Was Cyprus Chosen To Be Left Holding The Bag??

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This seems a bit strange to me.  It isn’t that important to me, but, it’s curious, and may lead to insights about the Eurozone’s leaders and help us anticipate some of their future actions or inactions. 

Cyprus is looking for a bailout, but, some of the EU members are reluctant to do so. 

BERLIN (Reuters) – The euro zone is not considering a debt restructuring for Cyprus, the EU’s top economic official was quoted on Friday as saying, as the heavily indebted island struggles to negotiate an international aid deal.

What is ironic, is that much of Cyprus’ problems stem from the Eurozone’s dealings with Greece.  Of course, not all, they still had and still have some fundamental problems.  Electing a communist probably isn’t the smartest way to deal with them.  Still……

Cyprus applied for a financial rescue last June after its banks suffered huge losses on the EU-approved writedown on Greece’s debt.

Cyprus was heavily invested in Greece and its debt. 

But “a haircut is not an option for us,” Olli Rehn, the European Economic and Monetary Affairs Commissioner, told the German business daily Handelsblatt in an interview.

Ratings agency Moody’s slashed Cyprus’s credit rating by three notches late on Thursday on an expected rise in its liabilities, adding that it saw a 50 percent probability the Mediterranean island would “default outright or press for a distressed exchange” on its debt.

Are they going to simply let Cyprus go down the drain?  I doubt it.  They’ll probably give them the $17 billion or so and simply keep Cyprus indebted to the ECB and IMF.  And, maybe that’s the plan.  But, why let Greece write down it’s debt but not Cyprus?  Sure, Cyprus is friendly with Russia, and Russia doesn’t play nice with the Eurozone, but I can’t believe that’s what is behind this reluctance to bail out such a tiny nation when they throw billions of Euro’s around to other much more expensive nations. 

Read more here.

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8 Responses to Was Cyprus Chosen To Be Left Holding The Bag??

  1. tckev says:

    Has the music stopped in the EU and Cyprus is left without a seat? It certainly looks like it. Or maybe the politics is a bit deeper.
    From http://www.zerohedge.com/contributed/2013-01-09/russian-“black-money”-threatens-boot-cyprus-out-eurozone

    “A “secret” report by the German version of the CIA, the Bundesnachrichtendienst (BND) was leaked last November, revealing that any bailout of Cyprus would benefit rich Russians and their €26 billion in “black money” that they deposited in the now collapsing banks. The report accuses Cyprus of creating ideal conditions for large-scale money laundering, including handing out Cypriot passports to Russian oligarchs, giving them the option to settle in the EU. Much of this laundered money then reverses direction, turning minuscule Cyprus into Russia’s largest foreign investor [read… The Bailout of Russian “Black Money” in Cyprus at http://www.testosteronepit.com/home/2012/11/4/the-bailout-of-russian-black-money-in-cyprus.html%5D.”

  2. Bruce says:

    More to this than meets the eye.

    Germany, the EU’s paymaster, has expressed unease about channelling taxpayers’ money into a country seen by some as a hub of money laundering. Cyprus is a popular tax haven for wealthy Russians but says it fully complies with international rules against money laundering.

    Mr Rehn said he shared those concerns.

    “The government in Nicosia has already changed its legislation (on money laundering). But we must now ensure that the new laws are also applied. The problems are known to me,” he said. (Link)

    Looks like the EU are applying thumbscrews to make sure the regime in Nicosia don’t weasel out of fixing up the corruption issues. I wonder who will blink, given the Russian mafias are not quite so nice as Eurocrats when it comes to kneecappings and the like.

    • DirkH says:

      It depends. The Lisbon treaty declares that the EU may use as much military force as necessary to quell uprisings, and that deaths during such action are very unfortunate indeed but entirely legal.

    • suyts says:

      I wasn’t aware they addressed such eventualities.

      • DirkH says:

        http://www.redicecreations.com/article.php?id=5932
        “Professor Schachtschneider pointed out that it [the European Union reform treaty, a.k.a. the Lisbon Treaty] also reintroduces the death penalty in Europe, which I think is very important, in light of the fact that, especially Italy was trying to abandon the death penalty through the United Nations, forever.

        And this is not in the treaty, but in a footnote, because with the European Union reform treaty, we accept also the European Union Charter, which says that there is no death penalty, and then it also has a footnote, which says, “except in the case of war, riots, upheaval” – then the death penalty is possible.

        Schachtschneider points to the fact that this is an outrage, because they put it in a footnote of a footnote, and you have to read it, really like a super-expert to find out!”

        This is the preferred instrument of execution:
        http://www.eurogendfor.eu/
        “EGF goal is to provide the International Community with a valid and operational instrument for crisis management, first and foremost at disposal of EU, but also of other International Organizations, as NATO, UN and OSCE, and ad hoc coalitions.”

        EUROGENDFOR does comprise troops from the protectorates but not from the fatherland (Germany); we have outsourced it this time.

        • Bruce says:

          You realise Dirk that any eurocrat actually doing any of this stuff would be stuck in hearings before the EU Human Rights Commission forever? A fate truly worse than death!

          Anyway Turkey owns the top half of the island. I doubt they’d be pleased with Europolitik happening just over the border.

  3. Pablo says:

    The new funds that Cyprus needs to recapitalise its banking system are estimated to be in the region of 6-9 billion. Out of these around 4.5 billion (or 25% of GDP) were a result of the EU imposed haircut to Greek sovereign debt. A political decision at EU level aimed to save Greece but in effect shattered the Cypriot Banking System that now requies up to 50% of Cyprus GDP to recapitalise.

    In effect EU leaders dumped on Cyprus a disproportionate share of Greece’s bailout in the form of greek bond haircut and now attack Cyprus for a problem THEY created. Imagine if a country like germany found themselves requiring half their GDP to recapitalise their banking sector!

    These are the facts gentleman. The rest are politics and geopolitical games by Germany and Co. The funny thing about the Germany / Finland / Holland claims of Cyprus being a money laundering heaven is that according to all available reports on Money Laundering (MoneyVal, OECD, FATF) Cyprus is way ahead of these countries in compliance and in fact is leading in some crucial areas..

    Below the relevant presentation that can be found in Cyprus Minitry of Finance website:

    http://www.mof.gov.cy/mof/mof.nsf/All/7898A0DEC664B4D9C2257AEF0043718D/$file/AML%20MOKAS.pdf.

    • suyts says:

      Pablo, sorry about the wait for your comment to be posted. I had overlooked it earlier today. Welcome and thank you for your contribution. Now that you’ve been approved as a commenter, your comments will appear in real time without the need of prior approval. (With a two link limit) Again, welcome!

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