the bailout has risen to €23bn, from an original estimate of €17bn, less than a month after the deal was agreed – and the entire extra cost will be imposed on Nicosia.
Cyprus's politicians had already faced intense domestic political pressure for agreeing to impose hefty losses on savers at two struggling banks in order to fulfil its eurozone partners' demands of contributing €7bn.
But after a more detailed "debt sustainability analysis" showed that the black hole in the island nation's finances is far deeper than first thought, the total bill for Cypriot taxpayers and depositors has now been set at €13bn. The €23bn overall bill is larger than the size of the Cypriot economy.
The document, leaked on Wednesday night, underlines the botched nature of the initial bailout agreement, which was hurriedly cobbled together in March and had to be redrawn after Europe's finance ministers rejected the idea that depositors holding less than €100,000 – whose savings are meant to be insured – would face deep losses.
Under the new plan, which is likely to spark fresh public outrage, Cyprus will be forced to sell €400m-worth of gold reserves, renegotiate the terms of a loan with Russia and "bail-in" creditors of the Bank of Cyprus, to claw back some of the cost of the rescue.
Furthermore, as we also forecast, Cyprus will soon be forced to engage in some form of Greek-like PSA, or other "consensual" exchange offer, with the details still murky, but the outcome clear: convert yet another debt instrument into a "perpetual PIK" never to pay interest or be repaid again.
There was also a suggestion that holders of €1bn-worth of Cypriot government bonds could be urged to agree to a debt swap, reducing the country's repayments. That could signal a messy period of negotiation and uncertainty.
Finally, the DSA had the following clause, which was also previously reporterd:
Sale of excess gold reserves: The Cypriot authorities have committed to sell the excess amount of gold reserves owned by the Republic. This is estimated to generate one-off revenues to the state of EUR 0.4 bn via an extraordinary pay-out of central bank profits
Yet somehow this happened without the actual "Cypriot authorities" knowledge, because the entire morning has been spent by them denying they had any idea this has happened [7]. Alas, when one has ceded all sovereignty to the Troika, the word "authority" has a far looser meaning.