When the final "bailout" structure of the Cypriot deposit-confiscatory bail-in was revealed in late March, the implied victory for the Troika (which has since notched up its demands for the insolvent country to now sell its 14 tons of gold) was that instead of the deposit haircut passing as a tax, and thus needing a parliament ratification, it would come in the form of a bank resolution, with Laiki bank liquidating and being subsumed by the remaining Bank of Cyprus, and with uninsured depositors in both banks ending up crushed. However, as previously reported, in the interim period deposit outflows have continued and accelerated despite the assorted ineffective "capital controls" which has led to additional underfunding for the local banks, and to a second bailout of Cyprus, this one rising to €23 billion or a 35% increase from the original, as part of which the Troika has demanded that Cyprus sell their gold in the open market. Now, a month later, it appears that the Troika's initial victory may have been a Pyrrhic one, as yesterday the Cypriot attorney general announced [9], and today the government's spokesman confirmed, that the parliament will have to ratify the €23 billion bailout of the tiny island nation after all, thereby refocusing the popular anger from some ephemeral technocrat in Europe to the country's own elected representatives, thereby changing the calculus of the Cypriot decision by 180 degrees.
From dpa [10]:
Cyprus‘ parliament must ratify a 23-billion-euro (30.3 billion dollar) international bailout deal in order for it to become valid, government spokesman Christos Stylianides said on Wednesday.
"It is not possible that Cyprus‘ bailout deal needs to secure the approval by other parliaments in the eurozone, while at the same time it is not voted on by our parliament," Stylianides told state radio RIK.
"It looks like the parliaments of the other eurozone countries will pass it and we will now see what ours will do. I hope that the legislators will vote with wisdom and responsibility - I have this expectation," he added.
Naturally, since the fate of the country's freedom from the European neo-feudal regime, and potentially the future of the Eurozone itself, is suddenly once again where it never should be: in the democratic hands of the majority of the "great unwashed", the threats of fire and brimstone have started already. Here is Stylianides with his best rendition of Hank Paulson:
"Anyone who is ready to vote against the loan agreement should at the same time be prepared to come up with 10 billion euros needed to continue to pay salaries and pensions."
One word here: Iceland. But we are confident that by now even Cyprus' population, which has stoically absorbed everything from deposit haircuts to the upcoming forced gold sales, is familiar with what the only success story in Europe to date has been, and why.
So what exactly will be voted:
The new vote will cover additional austerity measures drawn up by international creditors - the European Commission, the European Central Bank and the International Monetary Fund (IMF). The measures aim at downsizing the public sector.
EU Economy Commissioner Olli Rehn admitted that "mistakes" had been made "under enormous time pressure" in the initial decision to bail in small depositors, which prompted outrage and was rejected by Cypriot lawmakers.
On the other hand, mistakes were not made when as part of the European Commission's DSA, the following explanation of what is without doubt the immediate future for Cyprus:
In accordance with the Cypriot authorities policy plans, major financial institution will be downsized combined with extensive bail-in of uninsured depositors, and a set of wide-ranging temporary capital controls and administrative measures. The programme is envisaged to build the foundation for sustainable growth over the long run. Nevertheless, in the short run, the economic outlook remains challenging. Real GDP is projected to contract by 12½% cumulatively in 2013-14. Short-run economic activity will be negatively affected by the immediate restructuring of the banking sector, which will impact on net credit growth and by additional fiscal consolidation measures. Temporary restrictions required to safeguard financial stability will hamper international capital flows and reduce business volumes in both domestic and internationally oriented companies. The bail-in of uninsured depositors will cause a loss of wealth, which will reduce private consumption and business investment. This, compounded by the impact of fiscal consolidation already undertaken and new measures agreed, will result in a sharp fall in domestic demand. Little reprieve can be expected from exports amid uncertain external conditions and a shrinking financial service sector.
Cyprus had a choice to say no. It still does: probably its last one. If it once again opts to vote for a fate of Brussels-dominated serfdom, we can wish them is all the best on their uphill climb to a bleak, non-existent, hopeless future.
The vote is expected to take place early next week, unless delayed again. Choose wisely Cyprus.