So Cyprus has been in the news. Looks like they’re trying to create a blueprint for bank-runs and Euro exits.
So far, this is the timeline. I may update this over the next few days, depending on how the story unfolds.
- Announcement of a “levy” on all deposits with Cypriot banks. All. Doesn’t matter if you’re a billionaire Russian oligarch or a widow with Euro2,000 on deposit. Nice. Some comments about the Eurozone (ahem, Germany) not wanting to bail out said Russian oligarchs.
- Then announcements of a Euro20,000 minimum below which no levies will be, uh, levied. Banks are still shut. I wonder whether ATMs are still working?
- Then the surprise (?) failed vote. The “levy” or “haircut” is not happening just yet.
- Cyprus looking to Russia for a bail-out
- Former Cyprus Central Banker on the “failure of the European project”
- Cyrpus has 4/5 chance of leaving the Euro according to some betting sites. (Haven’t got a link to this, or even genuine confirmation. Still looking. Interestingly, until recently, Greece was still the clear favourite with Cyprus well behind.)
- The UK is flying Euro1,000,000 to troops in Cyprus. That sounds like a failure of a banking system already to me.
- Medvedev blames EU for treating Cyprus poorly. But I guess there are vested interests there in spades. Cyprus is the largest FDI investor in Russia, thanks to some fancy finance and tax haven loopholes.
- Banks will now be closed until next Tuesday (26 March 2013), which means they will have been closed for over a week. That’s only a few days to get a solution agreed AND implement it.
- And now a new deal. Large depositors taking significant haircuts, bad debt rolled into “bad bank”, closure of at least one bank, some banks to open tomorrow, but others only in another couple of days and general chaos. This is not pretty.
- As expected, banks did not open on Tuesday, but are scheduled to open today. With restrictive withdrawal limits, no ability to cash cheques, limited monthly credit card transactions and police guarding the banks.
The saddest part that these two weeks of chaos are only the thin edge of the wedge. The massive depression and unemployment (and probably *still* capital flight) that we will have over the coming year in Cyprus is the real tragedy.