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FAO, CAIN: The Germans don't even TRY to hide it, anymore.

Started by The Good Reverend Roger, March 18, 2013, 08:19:46 PM

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Cain

Via an anonymous source in Madrid:

Quote"...Far more significant is a growing sense here that Germany is up to something big, perhaps even a decision to get the hell out of the euro. It simply isn't credible to suggest that Schäuble didn't know what effect this Cyprus deal would have. After the briefing against Draghi last week, I think the smart money is on a selfish move by Berlin, but Merkel won't want to do that before the elections there – unless she wants to spike the anti-eurozone guns by getting out before it all goes tits up. You have to see this Cyprus haircut as an attempt by the Finance men in Berlin and Frankfurt to test the water. There's no other logical explanation. But Merkel isn't a risk-taker. To be frank, almost none of it makes sense right now".

Cain

Cyprus has rejected the German plan.  And their finance minister (who has not apparently resigned) is in Moscow.

Hmmm.

Faust

Quote from: Cain on March 19, 2013, 05:22:21 PM
Quote from: Cain on March 19, 2013, 01:17:08 PM
When you're not HSBC, or Wells Fargo, or...

Also, remember what all the banks have been after since 2008?  That sweet, sweet drug money...they'll launder it for organized crime, and it keeps them capitalized.  It's been strongly suggested that drug money was the only thing that prevented several large banks from collpasing in the wake of the credit crisis.

Just to back up my claims

http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims

QuoteDrugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations' drugs and crime tsar has told the Observer.

Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were "the only liquid investment capital" available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

Fuck.
Sleepless nights at the chateau

Cain

This is a really good article.

QuoteThe Cyprus sovereign has not been particularly profligate. Debt to GDP as late as last year was in the low 70% range, lower than Germany, etc. While the last Communist government ran unnecessary fiscal deficits, the new government was elected with a more or less 'austerity' orientation

QuoteBanking assets are about 7.1x GDP relative to the EU average of 3.5x GDP and similar to Ireland and Malta.

Luxembourg, by contrast, where Anglo-Saxon firms do their tax arbitrage has banking assets of 21x GDP. So, Cyprus's exposure is similar to that of an economy that has large financial services sector, but that still has a real economy too. It is not Luxembourg nor the Cayman Islands nor the Bahamas nor the Channel Islands and so on.

QuoteWhat is even more absurd is that this is not a bail-in of Depositors of Bank A to rescue Bank A, but a bail-in of Depositors of Banks A-Z to rescue Depositors of Bank A (Laiki), B (Bank of Cyprus) and C (maybe some small amounts to the others).

This is one of the reasons that the Russians are howling mad. There are 3B dollars of Russian money in a subsidiary of VTB in Cyprus, a perfectly solvent Russian bank. As far as I can tell, they will be haircut in order to bail out Laiki, a bank that they never deposited money in. On the contrary, the depositors in Laiki's branches in Greece (aka a totally insolvent bank in a much more insolvent sovereign) will not be haircut.

QuoteThe large account holders (large being defined as above 100K) are not just fat-cat hedge funds (as if 100K makes you a fat-cat) but the operating accounts of basically every business of size in Cyprus.

BoC and Laiki are the whole money center system of Cyprus and basically you cannot transact business in Cyprus if you are of any size and avoid them.

So, the chaos that is going to emerge when checking accounts, payroll accounts, escrow accounts, pensions, trusts, payments-in-transit and so on are arbitrarily haircut is going to be massive – both in disrupted business operations and small business bankruptcies, but also in thousands of legal disputes.

QuoteYou will haircut 10% of deposits on day 1 to make up a capital shortfall and promptly watch 30% of the rest of the deposits flee the country, leading to a much bigger capital hole that Europe will have to fill.

In addition, this will severely cramp Cyprus's main economic driver the last 2 years (selling real estate, tourism and accounting services to Russians) so any concept that it will make the debt "more sustainable" comes from a lunatic place in financial modeling. Cyprus is a 78% services-based economy. So, if you assume that GDP growth is exactly the same before and after you confiscate the assets of your clients, well, I have a solvent Cypriot bank to sell to you...

This is so obviously risky, that the more paranoid commentators believe it is a deliberate plan by Germany to end up as a multi-deca-billion creditor to Cyprus to which the pledging its oil and gas reserves is the only solution. I don't think this is the case, but boy it is getting hard to believe that they are this short-sighted.

Personally, I think the paranoids might have a point.

LMNO

Krugman has this to say:

QuoteThe Germans don't want a Cyprus collapse / exit from the euro, but they also don't want the spectacle of German taxpayers bailing out Russian money-launderers. So what they did instead was blackmail Cyprus into having Cypriot depositors bail out Russian money-launderers. That way Germany's hands are clean.


Cain

But that makes no sense, given the information in the above article.  Indeed, going by that, the Russian mobsters are taking a haircut to bail out Laiki, which is having problems due to overexposure in Greece.  And the Russian government is pissed about the whole process.  I won't given credence to the more lunatic proclamations against the Russian government or Putin, but even I'm not going to admit the government over there is not heavily intertwined with organized crime.

Krugman doesn't know what he's talking about.

Cain

The response of the German government to the vote: "nice economy you got there.  Would be a shame if anything were to happen to it."

Teh Beeb:

QuoteGermany's finance minister has warned Cyprus that its crisis-stricken banks may never be able to reopen if it rejects the terms of a bailout.

Wolfgang Schaeuble said major Cypriot banks were "insolvent if there are no emergency funds".

The Good Reverend Roger

Quote from: Cain on March 20, 2013, 12:50:53 PM
The response of the German government to the vote: "nice economy you got there.  Would be a shame if anything were to happen to it."

Teh Beeb:

QuoteGermany's finance minister has warned Cyprus that its crisis-stricken banks may never be able to reopen if it rejects the terms of a bailout.

Wolfgang Schaeuble said major Cypriot banks were "insolvent if there are no emergency funds".

His name.  :lol:

WOLFGANG.
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

Anna Mae Bollocks

Quote from: The Good Reverend Roger on March 20, 2013, 01:49:12 PM
Quote from: Cain on March 20, 2013, 12:50:53 PM
The response of the German government to the vote: "nice economy you got there.  Would be a shame if anything were to happen to it."

Teh Beeb:

QuoteGermany's finance minister has warned Cyprus that its crisis-stricken banks may never be able to reopen if it rejects the terms of a bailout.

Wolfgang Schaeuble said major Cypriot banks were "insolvent if there are no emergency funds".

His name.  :lol:

WOLFGANG.

:lulz: :horrormirth: :lulz:
Scantily-Clad Inspector of Gigantic and Unnecessary Cashews, Texas Division

Junkenstein

I seem to recall something about the percentage of dirty money in cyprus being way over the legitimate funds.

I wonder how much of that money is Russian? There's certainly a lot of UK dirty cash there, surely that would be pocket change compared to Russian funds?
Nine naked Men just walking down the road will cause a heap of trouble for all concerned.

Cain

From the article I posted above

Quote20B of the 70B of deposits are non-EU (aka Russia/CIS) which, while meaningful (28%), hardly dominate the system

Junkenstein

This is exactly what happens when I post without reading links first.

Back to the quiet corner for me.
Nine naked Men just walking down the road will cause a heap of trouble for all concerned.

Faust

So Cypress 's finance minister was in Russia yesterday and now we are getting rumours of a Russian naval base being established in cypress.

Cypress has seen what Europe did to Greece. Greece, Russia and the Greeks in Cypress are all orthodox. I wonder how uneasy the Turkish part of the Island is feeling right now.
Sleepless nights at the chateau

Cain

http://www.foreignaffairs.com/articles/139069/yuri-m-zhukov/trouble-in-the-eastern-mediterranean-sea

QuoteIn recent years, resource disputes in the South China Sea have made headlines across the world. But another body of water -- the Mediterranean -- is rapidly becoming as volatile as its eastern cousin. Exploratory drilling near the coasts of Cyprus, Egypt, Israel, Lebanon, Syria, and Turkey has unearthed vast reserves of natural gas. Competition over the rights to tap those resources is compounding existing tensions over sovereignty and maritime borders. Without more active engagement by outside powers, these disagreements will be difficult to resolve.

QuoteSince Cyprus signed a maritime border agreement with Israel in 2010, it has become the second main beneficiary of the gas boom. The island straddles Israel's most likely gas export route to European markets. Cyprus also lays claim to its own gas deposits. The Aphrodite field, which is adjacent to Leviathan, may contain up to seven tcf of natural gas -- enough to meet Greek Cypriot domestic consumption needs for decades to come. Yet even that field is contested by others. The breakaway Turkish Republic of Northern Cyprus claims co-ownership of the island's natural resources and has opposed Nicosia's attempts to unilaterally secure offshore drilling contracts.

Like Northern Cyprus and Lebanon, Turkey has viewed the Israeli-Cypriot gas bonanza with apprehension. Ankara does not recognize Cyprus' border agreements with its neighbors and fears that Turkish Cypriots will be excluded from Nicosia's future gas profits. Turkey also sees a possible gas export route through Cyprus and Greece as a threat to its own ambitions as a transit country feeding Caspian and Central Asian gas to the European market. Ankara has thus protested cooperation between Israel and Cyprus and supported Lebanon's position in boundary disputes with Israel. Upping the ante, Turkey has scheduled major naval exercises to coincide with drilling by Greek Cypriot contractors and has sent its own exploration vessels to disputed waters, threatening to drill on behalf of Turkish Cypriots in the Aphrodite field -- which lies partly within Israel's economic zone.

QuoteIsrael and Cyprus see Russia as a source of both technical expertise and potential political support. Russia has repeatedly affirmed Cyprus' right to explore offshore deposits in its exclusive economic zone. And the Russian navy has sought to restore its once-formidable local presence -- which peaked at 96 warships during the 1973 Yom Kippur War, declined to between five and eight by 1991, and fell to zero throughout most of the post–Cold War period. Since 2011, Russia has conducted three series of naval exercises in the Mediterranean, on a scale unseen since Soviet times. The latest round, in January 2013, involved more than 20 surface warships and submarines from the Black Sea, Baltic, and Northern fleets, as well as long-range aviation from the Fourth Air and Air Defense Forces Command. The exercises covered more than 21,000 nautical miles and tested the resilience of command and control systems in a range of scenarios -- from disaster management and counterterrorism to air defense and antisubmarine warfare. Commenting on the exercises, Russian Foreign Minister Sergey Lavrov said, "We are not interested in further destabilization of the Mediterranean region, and the presence of our fleet is an unconditional factor of stability."

The more you know, and all that.

The Good Reverend Roger

" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.