29 March 2013: USA Markets – S&P index beat its historical maximum

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Yesterday stock market of United States finished trading session with a moderate growth, at the same time the index of the wide market S&P 500, during the last minutes of the trading session, managed to subdue the level of its historical maximum 1565,15 points and was closed 4 points above it. Data on GDP of the USA presented yesterday, where the indicator increased by 0,4% in comparison with the previous assessment in 0,1% gave support to the market and positively influenced purchasing moods. The rest of the statistical data was not so positive, the number of primary requests for unemployment benefits last week increased by 16 thousand to 357 thousand and significantly exceeded expectations, and the Chicago index of business activity in March made only 52,4 points and more than 4 points didn’t hold on to average forecasts.

Asian stock markets in the last working day not only of this week, but also month, and also the whole quarter show quiet multidirectional dynamics. Trading volumes are insignificant. The Japanese stock exchange bargains almost neutrally. Nevertheless, index Nikkei is ending quarter with growth of nearly 19%, which is the best result since middle of 2009. At the end of March the Nikkei index keeps about levels 12300-12400, which is just a bit lower its maximum levels. From the middle of November growth of the main exchange indicator of the country grew almost by 45%.

Leading stock indexes of Europe also closed yesterday’s trading session with a moderate growth – the British FTSE-100 grew up for +0,38%, the German DAX grew by 0,08%, the French CAC increased for +0,52%. Also it should be noted that in relation to the Catholic holiday “Passionate Friday”, markets of the USA, Australia, Hong Kong, India, Singapore and as well as many European platforms are going to be closed today.

Prices of oil following the results of last trading session continued a shy rebound upward and again showed positive dynamics. In the short term ascending dynamics can be continued up to the closest zone of resistance around $112-113 for barrel. This morning, we can see BRENT traded on a level of 109.77$ per barrel, NYMEX adds 0.67% in price and is on a level of 97.23$ per barrel.     

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28 March 2013: Asian indexes are decreasing on news that China is going to limit foreign investments

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China will encourage foreign investments into services and high technologies sectors, but at the same time will rigidly limit capital investments in construction, real estate, and also the projects, differing to high power consumption and polluting environment. This news brought negative impact on Asian stock markets where weaker than the others is Chinese continental SSE index. Most of all it was reflected in the banking sector, where Bank of Communications and China Merchant Bank are losing more than 4%.

On Wednesday, American market could not any longer ignore bad news coming from the Europe and did not continue its growth started the day before. Index of incomplete transactions on sale of houses in February decreased more strongly than expected 104,8 points. Following the results of the trading session the indicator of “blue chips” the Dow Jones Industrial Average index was closed with -0,23% on a level 14526,16 points, the S&P 500 lost 0,06%, and the index of the hi-tech companies Nasdaq grew up for 0,12% to a level of 3256,52 points.

In Europe, besides Cyprus – Italy is again coming to the headers of news feeds. On last placement of the Italian debt papers, Rome managed to attract only 6,91 billion euro from the planned 7 billion euro. In Nicosia, in turn, the authorities presented a package of measures for capital control. Among other things it should be noted that single withdrawal of funds won’t exceed 300 euros, and it will not be possible to take more than 1000 euros out of the country. The Cypriot banks will open today after almost two-week break.

Prices for oil are stable this morning and both Brent and NYMEX are adding 0.22% and 0.33% accordingly. Brent is traded on a level 109.94$ per barrel and NYMEX on a level of 96.90$. Ascending movement proceeds against noticeable strengthening of the American dollar in relation to the majority of world currencies. Gold is losing 0.12% and is traded on a level of 1604.28$ per troy ounce.

EUR/USD pair is slightly correcting and is strengthening for 0.20% traded on a level 1.2804.

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27 March 2013: Asian shares gains on positive US data

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Asian shares rose on Wednesday as positive US data confirm a moderate recovery. US Home sales and manufacturing fed optimism with the Dow Jones industrial climbing more than 100 points to a new record high. 14 559 beats he former record from March 5th 2007. Data showed that single family home prices in January rose at the fastest pace in six years. Durable manufactured goods also shot up in February. The numbers are boosting investor confidence and loading up on equities.

The rosy US picture is in stark contrast to Europe where the Cyprus crisis and its possible contagion impact on other vulnerable members of the euro zone take central stage. The Cyprus bank bailout inflicts huge losses; up to 40% on deposits above Euro 100 000. Banks are still closed. When they hopefully open tomorrow it would be strict restrictions on currency transactions to avoid a run on the banks.

The second biggest bank, the Popular Bank of Cyprus, has been closed down. Its healthy assets, deposits below Euro 100 000, will be transferred to the Bank of Cyprus in an effort to boost and save the island’s biggest bank. Minister of Finance Michael Sarris stroke a positive tone yesterday when he stressed that the banking transaction restrictions would last only for some weeks. Others are more realistic. Cyprus fears capital flight and a run on their banks. It is likely that big Russian, British and Middle Eastern clients will take their money out as soon as there is a chance.

The handling of the Cyprus crisis also threaten to set a bad precedence. For the first time EU, the European Central Bank, ECB, and the International Monetary Fund, IMF, has confiscated funds on private accounts to finance a bailout. That has violate sacred principles. European politicians have later indicated that this practice would be followed in connection with possible other bailouts inside the Eurozone. This has sent shock waves through the European financial system and threaten banking clients especially in countries like Italy and Spain which might be next in line.

The practical consequence of the Cyprus bailout is that it might have undermined public trust in a banking system ridden by high profile scandals and banker’s speculation and misuse of client funds. The way the EU, ECB and INMF has handled the Cyprus crisis has further increased the divide between north and south in Europe. Southerners are reacting with dismay on what they see as German and EU technocrat arrogance. Confidence in the common currency is thereby also hit. While bankers are saved with generous parachutes the EU and IMF imposed austerity measures have meant unemployment and misery for the people in the southern periphery.

The Euro/USD is under steady downward pressure and trades at 1.2849. Currency analysts are expecting 1.25 in a short two months perspective. Oil prices are up with NYMEX trading above 96 the highest level seen for weeks. Brent crude is above USD 109 a barrel on the better US data. The BRIX countries meeting in Durban in South Africa has decided to establish a new investment bank in support of weaker economies with acute payment problems. It is stressed that this banking establishment is not a substitute, but a complementary to IMF.

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26 March 2013: Markets negative to Cyprus bail-out

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Digesting the details of the Cyprus bailout markets reacted negative to the scheme agreed in Brussels Monday morning. After initially rallying stock markets fell back yesterday evening and Asian shares eased as investors worried about the potential risk from the Cyprus bailout scheme. Euro/USD which rallied on the news and reached 1.3050, fell steeply back and trades at 1.2869 putting the single currency under new downward pressure. “Safe haven” currencies as USD and Japanese yen have strengthened. Gold is falling back after initially rallying to 1614.

Markets were positive to the news that a crisis was averted. But as the details of the bailout scheme became clear, markets were starkly reminded of the risk involved in the Euro zone. When little Cyprus with a million people and a GDP constituting 0,2% of the GDP in Western Europe, creates such waves in the financial markets what when a crisis occur in Spain or Italy? The EU handling of the crisis leaves serious questions and strengthens the impression that the Euro zone is living on borrowed time and a breakup of the common currency edges closer.

The Euro based on a lack of common taxation and financial policies has over the last years experienced 5 crisis situations ending up with bailouts in Ireland, Portugal, Greece, Spain and now Cyprus. While tax payers were doomed to pay the bill for the first four crisis, Cyprus is instituting a new unheard principle. Bank depositors are this time asked to pay for the mess created primarily by Bank of Cyprus and Popular Bank of Cyprus’s speculations with depositors’ money over the last years in crisis ridden Greece.

The new package exempts depositors with accounts below Euro 100 000. Depositors with a balance above EURO 100 000 will have their accounts frozen and the door kept open for future confiscations in the magnitude of 40%. EU officials stated yesterday that this step, confiscating private depositors’ funds, might constitute the rule for the future. Strict currency controls are introduced and the banks are going to open firstly on Thursday being closed for two weeks. Bank clients are permitted to subtract Euro 100 from their accounts using ATM machines.

EU and especially Germany have in their propaganda for justifying what they with a misled concept have called “levy”, made Russian depositors in Cyprus the scapegoat. Most observers with some knowledge are aware that the big chunk of the Russian cash in Cypriot banks has its root in the chaotic privatization following the fall of communism and the Soviet Union in 1991. The bank system broke down, and Russians used Cyprus as one of many new domiciles for cash stashed in their luggage. Nobody asked, too, many questions. The west supported the wild-west privatization as the true token of freedom and democracy. Cypriot auditors, law offices, real estate agents and bankers did not ask naughty questions and greatly thrived on the Russian business.

OECD in the late 1990-ies put Russia on the black list for suspected money laundering countries. After thorough investigations Cyprus was removed from this list in 2002. Removal from the black list was one of the preconditions for EU membership in 2004 and the entry into the Euro in 2006. The 10% corporate tax which now is going to be increased to 12,5%, was introduced as a result of negotiations and EU-agreement to facilitate a country that had to accept the common agriculture policies and prohibition of production of traditional products. The so called “troika” has for a long time demanded free access to banks and other institutions. Suddenly over the night Russian money and some “oligarchs” have been turned into a money laundering mafia.

President Nicos Anastasiades who has his fair share of rich Russians on his law office clients list, defended the bailout terms in a televised speech to the nation yesterday last night as the majority of Cypriots ask for independence and threaten to leave the Euro. Whether his arguments will dampen the anger of fury in a small country realizing being dictated from Berlin and Brussels, are open questions. The last two weeks have opened independent Cypriots’ eyes for what it means to be member of a rich man’s club in Northern Europe. Cypriots are as Greeks, Russians and Serbians orthodox. Religion plays an important role as strategic and security considerations did when Turkey invaded the island in 1974.

In this situation it may be dangerous to concentrate only on small figures and behave as elephants in a Chinese porcelain shop. 

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25 March 2013: Euro gains on Cyprus bail-out

The Euro and Asian shares rose on Monday after Cyprus reached a last minute deal with international lenders for a 10 billion euro bailout. The agreement was reached hours before a deadline to avert a financial collapse. The European Central Bank (ECB) had declared on Friday that it would stop emergency liquidity to two big exposed, Cypriot banks, Bank of Cyprus and the Popular Bank, on the 25th if a solution was not found. The deal which is not dependent of support by the Cypriot parliament which last Tuesday rejected a bail-out proposal obtained in Brussels earlier. Euro/USD trades 1.3029; 50 points up from Friday.

During the negotiations all the concerned parties plaid hard ball. The newly elected Cypriot president, Nicos Anastasiades, who is known as Euro-friendly, threatened the Euro-ministers to resign if he was pressed, too, far. Anastasiades also firstly rejected to participate when final EU-meetings were resumed late Sunday night stressing the unacceptability of Cyprus negotiating with a pistol to its head. The German Finance Minister countered claiming a total lack of realism on Cyprus’ behalf. A crisis sentiment ruled during the talks, and in line with Brussels traditions a last minute deal was clinched after 12 hours negotiations.

The deal involves a winding down of the second largest bank, the Popular Bank of Cyprus, Laiki, and shifting deposits below 100 000 euros to the biggest Bank of Cyprus to create a bank with healthy assets. Deposits above 100 000 euros in both banks, which are not guaranteed under EU-law, will be frozen and used to recapitalize the Bank of Cyprus through a deposit/equity conversion. This raid on uninsured Laiki depositors is expected to raise 4,2 billion euros. Up to 40% of the balance on these accounts risk to be confiscated much higher than the 20% originally envisaged. This will especially hurt foreigners and mainly Russian depositors who stand to lose billions of dollars. It is estimated that Russians have deposited up to 35 billion euros in Cyprus.

It is likely that the proposed agreement will create strong negative reactions from Russia, Ukraine and other concerned countries. Prime Minister Medvedev likened last week the EU-proposal with Soviet-type confiscation. Most of the 6 200 employees in Laiki would probably lose their jobs. Employees reacted last week with fury on the proposals and out the President and Parliament under strong pressure. A poll during the weekend showed that 2/3 of the Greek Cypriots preferred to leave the Euro. A week earlier 67% was in favor of the Euro.

The Minister of Finance, Michael Sarris, said in an interview with BBS that the agreement avoided financial disaster for Cyprus. Anastasiades left Brussels without making any comments. A Cypriot exit from the euro might have been avoided in this first round, but the fact that international lenders for the first time during the debt crisis in the Euro zone use sacrosanct private account funds in a bail-in arrangement might have serious contagion consequences all over the euro zone.

Bank employees and the public have additionally taken notice that leading managers in Bank of Cyprus and Laiki lately have received generous parachutes when the two banks for all practical purposes were bankrupt. Many Cypriots are asking the fairness of such parachutes in a situation where the same bankers have gambled with clients money and speculated in treasury bills and unsecured Greek loans. The two biggest banks have 25 billion euros in bad Greek loans after firstly losing billions on the Greek Treasury bill haircut imposed by EU and IMF. 

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22 March 2013: ECB gives Cyprus bailout ultimatum

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The Cyprus drama escalated with furious banking employees protesting in front of Parliament as worries about the effect of the Cyprus-crisis on the euro zone intensified. Shares in Europe fall yesterday as did USD/EURO. The Euro is under continued downward pressure. The European Central Bank (ECB) simultaneously issued a bailout ultimatum that liquidity transfers to the Central Bank of Cyprus would be stopped on Monday unless Cyprus agreed on terms and conditions for a bailout.

In a bid to raise investments in a Solidarity Fund to raise the required Euro 5,8 billion that is necessary to unlock the EU/IMF’s Euro 10 billion financial assistance package for Cyprus, the Government yesterday succeeded in mobilizing support from all the political parties. The powerful and economically strong Greek Orthodox Church has also stated its willingness to contribute with cash injections and land assets. The Fund would be built up on possible future income from the oil and gas reserves on the continental shelf.

Any effort to speed up offshore natural gas exploration as a way of attracting desperately needed investment to save its teetering economy, might, however, be challenged by Turkey which questions Cyprus sovereign rights to explore and exploit what Turkey regards as disputed areas. According to the International Law of the Sea Convention agreement between the concerned parties is a prerequisite for starting drilling activities in disputed areas. A possible Turkish challenge gives an added dimension to the crisis as a stark reminder of the Turkish invasion of Cyprus in 1974.

Potential gas riches also seem to have been part of the negotiations the Minister of finance, Michael Sarris, is conducting in Moscow. The gas resources have been identified as one area where Russia might be interested in investing. A lot of rumors are surrounding these negotiations which so far has reached no breakthrough. Yesterday it was claimed that the second biggest bank, Popular Bank of Cyprus, was bankrupt, and that Gazprombank the financial arm of Gazprom, the world’s biggest gas company was ready to take over in a trade off with access to blocks on the shelf. That was denied by Gazprombank. It is, however, a fact that both Popular and the Bank of Cyprus are closed to bankruptcy.

Rumors were also spread that Cyprus has given Russia rights to establish a naval base in Mari. Russia might in connection with informal talks on the side line of the official negotiations, sounded out the opportunity to establish repair facilities for its merchant fleet in Cyprus. Similar sounding outs have been given to Greek islands. Nothing has yet been finally settled. Russia might be willing to extend the Euro 2,5 billion credit given to Cyprus for 5 years at 4,5% interest rate for 5 more years.

It is nevertheless worth reminding that England has had two military bases on the island since Cyprus gained its independence in 1960. There are also bases on the Turkish occupied northern part of Cyprus. On that basis a Russian naval base seems rather unlikely.

A delegation from the EU-commission headed by the President, Manuel Barroso, met yesterday with Prime Minister Dmitry Medvedev. Before the meeting Medvedev lambasted the EU’s handling of the Cyprus debt crisis comparing the “levy” with Soviet style confiscations. The fact that EU and the newly elected Cyprus president, Nikos Anastasiades, left Moscow, one of the most concerned parties, out in the dark regarding the bailout created outrage.

Officials in Moscow were privately skeptical to a Russian bailout or in Russia’s interest to provide further bridging loans. Commercial criteria would be the basis for any possible investments. This was clearly expressed by one Russian banker: “Buying worthless equity in a bank for a million or two. That is not going to bear very far here in Moscow”.

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21 March 2013: EU threatens Cyprus with cutoff of funds

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Cyprus is considering to nationalize pension funds which hold between 2 and 3 million euros and issuing an emergency bond linked to future natural gas revenues as talks continue in Nicosia, Brussels and Moscow. The Government has decided to keep banks closed till Tuesday 26th next week in an effort to try to avoid a customer’s run on the bank when they open. The banks have been closed since Friday last week. The Cypriot Parliament on Tuesday rejected EU’s term and conditions for a Euro 10 Billion bailout and turned to Russia for aid. This comes amid threats for a complete cutoff in funds to Cyprus.

Finance Minister Michael Sarris has extended his stay in Moscow. Russian officials said that Sarris has asked for a further 5 billion euros on top of a five year extension and lower interest on an existing 2,5-billion euro loan given in 2011. Russian clients hold approximate 30 Billion Euros in Cypriot banks, and would be especially hard hit by the proposed bailout which threaten to confiscate 9,9% or more on all bank accounts with a balance above 100 000 Euros. That equals a confiscation of 3 – 5 B euros from Russian citizens’ dependent of which percentage is finally chosen. EU has indicated an even higher levy than 9,9% on deposits above 100.000.

Russian Prime Minister Dmitry Medvedev will today meet with a delegation from the EU Commission in Moscow. Both President Vladimir Putin and Medvedev have expressed outrage with the way both EU and the Cyprus government have handled the bailout question. Russia was in spite of promises not consulted in advance. Putin called the bailout package “unfair, unprofessional and with unprecedented consequences”.

In a statement yesterday Medvedev said that Euro zone ministers had behaved “like a bull in a China shop” and likened the proposals to Soviet-era confiscations. This made little impression on EU-leaders who continued to stress that the bailout was fair and urgent action needed to save the overblown banking system in Cyprus from collapsing. The European Central Bank (ECB) warned simultaneously that Cyprus was running out of time. ECB would pull the plug on Cyprus unless the tiny country of 1 million people, quickly accepts a bailout.

That made little impression on Cypriots who continue to balk at EUs demands for a confiscation of 5,8 billion Euros from private accounts. This has so far been a taboo in Europe’s handling of the debt crisis. Private accounts have been regarded sacrosanct and not touched. The reason why EU in relation to Cyprus has chosen to break with this sacred principle, is probably due to the fact that a big number of Russian accounts are involved. Facing an election in September the German Chancellor, Angela Merkel, is afraid of being accused for bailing out rich Russian with for what might be claimed as German taxpayer’s money.

The first turbulence in global markets after the Cyprus crisis is slowly fading for now. Asian markets rose on FED chief, Ben Bernanke’s statement yesterday painting a more optimistic picture of the employment situation without indicating an end to monetary easing. The Euro has stabilized from steep falls earlier in the week. The handling of the Cyprus crisis has once again put the question of the survival of the common currency on the agenda and raised focus on negative growth, political instability and the mass unemployment inside the Euro zone.

On that basis global observers are asking whether the EU-leaders complete have miscalculated markets reaction in their handling of the Cyprus crisis. It is announced that the Cypriot President, Nikos Anastasiades, today is going to present his Plan B for how possibly get out of the crisis. 

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20 March 2013: Cyprus might travel east

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After serious miscalculations both on the part of the Cypriot government and the euro zones finance ministers, the newly elected President Nikos Anastasiades might be heading east. After building close and friendly relations with Angela Merkel and his German sister party, CDU, during the first month of his Presidency, the real content of these relations were put on a severe test during the Euro zone meeting last Friday.

Anastasiades was met with a done deal. His strong objections and clear statement that the proposed bailout would have no chance to pass Parliament, fell on death ears. When appealing to Merkel for flexibility when calling her on Monday, he was met with a cold shoulder and instruction to talk with the troika. Merkel also strongly advised against any contact with Russia.

This response and the Cypriot parliament’s flat rejection, might have given the Cypriot President exactly the encouragement he needed to demonstrate that he is nobody’s puddle. He is neither the property of the German Chancellor or the European Union. In a critical moment of need what the ruling technocratic elites in Europe were able to come up with, was a proposal to temper with private banking accounts and confiscate from 6.75 to 9,9% of their value. This infuriated everybody concerned from poor Cypriot pensioners to rich Russian oligarchs, Arab sheikhs and ordinary employees with small accounts. Nobody likes to have their savings stolen. Over the last days the Euro zone proposal has created an uproar. We can see the beginning of global financial crisis where the Euro falling as a stone and everybody asks which are the next banks to fall.

If this was a calculated risk on behalf of European technocrats they are paying a high price completely overlooking the explosive political dimension in Southern Europe. The President of European Central Bank, Mario Draghi, was as late as in September willing to take whatever it takes to save the Euro. By his strong statement he stabilized euro zone markets and the common currency. By treating a small, but very proud nation as a given entity, the euro zone and the financial markets are plunged back to where they were a year ago. The result of the German inspired austerities are there for everyone to see; negative growth, mass unemployment and new lost youth generations, especially in the periphery of Europe. This does not inspire belief in the high values of democracy and freedom preached by European technocrats.

During the session in the Cypriot parliament yesterday there was not a single vote in favor of the European bail out. Outside Parliament there were furious demonstrations and flag waving remarkably enough in favor of a Russian solution. No wonder that Anastasiades, humiliated and rejected from his Western European friends, feels for going east. His Minister of Finance is already in Moscow. If the President decides to take the next plane the whole nation shall stand behind him and wish him well in the negotiations. From being the “traitor” selling out Cypriot interests, he might during some days have turned into a national hero.

There is, however, be no easy sell for Anastasiades. President Vladimir Putin was furious and offended for not being consulted either by EU or Cyprus before last Friday’s decision. He found the proposed solution “unfair, unprofessional and with unforeseeable consequences”. Russians are world masters in chess, and each move must be carefully considered not at least from the Cypriot side.

But much is at stake also for Russia. The German Minister of Finance, Wolfgang Schaeuble, said this morning that Cypriots only have themselves to blame when they don’t understand that they have an overblown banking sector. From a logical point of view he might have a point. Psychologically he is building under the image of the arrogant German in a situation where the streets in Southern Europe are boiling and where especially bankers and the Brussels technocratic shall think twice before finger pointing. It might be easier for Anastasiades to find common language with their eastern orthodox brothers in Moscow than with a German Lutheran protestant.

Russia has recently given Cyprus a loan on Euro 2,5 billion. To prolong it with 5 years on better conditions might be the easiest part. But by playing hard ball with EU going east, Cyprus might be seeking a bail out partner for their banks in Moscow. For a Russia which already has deposited Euro 30 – 35 Billion in Cyprus, the 10 billion offered in bail out from EU, IMF and ECB, might seem such an excessive amount of money. And in addition: Qatari and Chinese money bags are flirting at the doors. Newly discovered gas on continental shelf is also a part of the game.

Might be that Western Europe in the end needs Cyprus more than Cyprus ever needed the euro. The Cyprus drama seems just about to begin.     

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19 March 2013: Deadlock over Cyprus bailout

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The Cypriot parliament is scheduled to vote over the Brussels agreed bailout later today. The meeting for yesterday was postponed when party deliberations showed that there was no majority in favor of the package. The President of Cyprus informed Angela Merkel last night that he had not been able to mobilize a majority for the bailout package which has created anger and fury in Cyprus and shaken international markets. The initial reactions to the so called “levy” have been disastrous. It is likely that today’s scheduled Parliament meeting again would be postponed. A reject of the bailout shall most probably create new tumults in the markets.

The Cyprus government has decided to close the banks today and most probably for the rest of the week to avoid a rush on withdrawal of deposits. The ATM machines which were emptied during the holidays have been filled up again and are functioning.

The decision to enter private banking accounts and confiscate them at will, have had far reaching effects. Major principles are at stake. The decision to put a levy on deposit accounts have scared global markets. Nervousness and risk aversion are back in play with focus on the Euro zone. Stock markets in America, Asia and Europe fell dramatically yesterday with Asia recovering this morning after digestion.

The big question is that when this could happen to euro member with a tiny economy as Cyprus; constituting 0,2% of the total euro zone GDP, who might next in line? Spain, Portugal or Italy? If the Cyprus bailout continues to be handled in an unprofessional manner this can lead to contagion and a run on the banks all over the euro zone.

The plain content of the Brussels decision is that it overstepped and violated sacred principles of private property rights. Governments should not mess with citizen’s private banking accounts regardless of which strong arguments you think you have. The “troika” representing some of the strongest capital forces in the world, has stressed that Cyprus has an overblown banking sector. Germany and other Euro countries accuse Cyprus for money laundering and that rich Russian oligarchs presumably have deposited money in Cypriot banks.

But are these news have not come to light over night? They have lived with Cyprus since the breakdown of the Soviet Union when Russian businesses without a functioning banking system at home turned its attention to the visa free Cyprus. Anti-money laundering measures are functioning more efficiently in Cyprus today then did when Cyprus entered the European Union 10 years ago and the Euro in 2006. Cyprus has been following the same rules and regulations practiced inside the European union and the Euro zone relating to money laundering.

At the same time Cyprus has been living high on Russian capital injections. Banks, law offices and auditors have prospered and so has the real estate sector. Why this sudden change of heart? What justifies that euro ministers and President Anastasiades permit to give banks a green light to intrude on and steal from clients banking accounts regardless of whether you call it a “levy” and not theft or for that sake a bank robbery.

The Cypriot government has used the last 24 hours to try sugar a decision which from the very beginning was ill thought. Brussels have seemingly blessed that Cypriots are free to decide to exempt smaller savings account from the “levy” as long as the total confiscation stands at 5.8 Billion Euro.

That does not change the sacrosanct principles involved in spite of Euro ministers and the Cyprus government now pretending to be modern Robin Hoods stealing more from the rich than the poor. Russian and British companies and private accounts are most severely hit. President Vladimir Putin and Prime Minister Medvedev are understandably furious. Russia gave Cyprus a generous loan on Euro 2,5 billion in 2011. Nevertheless neither Euro finance ministers nor the Cypriot government bothered to consult Moscow before this crucial decision was taken.

The Cypriot Minister of Finance has planned to go to Moscow on Wednesday presumably to ask for better terms. We wish him a good trip. The Minister might find that the timing for asking for more favorable terms and conditions on existing loans is ill planned when it comes on the top of a confiscation of might be 4 – 5 billion Euros. Putin has rightly called Friday’s decision “unprofessional, unfair and creating a dangerous precedent”.

For clients of MAYZUS Investment Company it is once more important to stress. Whatever outcome the planned “levy” shall have no impact on their deposits with MAYZUS Investment Company. Only a tiny portion of our funds are placed in Cypriot banks. Client funds are with prime banks outside Cyprus.

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18 March 2013: Vote on controversial Deposit haircut today

The Cypriot Parliament is later today going to vote on EU finance ministers unprecedented decision  to impose an all-out haircut on Cypriot deposits. The newly elected President Nikos Anastasiades was in Brussels with his  finance minister Friday night and returned back to a uproar among Cypriot and foreigners who had entrusted their savings to the island’s banks and now found them in risk of being confiscated.

  The bail-out was cut from Euro 17 to 10 Billion and implies that savers have been forced to bear the cut. Banks are by Tuesday 19th automatically going to withdraw 9,9 % on deposits above Euro 100 000 and 6,75 % on all smaller amounts. It is unclear whether this implies both private and corporate accounts.  But most likely both.  It also seems that the decision applies to accounts in all Cyprus based banks regardless of their origin country.  All accounts seem to be hit in an action that best can be described as pure confiscation or theft of private savings and funds.

  The unilateral action of the European Union and the Cypriot government have instituted a new practice never earlier seen in financial markets. The confiscation or “levy” which they call it, is estimated to contribute Euro 5,5 billion towards the recapitalization of the Cypriot banks. This counts for more than 50 % of the bail out from the richest countries in Europe.  In a televised speech on Sunday  President Anastasiades defended his decision and stated that Cyprus was faced with the gravest situation since the Turkish invasion in 1974. The Cypriot government has “sugared”  its measures by stressing that the confiscated funds are compensated by shares in the island’s   bankrupt banks, the Bank of Cyprus and Popular Bank.

  Supporters of the new president have lately stressed his good and friendly relations with Angela Merkel and other European center right leaders.  “Lazy” Greeks and “irresponsible” Cypriots have for long time leading up to the German elections in September,   been negative headlines in the German press. Nikos Anastasiades got his chance to prove he is Germany’s devoted  friend.  He might have helped Merkel’s election campaign, but does this decision serve ambitions of making Cyprus a financial center?

 This is also a question of negotiating tactics. In its dealings with EURO zone finance ministers and the “troika” of representatives from the International Monetary Fund, IMF, the European Central Bank, ECB, and EU, Cyprus demonstrated that they were overeager to strike a deal. This never pays off in  a Brussels nourished by confrontations and last minute’s deals.  The late hours exercise in Brussels have given both Cyprus and the Euro zone members a hard  lesson.  It is time for blue Monday blues.

 The new Cyprus government  has experienced – if they believed it in before – that there are no solidarity or true friends in Europe.  It does not matter  whether you are  a goodwill pro-European   or a former communist. European relations are built on interest politics.  Cyprus has less than a million people and institutes 0,2 % of the Gross Domestic product inside the Euro zone. But exactly the size is why European leaders could have afforded to be a little generous.  Instead  EU once again demonstrated  an attitude which lately has brought the Southern periphery of Europe to despair.

 Today the Euro is falling 100 points close to 1,29.  The message is clear.  Neither  markets nor Cypriots any longer trust the Eurozone reliability.  Why should other Western European depositors do when their banks are bankrupt.   Today Cypriot bank customers are  treated dis respectfully. Their deposits are stolen  and  they are offered valueless shares.  Next time the same medicine might be ordained to Italy, Spain, Greece, Portugal or  for that sake Netherlands.

 It has been sent a clear message to whole Europe. When governments are reluctant to pay for their banks speculations and excesses private property rights do not apply. Then it is up to the man in the street to pay the bill by having their accounts confiscated.

  Luckily enough Mayzus Investment has been wisely enough to keep our client funds in banks outside Cyprus.

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