Thread: Cyprus to get loans from russia

Those of us who get involved in the Financial Crisis know that little Cyprus has warranted inclusion in mainstream PIIGS discussion for at least the last two years .
But there is barely even passing reference to Cyprus when insolvent Staes are mentioned .No " C " in Piigs , unfortunately .
Of course Cyprus can have some money . Their requirements are comparative chicken feed

BUT FROM RUSSIA ?
Not the ECB .Not from the new organisation for loans to defaulting EU countries and not from the IMF
What deal has Russia offered?
Are they desperate for a Mediterranean port?
Of course they are . They have fought wars over hundreds of years to get a Med presence .
So I wait to hear the true background details behind this crafty move .
Far too clever for Putrid . I would love to know what part Kudrin played , even though he is nominally out of Government .


Cyprus to seek aid from Russia,
Cyprus will ask Russia for a loan of up to 5.0 billion euros ($6.4 billion) this week and then request aid from eurozone partners for its ailing banks, an EU diplomat said Wednesday.
The crisis-hit Mediterranean island will "first try to get a bilateral loan from Russia," said the diplomat, speaking on condition of anonymity.
Cyprus would then probably request eurozone aid for its banks next week along the lines of an offer made to Spain, he said.
The source had no figure for the banking needs, saying Nicosia must conduct a "clear analysis."
Asked for comment, a spokesman for the Cyprus mission to the European Union told AFP: "We are examining all possible options."
Cyprus, which is taking over the European Union's rotating presidency as soon as July 1, has already secured a 2.5-billion-euro low-interest loan from Russia to cover its refinancing needs for this year.
Estimates are that Cyprus needs around 4.0 billion euros to prop up its banks and help narrow the budget deficit, which widened last year to double the EU ceiling of three percent of gross domestic product (GDP).
The island's banks are heavily exposed to the troubled Greek economy.
The government is already committed to underwriting a 1.8 billion euro capital issue for the island's worst exposed institution -- Cyprus Popular Bank -- to recapitalise against the Greek debt crisis.
The Cypriot finance minister, Vasos Shiarly, said Tuesday that help could come bilaterally or through the eurozone's rescue fund, the European Financial Stability Facility (EFSF).
"We are optimistic that we can secure funding needed to recapitalise the bank either through a bilateral agreement or from Europe (Chicago Options: ^REURUSD - news) via the EFSF," he said.

Bank holiday in Cyprus till next week...

Cyprus banks shut until Tuesday amid scramble for Plan B
20 March 2013 - Cypriot officials have said the country's banks, which were closed to prevent mass withdrawals, will remain shut until at least Tuesday.

On Wednesday afternoon the cabinet began an emergency meeting to discuss alternatives to an EU-IMF bailout deal rejected by parliament on Tuesday. Reports say the government is considering imposing capital controls when banks are reopened. Meanwhile, Cyprus' finance minister is in Moscow to seek help from Russia. Russia holds multi-billion dollar investments in Cyprus.



Finance Minister Michalis Sarris said after talks with Russian Finance Minister Anton Siluanov: "There were no offers, nothing concrete," but he added, "we're happy with a good beginning." Talks are expected to continue in Moscow on Thursday. The banks will remain shut on Thursday and Friday this week and Monday 25 March is a scheduled bank holiday. The stock exchange also remains closed. Germany has said banks in Cyprus may never reopen if a bailout is not agreed.

'Not sustainable'

Earlier, Cypriot President Nicos Anastasiades met party leaders and the central bank governor in Nicosia to hammer out a Plan B, after a one-off tax on savings failed to get the support of any MPs. Mr Anastasiades has also been talking to the European Union, European Central Bank and International Monetary Fund (IMF). Bank mergers, a bond issue and more Russian funding have all been mentioned as ways to help the country out of the crisis.

The establishment of a "bad bank" which would take on risky assets held by Cypriot banks has also been mentioned by officials. The BBC's Mark Lowen, in Nicosia, says Cyprus' banks are still giving out cash through machines - although with limits, and some are running low. Some businesses are now refusing credit card payments, our correspondent reports.

On Wednesday, German Chancellor Angela Merkel said she regretted but respected the Cypriot vote. She said the eurozone had a duty to find a solution for Cyprus, but added that the country's current banking system was "not sustainable". Cyprus' banks were left exposed following the debt crisis in Greece and there are fears Cyprus could go bankrupt if they fail. German Finance Minister Wolfgang Schaeuble warned Cyprus that its banks might never be able to reopen if it rejected the bailout.

'Honest discussion'

Granny says, "Dat's right - dem banks was too big fer dey's britches...

Does size matter? Cypriot bank sector problem went overlooked
21 Mar.`13 - There was no official red flag that Cyprus's oversized banking sector posed a big risk to its economy until last year, when the European Union set up tools to monitor such imbalances, a Reuters review of EU reports dating back to 2003 showed.

The total consolidated assets of the Cypriot banking sector, dominated by three large banks, are 7.5 times the size of the island's economy, which produces almost 18 billion euros ($23.27 billion) a year. Because Cypriot banks suffered heavy losses in the Greek sovereign debt restructuring last year, Nicosia now needs an international bailout. Most of the emergency loans from the euro zone, once agreed, will go to recapitalize the banks.

One of the conditions for the bailout, however, if that Cyprus will more than halve the size of its banking sector by 2018 to match the EU average of around 3.5 times GDP. "The banking sector is completely over-sized. That's why the preconditions to solving this problem are very difficult," German Finance Minister Wolfgang Schaeuble said last week. "Solutions have to be found to that. The Cypriot banking sector, like in other countries, with its special rules that led to it becoming over-sized, has contributed significantly to the cause of the problem," he said.

This is a relatively recent conclusion. When Cyprus was examined as to whether it met the criteria to join the European Union in 2003, a European Commission report on its readiness mentioned no problems with the banking sector - it was not a criterion for membership.

Neither did the European Central Bank mention that anything was wrong with Cypriot banks or their business model - based on funding from deposits, almost half of which are from non-residents - when it evaluated whether Cyprus was fit to join the euro zone in a 2007 report. "They had 10 years to make this point and while it was made informally here or there, nobody ever said or did anything about it," one euro zone official said.

CYPRUS IS NOT THE ONLY ONE

Granny says, "Dat's right - the financial sky startin' to fall...

What happens if Cyprus collapses?
Mar 23,`13 -- What happens if Cyprus' banks collapse? If its government goes broke? If it leaves the euro?

The European Union, the International Monetary Fund, the European Central Bank and the country's leaders are trying to find a deal to secure a 10 billion euro ($13 billion) loan for Cyprus and stave off a failure of its banking system. The Cypriot parliament has already rejected one deal, which would have taxed all bank deposits in the country. The ECB has now put a ticking timer on this drama by declaring it would cut off emergency support to Cyprus' banks on Monday if no deal is found. That's the worst case. Even if a deal is found, the messy decision-making over the past week will have shaken confidence in Cyprus and the euro currency union itself. Here's what's at stake.

CYPRUS

The consequences for Cyprus itself could be so rough that many analysts think some kind of deal will be struck. If not:

The only thing keeping Cyprus' banks afloat right now are short-term loans from the Cypriot central bank with the blessing of the ECB. The banks need this special funding because they can't borrow normally. They don't have good enough collateral to receive normal loans from the ECB, and others are reluctant to lend to them for fear of not getting their money back. The emergency lending program isn't publicly declared, but analysts say the Cypriot central bank has already handed out around 9 billion euros ($11.6 billion). If the ECB pulls the plug, the Cypriot banks would probably not be able to open their doors, or would very quickly collapse because they wouldn't be able to satisfy the likely rush of customers pulling their money out. Then the banking system enters a sort of twilight zone - with the banks closed, there can be no real run on the banks, but salaries won't be paid, mortgage payments won't go through, electricity bills will linger.

After the banks, the next logical step is that the government goes bankrupt, either as it tries to shore up the banking system or because it is on the hook for insuring all deposits under 100,000 euros ($130,000). The resulting disaster cannot be predicted clearly - and shouldn't be underestimated. The road could lead to an utter breakdown not just of the economy, but of the country's social fabric. Some economists say that as euros become scarce, Cyprus may have to issue some sort of IOUs for people to buy basic necessities. That could lead to hyperinflation, in which the prices of goods double and triple regularly. The country might have to prevent cash from leaving its borders. People may turn to barter. Commerce will slow or grind to a halt.

The country could leave the euro, and no one really knows what happens then. It's such a terrifying possibility for Cyprus and Europe that some analysts think the EU will step in at some point to prevent it from happening, even if most of the damage to Cyprus is already done. "The euro area doesn't want a failed state in Cyprus," said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington. "Once the disaster happens, I would actually imagine that the euro area would be relatively lenient with respect to engaging in a new program."

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Originally Posted by waltky

What happens if Cyprus collapses?

What happens if it "collapses" ? Perhaps it would be for the best. Just because a "collapse" sounds bad, does not mean any of the other options would be better.

Originally Posted by waltky

What happens if Cyprus' banks collapse? If it leaves the euro?[/i]

Here's a question no one seems to be asking: Why exactly would Cyprus have to leave the euro? Why not just ban the government of Cyprus from issuing any euros?

Banks in Cyprus opened on Thursday - for the first time in nearly two weeks...

Bank of Cyprus big depositors could lose up to 60%
30 March 2013 - Bank of Cyprus depositors with more than 100,000 euros (£84,300; $128,200) could lose up to 60% of their savings as part of an EU-IMF bailout restructuring move, officials say.

The central bank says 37.5% of holdings over 100,000 euros will become shares. Up to 22.5% will go into a fund attracting no interest and may be subject to further write-offs. The other 40% will attract interest - but this will not be paid unless the bank performs well. It was known that the wealthiest savers at the Bank of Cyprus would take a large hit from the bailout deal - but not to this extent, the BBC's Mark Lowen reports. Cypriot officials have also said that big depositors at Laiki - the country's second largest bank - could face an even tougher "haircut". However, no details have been released.

The officials say that Laiki will eventually be absorbed into the Bank of Cyprus. The fear is that once the unprecedented capital controls - which are in place for an indefinite time - are lifted, the wealthiest will rush to move their deposits abroad, our correspondent says. He adds that the larger than expected loss could also have devastating consequences for large depositors such as schools and universities. And it could spread fear in other indebted eurozone countries that Cyprus might set a precedent.

'Loans written off'

Cyprus needs to raise 5.8bn euros to qualify for the bailout, and has become the first eurozone member country to bring in capital controls to prevent a torrent of money leaving the island and credit institutions collapsing. The original 10bn-euro bailout deal was agreed in Brussels earlier this month. It placed a one-off tax on all customers of Cypriot banks, starting at 6.75% for the smallest deposits. But this led to mass protests across Cyprus, and the deal was later voted down by the country's parliament. MPs later backed a revised deal. Cypriot President Nicos Anastasiades has said the financial situation has been "contained" following the deal. He has also stressed that Cyprus has no intention of leaving the euro, stressing that "in no way will we experiment with the future of our country".

On Thursday, banks in Cyprus opened for the first time in nearly two weeks. Queues formed of people trying to access their money, but the mood was generally calm. By Friday, banks had returned to their normal working hours and there were no longer reports of big queues. In a separate development, Cyprus launched an investigation after Greek media published the names of politicians who allegedly had loans forgiven by three Cypriot banks at the height of the crisis. The Bank of Cyprus, Laiki and Hellenic Bank apparently wrote off loans of millions of euros to companies, local authorities, and politicians from some of the island's biggest parties. The list has now been handed to the ethics committee of the Cypriot parliament.

http://www.bbc.co.uk/news/business-21982652

Russia Won’t Bail Out Cyprus Savers Facing Deposit Losses

Russia won’t bail out people or companies that stand to lose money held at Cyprus’s two largest banks, First Deputy Prime Minister Igor Shuvalov said.

“If someone gets stuck and loses money in those two biggest banks, that’s really too bad,” Shuvalov said in an interview late yesterday on Russian state television. “But the Russian government isn’t planning to do anything in this case.”
http://www.bloomberg.com/news/2013-0...it-losses.html

SAUER: Mebbe dis is why...

ANALYSIS: Russia tones down anger over Cyprus — but why?
Mon, Apr 01, 2013 - CHANGE OF HEART: Putin was breathing fire over the country’s first bailout deal, but he has not made any criticism over the current one, which raises questions

When the terms of the first and now abandoned EU bailout deal for crisis-stricken Cyprus were announced, Russian President Vladimir Putin bared his fangs to describe the proposal as “unfair, unprofessional and dangerous.” Russians have billions of euros deposited in Cyprus banks — some, but by no means all, in illegal tax evasion scams — and the 10 percent mooted levy on all bank deposits risked them losing chunks of their money. However, when a week later Cyprus and its EU partners agreed a different bailout deal that some analysts believe may prove just as costly for Russians, Putin did not make the slightest criticism and instead suggested Russia could ease the terms of a 2.5 billion euro (US$3.21 billion) loan to Cyprus. The Kremlin’s sudden change in tack raised a range of questions about the murky world of Russian money in Cyprus and the effect of the Cyprus bailout deal on the Russian economy.

The terms of the second deal were significantly different to the first. Rather than taking 10 percent from all deposits in all Cypriot banks, the levy was substantially increased, but restricted to just two banks, Bank of Cyprus and Laiki. Crucially, this excluded Russian Commercial Bank, which is the Cypriot unit of Russian state-controlled bank VTB, as well as other Russian-owned entities where Russian funds are concentrated. “A key positive for us was that no Russian bank was part of the solution,” Renaissance Capital chief economist Ivan Tchakarov said. Standard and Poor’s said that in the end, the terms of the bailout will have a “relatively marginal impact on the consolidated financials of rated Russian banks with a presence in Cyprus.” Nevertheless, Russian depositors are sure to sustain losses and also be hit by the capital controls imposed by Cyprus.

According to the Vedomosti daily, Putin’s initial fury was as much irritation at not being consulted by the EU about the first deal as concern about its economic consequences. The precise value of Russian deposits in Cyprus is disputed with estimates ranging from between 5 billion and 25 billion euros. Standard and Poor’s believes that the majority of the non-resident deposit base in Cyprus, which totaled 21 billion euros as of Jan. 31, came from Russia and other ex-Soviet states. Neil Shearing at Capital Economics said that even under the new bailout, Russian investors could lose 5 billion euros, but he said that even this is “fairly small in the grand scheme of things” and unlikely in itself to have a major impact on the Russian economy. However, there could be a more significant indirect effect, especially due to the imposition of capital controls, he emphasized in a note to clients.

The Russian government would like it to come home. Russian Deputy Prime Minister Igor Shuvalov said the crisis was proof of solidity of the Russian banking system compared with some of its partners and was a “good signal” to encourage Russians to invest more at home. However, a substantial reverse flight is hardly likely. “Russians keep part or all of their wealth abroad for a variety of reasons and while the Cyprus experience is not a good one ... there are plenty of other hubs out there,” Tchakarov said. Hong Kong and the Netherlands — which has a relaxed tax regime — have been cited as possible destinations for Russian deposits, as well as the Baltic states, in particular Latvia. Latvian media reports have said Riga has already been warned by the European Central Bank that accepting Russian money from Cypriot offshores would harm its chances of joining the euro, but Latvia’s finance minister has said there is just a “very, very minor inflow” of Cyprus money.

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Is it game over for Cyprus as the financial services sector crumbles?...

Cyprus: What does the future hold?
2 April 2013 - What is the future for the Cypriot economy following a 10bn-euro bailout deal with the European Union and the International Monetary Fund?

To ask about a country's long-term prospects in the middle of a financial crisis is something of a fool's errand. How the future pans out for Cyprus will depend crucially on what happens over the coming days, weeks and months. Will Cyprus be able to lift restrictions on bank accounts quickly? Will the banking system recover? Will the offshore banking business evaporate?

While we can only speculate at the answers to these questions, two conclusions stand out:

The short-term is looking very bleak and could involve a 20% shrinkage in gross domestic product (GDP) by some estimates
The longer-term is, at best, uncertain and largely outside the country's control

Bank malfunction

The immediate problem facing Cyprus is how to restore confidence in its banking system. The job of its banks is to keep the flow of money to the economy going. Disrupting that flow is akin to disrupting the flow of blood to the brain. Since the banks reopened - after closing for two weeks - there remain limits on how much access Cypriot people and companies have to their money. The continuing malfunction of the banks has two nasty consequences. First of all, capital controls - and a suspension of lending - prevent the normal functioning of the economy by starving businesses and households of the means of payment. There are potentially permanent consequences if these measures stay in place for too long. For example, Cypriot businesses face limits on their ability to pay suppliers, and may have to lay off staff and sell off valuable assets in order to survive.



Much of the cash they held at the two biggest banks - the defunct Laiki and the restructured Bank of Cyprus - has now been lost forever. As the weeks pass with restrictions still in place, the incentive will strengthen for Cypriots to hoard assets - such as euro banknotes, jewellery, even yachts - that can then be moved offshore, further disrupting economic activity. What the authorities hope is that, once hefty losses have been calculated and imposed on the trapped depositors at the two banks, the European Central Bank (ECB) will deem the Cypriot banks to be sufficiently healthy again. Then the controls can be quickly lifted because the ECB should be willing to lend the banks whatever cash they need to meet depositor withdrawals - as happened with Greece's bank run last summer. The ECB may also need to airlift a few million extra banknotes to Nicosia.

Feeling deflated

See also:

The pain of southern Europe's unemployed
2 April 2013 - When Europe's unemployment figures were published today, they once again underlined the north-south divide. Increasingly there are two Europes.

As Andrea Broughton from the Institute for Employment Studies points out: "At the lowest end are Austria, with an unemployment rate of just 4.8%, Germany (5.4%) and Luxembourg (5.5%). "This contrasts with Greece, where the rate is 26.2% (December 2012 figure), Spain, with a rate of 26.3%' and Portugal, with a rate of 17.5%." Perhaps the most disturbing figure is for youth unemployment. The average rate for the under 25s in the EU is 23.5%. Nearly a quarter of Europe's youth are not working. In Spain the figure is 55.7%.

For the moment the strategy for keeping the eurozone together is sharpening Europe's divide. The Germans believe that a combination of austerity and structural reforms will eventually spark growth in southern Europe and narrow the gap in competitiveness. There are a significant number of officials and economists, however, who doubt the policy is working. Indeed they believe that several countries are now trapped in a cycle of decline. Only this week the French President Francois Hollande said that "sticking with austerity would condemn Europe not just to recession but an explosion".

Lost generation


Some economists say Germany's austerity measures have trapped southern countries in a cycle of decline

So far Europe's young people have been remarkably tolerant of unemployment levels reminiscent of the Great Depression. There has been some burning of EU flags and anger with the Germans but Europe's so-called lost generation has not yet challenged the role of Europe and its institutions. Brussels and Europe's leaders have been able to blame the crisis on the financial crisis of 2008 and to insist it was "made in America". But the truth is somewhat different. The structure of the eurozone, with one interest rate for all, enabled countries like Spain to embark on a construction boom. Ireland had a similar story. Greece initially benefitted from unrestricted flows of outside capital and wages soared. What the financial crisis in America did was to bring the party to an end. A reckoning followed. The price is still being paid with wages and costs being slashed in an attempt for these mainly southern countries to regain competitiveness within a monetary union. The question remains: in the end were the economic differences between the countries which adopted the euro too great and are millions of young Europeans paying for that mis-judgment?

Whilst the official line is that the euro has been saved, privately there is far more anxiety. Increasingly the threats to the eurozone are seen as not so much the bond spreads, but the combination of deepening recession and rising unemployment in parts of Europe. As Nicholas Spiro of Spiro Sovereign Stategy said, "the surge in joblessness coupled with this morning's grim PMI surveys [manufacturing surveys] are a glaring example of the extent to which market sentiment towards the eurozone has become detached from economic fundamentals. The disconnect is most pronounced in Spain and Italy but is also manifest in France". Europe's leaders are in the fourth year of fighting this crisis and the reality is that the gap between some of those countries which share the common currency is only widening.

http://www.bbc.co.uk/news/world-europe-22006666