Parliamentary vote on a knife-edge as geopolitics remain to the fore
As European finance ministers urged Cyprus to rethink a bailout haircut that wasn’t their idea in the first place, Cypriot authorities were flailing about into the early hours of today trying to change the terms. It now looks certain that they are moving to scrap the small customer levy in favour of a much higher one on larger depositors.
But Wolfgang Schäuble’s “it wont me guv, ‘onest” line had fallen apart by this morning. What The Slog alleges on Monday, the Wall Street Journal confirms on Tuesday
‘Nicosia appears to have been taken entirely by surprise when presented with an ultimatum at Friday’s Eurogroup meeting in Brussels.’
And another high-profile Greek source adds, “Using Reuters the Germans are framing the story to appear as Cyprus’ fault. In other words they are blaming Anasta for wanting to protect Russians instead of Cypriots. The sad part of course is that there are people who will buy such crap because the Germanophile Reuters wrote about it….”
But even as Schäuble continued to defend his position, claiming “The levy on deposits under €100,000 was not an invention of the German government”, the Eurogroup begged to differ. Although last Sunday in an interview on public tv ARD, Schäuble directly blamed the European Central Bank, the European Commission and the Cypriot government for involving tax small savers (anyone but him, basically) ECB board member Joerg Asmussen rejected Schäuble’s accusations. He countered: “In the last days it was not the ECB that pushed for this special structure that was chosen, it was the result of the negotiations in Brussels.” And pushing hard for 40% in that meeting (with no transcript record of anyone batting for the little guy) was….Wolfgang Schäuble.
Then again, it seems Mr Asmussen himself is being economical with the truth: “One should not, through the wrong actions in Cyprus, put in risk what has been achieved at high political and financial risk in the eurozone in recent years,” Asmussen pronounced pompously. But the WSJ writes this morning that Asmussen was the one who, in the early hours of Saturday threatened to cut off Cyprus’ two largest banks from the ECB’s emergency funding if a deal was not achieved.
This might of course suggest to the casual reader that one can’t trust anything anyone of any rank in the European Union says. Ever. But we mustn’t be sour about it. The idea to focus on here is getting rid of these clowns at the earliest opportunity.
Banks on Cyprus were ordered to stay closed for two further days to avoid an inevitable bank run, as the government delayed for the second day running a parliamentary vote on the terms agreed between eurozone officials and the International Monetary Fund last weekend…those very same terms those very same officials are now ‘urging’ the Cyrpriots to change. George Orwell eat your heart out.
If the deal were not to change, it’s clear the vote would be a knife-edge affair.
In the Cypriot Parliament there are a total of 56 seats, divided currently between the Anastasiades party (20), the Coalition Party DIKO (8), AKEL (19), EDEK (5), EUROKO (2), Greens (1) and Independent (1).
Sources claim that around 27 out of 28 opposition MPs are expected to vote No to the depositor haircut. The total Yes votes range is between 27 and 30.
In short, the vote could very easily go either way – and the Cyprus Central Bank is prepared for both eventualities. Cypriot media are reporting that the CCB has already secured 5 billion euros to address the expected withdrawals from the banking system…always assuming of course the banks do ever open again. (Lest we forget, that expected bank run is half the bailout cost. You really couldn’y invent this nonsense if you tried).
Throughout yesterday, commentators around the world were trying to analyse and understand what looked like a profoundly crazy move from Brussels-am-Berlin. But Slog sources and established facts in the public domain build a telling picture of what this panic may really be about:
* It is thought that the natural gas reserves in Cypriot territorial waters could be as much as 60 trillion cubic feet.
* A delegation from Russian energy giant Gazprom recently visited the Cyprus presidential palace to submit a proposal for a refinancing commitment from the Russian side – as in, the complete decoupling of Cyprus from the EU and the IMF – in return for access to industrial development land in Cyprus, and permission to construct a gas processing plant in Mari.
* Although Wolfgang Schäuble talks a great deal about the Cypriot economy having been “unsustainable” because of the low taxes offered to investors, the reality is that Cyprus banks only got into trouble because of over-exposure to Greek bonds, and PSIs 1 & 2 – that is, the collateral damage was inflicted upon Cyprus by the subordination decisions of Mario Draghi at the ECB. (Once again, The Slog asks, “Where is Mario Draghi?”)
* The Cyprus bailout haircut decision will destroy the two systemic banks, Bank of Cyprus and Laiki, and that in turn will destroy the Cypriot economy. One is left wondering who gains and who loses geopolitically from this: but there’s little doubt in my mind that this was a geopolitical move.
* As a valued Greek source puts it. ‘Cyprus is a tiny economy that has survived 60 years as Spy Central for the British, US, and NATO looking east, and Russia and Israel looking west. This is a deliberate decision to upset the strategic apple cart.”
* Bizarrely, last Friday President Vladimir Putin signed a government-sponsored law banning foreign banks from opening branches in Russia. We wonder if he will make an exception for German banks.
Yesterday, normally calm and serene Cypriots mob climbed atop the German Embassy in Cyprus, tore down the German flag and burnt it. So it’s all going rather well.