Angela Merkel blames Cypriots for bankers’ gamblings

By LUIS MIRANDA | THE REAL AGENDA | MARCH 26, 2013

German Chancellor Angela Merkel said today that the new rescue program for Cyprus is “right” because it forces “those who have caused the problem.” to take “responsibility” for their actions. In saying this Merkel blames the people of Cyprus for the debt incurred into by the very same banks the German leader so strongly attacks publicly but defends in private.

The head of the German government was said to be “satisfied” with the result reached this weekend, after seven days of media controversy, political unrest and turmoil that followed in the stock market and that stopped the conditions of the first bailout from taking place.

The plan as it is now known includes a 40% charge on depositors who may not even see their savings ever again. According to the plan imposed by the European Union, Cyprus will liquidate both the Laiki and Cyprus Banks and has already mandated the confiscation of almost half of the funds in accounts with more than 100,000 euros.

“The result reached is right and puts the onus on those who have created the problem. Way it should be,” Merkel argued in a brief meeting with media in Langenfeld.

She added that she is “happy” that a “fair division of the burden” has been achieved with Cyprus temporarily bribing its way out of a financial collapse by stealing 7,000 million euros from its people, while the European Union supposedly lends the country 10,000 million euros.

“First, banks must take responsibility. On the other, it has become clear that Cyprus can count on the solidarity of the European countries,” said Merkel. The Chancellor said in this regard that the EU will support Nicosia in the “difficult road” ahead. In other words, Merkel sees the Cypriot people as responsible for the banks gambling on behalf of the Mediterranean nation, whose people will now suffer greater pain than those in Greece, for example.

The looting of Cyprus by the EU will follow the Greek model

By LUIS MIRANDA | THE REAL AGENDA | MARCH 24, 2013

The Government has reached an agreement with the troika to seize 20% of the deposits that hold more than 100,000 euros that are in the Bank of Cyprus, the country’s largest bank and also the one that is preferred by Russian oligarchs. “How do you think it will be? Tomorrow I will lose 25,000 euros,” replied the waiter in a bar where a customer shouted how are you?

This measure, which still must be approved by Parliament, joins the two taken on Friday: The Laiki settlement, the second largest and the one with the biggest problem when it comes to capital controls. His liquidation was negotiated as necessary to prevent panic next Tuesday, when Cypriot banks reopen. The restructuring of a bank that has been both the growth engine of the island and the head of its economic sinking is completed at a discount of 4% for all other banks.

Cyprus has had to swallow his pride showed on Tuesday when MPs overwhelmingly rejected the bailout custom designed by Germany, which required the smallest euro economy to steal 5,800 million euros from its savers.

The Plan B hastily designed by political forces will not be so different from Plan A: depositors will have to pay to avoid the bankruptcy of the country, and perhaps in addition leave the euro. But now, those who will take the deepest haircut are those who have 100,000 euros, an  amount theoretically untouchable according to European standards, an idea that has faltered this week. Of the nearly 68,000 million euros euros in Cypriot bank accounts, 38,000 banks exceed this amount.

If leaders want to avoid bankruptcy, they do not have much time, according to European leaders. For the plan of salvation to succeed, Parliament in Cyprus will need to vote in favor of it after Cypriot leaders and finance ministers of the euro zone met on Sunday.

The European Central Bank has warned that if no agreement is reached by Tuesday, the Union will close the tap of liquidity to institutions of the island, which would mean the collapse of the banking system within hours. The domino effect in the government accounts would be very fast. This scenario was seen in Iceland, where the government refused to pay the debt created by the same banks who are now feeding on Cyprus. In Iceland, the government and the people stood up against banker bullying and kicked the bankers out.

A parliamentary source quoted by the Greek daily Kathimerini noted that the Cypriot deputies could wait for the Eurogroup meeting to conclude to vote the final agreement. It would be only after this vote that Cyprus would step away from the abyss that has approached this week. That does not mean the country is safe or that things will improve rapidly.

One only needs to take a look at Greece, where the bankers took over the country and its people are still suffering the pain of closing deals with the bankers. Cyprus will also pay a very high cost for the financial rescue: the collapse of confidence in its banking system and a black economic outlook, with a sharp drop in GDP and a rise in unemployment, according to several analysts, will make things even worse than in Greece.

If savers at Bank of Cyprus have suffered a severe punishment, Laiki’s have suffered even more. At midnight on Friday and Saturday, Parliament gave its approval to split the bank, converting it into an entity that takes control of more modest and healthy deposits and loans, while also bearing responsibility for the bad and large toxic assets.

Those who have money in Laiki will not recover it in the next few years, and when they do, it will be an amount much lower than they had.

This is what is feared by hundreds of employees at Laiki, who have been demonstrating against the plans of the Eurogroup. European governments have made it clear that one of the conditions of the bailout of Cyprus is that country reduces the size of its financial sector, especially the part that attracts large amounts of money at high interest rates.

Besides restructuring Laiki, lawmakers approved the creation of a ‘solidarity fund’ which will feature contributions from private citizens and businesses, as well as state assets and the Orthodox Church. The money contained in this fund will be directly managed, not to say stolen, by the European government, which has also said that pension funds will not be touched right now, but that refused to say what will happen with people’s retirement funds in the near future.