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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