Cypriots Stunned by Forced Savings Cuts

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

Antipathy towards Russia was one of the prime driving forces to bring the small eastern European countries into the EU, so nobody should be surprised at the sentiment expressed by the Estonians. But I wouldn't put much weight on it in terms of supporting a "Germanic block".

These states don't trust Germany either. Poland in particular is extremely wary. The Germans under Angela Merkel's immediate predecessor, Gerhard Schröder, didn't do themselves any favours with their rush to cosy up to the Russians to secure gas energy supplies via Nord Stream. That sort of thing isn't forgotten, and not one of these states believes that the Germans or Europe will come their aid if push comes to shove with the Russians (my late father-in-law was born in Poland, fought against both the Germans and Russians in WWII, so my views might be biased based on that association). I don't think the Germans can or should count on the unconditional support of the FSU eastern Euro states.

A "Germanic restructuring" of the whole of southern Europe flies in the face of more than 2000 years of history. It is a doomed venture imo...unless this is the second coming of the Visigoths with a modern-day financialized version of the Battle of Adrianople...

From the BBC:

Today about 1,500 students marched to parliament in Nicosia. They believe the bailout deal robs them of a future.

Their angry chants were directed at the troika, the EU and in particular Germany's Angela Merkel. There were banners linking Mrs Merkel to Hitler. Outside parliament they shouted "Merkel is a whore!" Such a scene would have been unimaginable in Europe only a short while ago.

The eurozone crisis has soured relations between Germany and southern Europe. I have heard anti-German rhetoric in Italy, Spain, Greece and Cyprus.

The currency intended to bind Germany into Europe has ended up sowing division.

Germany did not, I believe, seek a leadership role in Europe. Its economy, however, has made it Europe's indispensable power. In order to keep the eurozone together Berlin has prescribed its medicine - cuts to the deficit and structural reforms that are intended to usher in growth later. To survive in the eurozone these mainly southern European countries are being told to regain competitiveness by cutting wages and benefits.

The ultimate test for the eurozone is whether this strategy will work. The German Finance Minister, Wolfgang Schaeuble, told the Athens daily Ta Nea that he believed the austerity measures were not just working but making up for decades of policy lapses...

You could very well be right that Germany is overplaying its hand, and that what I've referred to as the germanic block isn't as unified as it needs to be to succeed. There is indeed a lot of history to sift through, and it is hard to know who will be seen as a bigger threat, for example Germany or Russia. My own father is from what is now Kaliningrad, so I have also heard enough stories to believe that the region has plenty to be suspicious of on all sides.

I'm a little less convinced that the restructuring is necessarily doomed, but I am willing to believe that there is a good chance it won't be pulled off.

The reason is that I'm trying to focus not on the intensity of protests, but the trends. I would expect the most fiery protests to come at the moment that change is actually implemented, and drop off from there, unless conditions continue to worsen after that point. What remains to be seen is if the protest of 1,500 students is the largest, and tails off, or if it continues to grow, even after the action is settled and over. Assuming that the deal is implemented swiftly, I'd hold off for about a month, to evaluate the reaction to the actual deal. The man-on-the-street reaction to the overall plan will take at least a decade to judge, should things last that long.

I do agree with you that Germany is unwilling to be seen as modern-day Visigoths. But it will take an incredible amount of convincing for them to consider that concept seriously. I believe that they see themselves as offering the gift of institutional soundness and parasite-free, democratic government to the people in the periphery. They think this will be a traumatic transformation, but will in the end be, if not exactly appreciated, then at least grudgingly acknowledged as less corrupt. As long as they see the possibility of such a long-term reconciliation with their process, I imagine they will persevere.

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

You could very well be right that Germany is overplaying its hand, and that what I've referred to as the germanic block isn't as unified as it needs to be to succeed. There is indeed a lot of history to sift through, and it is hard to know who will be seen as a bigger threat, for example Germany or Russia. My own father is from what is now Kaliningrad, so I have also heard enough stories to believe that the region has plenty to be suspicious of on all sides.

I'm a little less convinced that the restructuring is necessarily doomed, but I am willing to believe that there is a good chance it won't be pulled off.

The reason is that I'm trying to focus not on the intensity of protests, but the trends. I would expect the most fiery protests to come at the moment that change is actually implemented, and drop off from there, unless conditions continue to worsen after that point. What remains to be seen is if the protest of 1,500 students is the largest, and tails off, or if it continues to grow, even after the action is settled and over. Assuming that the deal is implemented swiftly, I'd hold off for about a month, to evaluate the reaction to the actual deal. The man-on-the-street reaction to the overall plan will take at least a decade to judge, should things last that long.

I do agree with you that Germany is unwilling to be seen as modern-day Visigoths. But it will take an incredible amount of convincing for them to consider that concept seriously. I believe that they see themselves as offering the gift of institutional soundness and parasite-free, democratic government to the people in the periphery. They think this will be a traumatic transformation, but will in the end be, if not exactly appreciated, then at least grudgingly acknowledged as less corrupt. As long as they see the possibility of such a long-term reconciliation with their process, I imagine they will persevere.

1500 students in Cyprus is irrelevant in the greater scheme of things, I agree. The results of the restructuring, essentially the Germans demanding that southern Europe somehow remake their economies in their image, will determine the outcome. If it is seen to be working (and I firmly believe that history is on the side of failure) it will indeed save Europe. If it is not and the pain of austerity drags on, I expect there will be mass emigration out of the region to the north of Europe or elsewhere (including the USA), and a rise in dependency on EU handouts for those that remain...

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

1500 students in Cyprus is irrelevant in the greater scheme of things, I agree. The results of the restructuring, essentially the Germans demanding that southern Europe somehow remake their economies in their image, will determine the outcome. If it is seen to be working (and I firmly believe that history is on the side of failure) it will indeed save Europe. If it is not and the pain of austerity drags on, I expect there will be mass emigration out of the region to the north of Europe or elsewhere (including the USA), and a rise in dependency on EU handouts for those that remain...

It seems we differ at this point only in our probabilities. Maybe I'm just an optimist (though that would be an unusual characterization for me generally). I do like to think people are adaptable to change, even if they resist it coming. I know people who have been forced to adapt to far, far worse. They were miserable, but survived.

The outcome you describe in the event of EU failure is certainly in line with what I'm thinking. It would be pretty ugly.

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

It seems we differ at this point only in our probabilities. Maybe I'm just an optimist (though that would be an unusual characterization for me generally). I do like to think people are adaptable to change, even if they resist it coming. I know people who have been forced to adapt to far, far worse. They were miserable, but survived.

The outcome you describe in the event of EU failure is certainly in line with what I'm thinking. It would be pretty ugly.

I've never been able to quite understand how Germany expects Greece to become "more German" when the primary industrial infrastructure to work with is 500-year old olive trees...

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

I've never been able to quite understand how Germany expects Greece to become "more German" when the primary industrial infrastructure to work with is 500-year old olive trees...

It is rather hard to visualize, isn't it? But in many ways some of the southern countries have already changed a lot more than we give them credit for. I've read, for example, that the cultural norm of the siesta, in place for centuries as a way to adapt to the southern climate, has largely being abandoned to accommodate international business norms. What other adaptations have been implemented that we just haven't noticed yet? Europe is by its nature and geography more international than the US, and even Canada. There's a lot of change that might have been drifting below the publicized surface, driven by trade.

I tend to think of a lot of these changes as being the sort of ones southern nations might have gravitated towards anyway over time, but are by virtue of a crisis being forced to adopt far faster than they otherwise would have. And that will exacerbate the pain. But I'm less certain that these countries really want no change at all.

I tend to think that if that were really the case, they wouldn't have joined the Euro in the first place. Maybe the FIRE elements saw it as a get-rich-quick scheme, but I have a harder time picturing that notion in the average man-on-the-street. The politicians may have mislead about the extent of change, but the people did follow, at least enough to let them go through with it. And I don't think the average European was entirely unaware of the concept that this would involve change. Am I really giving them too much credit in that? European voting statistics usually describe a more politically active and aware society than in the US (I can't speak for Canada).

So I don't have the answer to how Greece will adapt. But I do think that there are some entrepreneurs there who have some ideas, and freed from an overwhelming and opaque state, they might have a chance to actually do something with them. This isn't the sort of question that anyone but a person on the ground can answer. Who knows, maybe someone has a great idea to remake olive oil into the next big health food. Stranger things have happened. I eat Greek yogurt for breakfast.

Would you prefer that the state, or worse, Germany, pick the exact path? ;)

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

It is rather hard to visualize, isn't it? But in many ways some of the southern countries have already changed a lot more than we give them credit for. I've read, for example, that the cultural norm of the siesta, in place for centuries as a way to adapt to the southern climate, has largely being abandoned to accommodate international business norms...

Chuckling to myself...the reason the siesta was "abandoned" is because air conditioned offices and retail malls allowed that to happen. The same thing has happened all across the Middle East, Africal and large swaths of India. Given how difficult it is to travel in now congested cities nobody but the wealthiest individuals from the last generation (with chauffeured cars) wants to go home and then come back again for another 4 hours of work. For the most part only the open air souqs and bazaars, and certain professional service offices run by older partners tend to close during the afternoon. I don't think international (read: "temperate climate European and USA") business norms had all that much to do with it. If that was the case we would have seen a convergence of the weekend days across the globe to facilitate international business...and that has certainly not happened. Compare Dubai, with it's 50 deg C summer temperatures, to what it looked like 20 years ago. No need to stop working mid-day now, but they still shut the place down every Friday...

Edit Added: I thought this was interesting. I gather this pension fund got caught with €2m of Cypriot bonds still in its portfolio this past week (a paltry sum in reality). "...Its finance minister Helmuth Markov from the far-left Linke party says he's confident their value will bounce back..."

German pension fund slammed for 98% bond allocation

29 Aug 2012

GERMANY - The €252m civil servants pension fund for the German province of Brandenburg has drawn fire for its ongoing exposure to the bonds of Europe's downgraded peripheral member states.

The pension fund, set up in 2010, has invested solely in bonds, with more than 90% rated A to AAA due to investment regulations.

A finance ministry spokeswoman confirmed to IPE that nearly 98% of the portfolio was invested in the bonds of companies, banks and EU member state governments.

Brandenburg's finance ministry sold off some of the scheme's Portuguese holdings earlier this year amid growing fears of a default, while a few of its bond holdings in Cyprus and Ireland have recently been downgraded below investment grade.

Yet Helmuth Markov, Brandenburg's finance minister, noted during a parliamentary question hour that the scheme was not planning to sell off any more holdings in Cyprus and Ireland, given that it did not anticipate major losses, and the fact the scheme had adopted a 'buy-and-hold' strategy...

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

Chuckling to myself...the reason the siesta was "abandoned" is because air conditioned offices and retail malls allowed that to happen. The same thing has happened all across the Middle East, Africal and large swaths of India. Given how difficult it is to travel in now congested cities nobody but the wealthiest individuals from the last generation (with chauffeured cars) wants to go home and then come back again for another 4 hours of work. For the most part only the open air souqs and bazaars, and certain professional service offices run by older partners tend to close during the afternoon. I don't think international (read: "temperate climate European and USA") business norms had all that much to do with it. If that was the case we would have seen a convergence of the weekend days across the globe to facilitate international business...and that has certainly not happened. Compare Dubai, with it's 50 deg C summer temperatures, to what it looked like 20 years ago. No need to stop working mid-day now, but they still shut the place down every Friday...

Fair enough. I could be reading that one dead wrong (that's what happens, I suppose, when you get your news from the Economist.) And I have from the beginning conceded that my broader optimism may also be misplaced, if so I would guess is more a function of my personal philosophy than any data I have seen.

Edit Added: I thought this was interesting. I gather this pension fund got caught with €2m of Cypriot bonds still in its portfolio this past week (a paltry sum in reality). "...Its finance minister Helmuth Markov from the far-left Linke party says he's confident their value will bounce back..."

German pension fund slammed for 98% bond allocation

29 Aug 2012

GERMANY - The €252m civil servants pension fund for the German province of Brandenburg has drawn fire for its ongoing exposure to the bonds of Europe's downgraded peripheral member states.

The pension fund, set up in 2010, has invested solely in bonds, with more than 90% rated A to AAA due to investment regulations.

A finance ministry spokeswoman confirmed to IPE that nearly 98% of the portfolio was invested in the bonds of companies, banks and EU member state governments.

Brandenburg's finance ministry sold off some of the scheme's Portuguese holdings earlier this year amid growing fears of a default, while a few of its bond holdings in Cyprus and Ireland have recently been downgraded below investment grade.

Yet Helmuth Markov, Brandenburg's finance minister, noted during a parliamentary question hour that the scheme was not planning to sell off any more holdings in Cyprus and Ireland, given that it did not anticipate major losses, and the fact the scheme had adopted a 'buy-and-hold' strategy...

Ya know, I feel like I can relate to every party in the Bundestag, and even their unseated rivals. But the Linke (formerly the communist party) still surprise me on occasion. In this case I'd say the decision had to be a conscious choice to show solidarity with the periphery. The Linke party is also the sole, small, dissenting voice in German politics that advocates for Keynesian stimulus (and consequently votes against the stricter measures). It must be lonely...

[Chris Coles]

Re: Cypriots Stunned by Forced Savings Cuts

Edit Added: I thought this was interesting. I gather this pension fund got caught with €2m of Cypriot bonds still in its portfolio this past week (a paltry sum in reality). "...Its finance minister Helmuth Markov from the far-left Linke party says he's confident their value will bounce back..."

German pension fund slammed for 98% bond allocation

29 Aug 2012

GERMANY - The €252m civil servants pension fund for the German province of Brandenburg has drawn fire for its ongoing exposure to the bonds of Europe's downgraded peripheral member states.

The pension fund, set up in 2010, has invested solely in bonds, with more than 90% rated A to AAA due to investment regulations.

A finance ministry spokeswoman confirmed to IPE that nearly 98% of the portfolio was invested in the bonds of companies, banks and EU member state governments.

Brandenburg's finance ministry sold off some of the scheme's Portuguese holdings earlier this year amid growing fears of a default, while a few of its bond holdings in Cyprus and Ireland have recently been downgraded below investment grade.

Yet Helmuth Markov, Brandenburg's finance minister, noted during a parliamentary question hour that the scheme was not planning to sell off any more holdings in Cyprus and Ireland, given that it did not anticipate major losses, and the fact the scheme had adopted a 'buy-and-hold' strategy...

This is a wonderful example of the underlying structural difficulties caused by, (we must assume in all fairness; the unintended consequences), of regulation. It is these regulations that have very effectively broken the chain of events that once made the Western economies so successful but that now preclude ANY involvement in what I call grass roots equity capital investment. Over most of the Western nations, we hear of very high unemployment levels; yet we now have no mechanism to invest from large pools of savings due to regulations that preclude the "Risk".

[don]

Re: Cypriots Stunned by Forced Savings Cuts

Financial Times

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

This is a wonderful example of the underlying structural difficulties caused by, (we must assume in all fairness; the unintended consequences), of regulation. It is these regulations that have very effectively broken the chain of events that once made the Western economies so successful but that now preclude ANY involvement in what I call grass roots equity capital investment. Over most of the Western nations, we hear of very high unemployment levels; yet we now have no mechanism to invest from large pools of savings due to regulations that preclude the "Risk".

The western economies are no longer structured for investment. They are structured to encourage and demand speculation. This is a trend that has been in place since the 1980s commodity downturn and financialization. We just don't seem to know any better now...

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

Financial Times

Doesn't seem to matter where that bar is, they are all in trouble...

[don]

Shattering the Myths of Certainty

Fear and Uncertainty in Cyprus

by NIGEL O'CONNOR

Nicosia.

The municipal theatre of Nicosia sits directly behind the Cypriot parliament. Its prominence within the capital suggests the importance of such civic buildings to a population seeing itself as the inheritors to the grand heritage of Greek tradition stretching back millennia.

On the dusty window of the theatre’s box office, set behind the neo-classical columns of the building’s exterior, a poster advertises a production of classic Greek tragedies. Given the events unfolding in the Greek portion of this divided Mediterranean island over the past week the choice of production seems poignant.

The irony is compounded by the fact that the poster is from the summer of 2008. Performances of the production were cut short when the theatre’s roof collapsed that June – months before the onset of the global financial crisis which brought sharp shocks to European Union economies, including Cyprus. After extensive renovations in 2004, during the boom years when Cyprus enjoyed the benefits of its newfound position as a growing financial centre and member of the EU, the building now sits empty, unused and unusable.

Many Cypriots may now feel their country went the way of Icarus who, according to Greek mythology, thrilled by the exhilaration of flight, flew too near to the sun before the wax holding his wings together melted – sending him plummeting into the sea.

The comparison may be an obvious one but it certainly looks to be the scenario facing the financial services sector of the Cypriot economy.

Fear and uncertainty pervade the atmosphere in Cyprus.

Last week’s announcement that the Cypriot government would seize a portion of all bank account holders’ deposits sparked anger in Cyprus and concern for a bank run in other euro zone economies affected by the debt crisis.

While it may be difficult to sympathise with financial institutions and their managers whose unquenchable thirst for profit has led their countries to the brink, it should be remembered that human lives are being affected too – in the form of the hardworking people being made to pay for the mess and unsure of the security of their savings, jobs and livelihoods. A basic tenet of the social contract in our market capitalist society – that workers can trust banks to safely keep their finances – has been breached.

“People were making millions selling air and now they say we were all responsible for it. It was like there was a party on for years and I was never invited,” said Panayiotis Stavrindis, a psychology professor at the University of Cyprus. “Now I wake up and the party’s a funeral and they’re burying me. “

To tempt investors the lowest corporate tax rate in Europe was offered, at 10 percent. Foreign money looking for safety in the euro zone arrived and the region’s third smallest economy, with an annual GDP of €18 billion, accumulated bank deposits to the value of €70 billion. Many Russian investors arrived in Cyprus to establish companies and the ratings agency Moody’s estimates Russian deposits account for €24 billion of the total. It is thought that last year alone saw more than €192 billion transferred between Cyprus and Russia.

Allegations of Cyprus being a centre for money laundering are commonplace. A November 2012 article in Der Spiegelcited German foreign intelligence reporting the main beneficiaries of any European assistance to Cyprus would be “Russian oligarchs, businessmen and mafiosi who have invested illegal money in Cyprus”.

While lax scrutiny from national regulators attracted money launderers it was also the undoing of the entire system and placed Cyrpus into its current crisis.

Last May the Cypriot government nationalised part of the Cypriot Popular Bank – or Laiki – and took over management in order to avoid requesting a bailout from the European Union. Cypriot leaders feared Europe would impose austerity measures should they request financial assistance – ruining its attractiveness to foreign investors. Nonetheless that appeal was made just several weeks later, making Cyprus the fifth euro zone economy to seek funds from the EU after Greece, Ireland, Spain and Portugal.

Last decade, business, as they say, was booming and in 2006 the Greek investment company Marfin Investment Group acquired Laiki with a cash injection from Dubai Financial, an arm of the state-owned Duabai Investment Group, by purchasing HSBC’s 21 percent share. By year’s end MIG had acquired a controlling stake in the bank. The purchase of Laiki coincided with MIG’s acquisition of Greece’s Egnatia Bank and the pair were merged to create Marfin Popular Bank – later renamed Cyprus Popular (Laiki) Bank.

Between 2007 and 2009, as the economic bubble burst and financial crisis set in, Laiki acquired around €3 billion in Greek sovereign bonds. In 2011, Greek bonds lost over 70 percent of their value and Laiki registered a loss of €2.5 billion for the financial year. The Cypriot government borrowed the same amount of money from Russia in December of 2011.

In addition to Laiki’s Greek bond purchases, many questions have been asked regarding hundreds of millions of euros in loans to Greek companies and investors that used the money to invest directly back into MIG.

The bank’s plight has sucked the national economy into a spiral.

Michaelis Sarris was the government-appointed non-executive chairman at Laiki and now serves as the country’s finance minister. A June 2012 Reuters report quoted him as calling for an investigation into the loans used to buy MIG shares.

“We now have a loan portfolio in Greece of about €12 billion and funding of €6-7 billion,” Sarris was reported to say. “There is a lot of smoke, which means there is some fire but how much of it, and to what extent can it be justified, I am not sure.”

The Cypriot government’s intervention into Laiki diluted MIG’s holdings to 1.5 percent. In January, MIG announced its intention to sue the Cypriot government for the losses.

Cyprus was said to need €17 billion in assistance in order to prevent the collapse of its banking system. By Friday 15 March, it was apparent that when the banks reopened the following Tuesday, after a national holiday on Monday, Laiki would be bankrupt before lunchtime. It was feared this would trigger a run on the entire sector and cause national paralysis.

Following meetings in Brussel’s Cyprus’s president Nicos Anastasiades, emerged from talks with the European Central Bank, the European Union and the International Monetary Fund to announce a plan that would seize a percentage of all of the country’s private bank accounts in order to recapitalize two ailing banks, raising close to €7 billion and securing€10 billion in emergency loans from Europe.

Despite the insistence of EU officials to the contrary, the announcement – in addition to prompting anger amongst Cypriots fearing for their savings – caused panic in other troubled European economies, where people feared the Troika was establishing a precedent of raiding bank accounts in order to secure public finances.

Anastasiades, elected president in February, lacked support within the legislature to pass the tax into law and delayed the implementation of the plan in order to consider other options, including financial assistance from Russian investors. Last Tuesday, parliament met to reject the tax. Anastasiades’s own party abstained during the vote.

With no alternative forthcoming the government determined to hit accounts with more than €100,000 with a 30 percent tax and to split Laiki into so-called “good” and “bad” banks. The Bank of Cyprus, the country’s second largest bank, would acquire the good portion and the bad would be sold off.

As Cypriot authorities continue to seek to minimise the effects to the national economy, banks remain closed until Thursday and limits have been placed on daily cash machine withdrawals from customers’ accounts.

The situation last week in Cyprus was fluid, with people not knowing what the next day would bring. An economist with Laiki, I met Stavros (name changed on request) in his home on the Monday following the announcement. He sat in his tracksuit glued to the television in his modest domestic surroundings on the outskirts of Nicosia. Frustration crossed his face as he flicked through satellite channels offering a stream of talking heads giving their perspective on the crisis.

“This is a time for the economists and all we are hearing is the opinions of politicians and idiots,” he said, changing the channel with an exaggerated flick of the remote control.

He offered a frank analysis of the state of Laiki.

“If the bank opens tomorrow we will collapse within one or two hours,” he said. “We’ll need police protection because there will be desperate people willing to do something crazy to get their money.”

Intermittently he glanced at a mobile phone and laptop sitting on the side table next to the couch. He was waiting for a phone call or email to say whether the bank would open the next day for him to go to work. For all he knew it might ring for someone to tell him he no longer had a job to go to.

“The Germans are sending a message to the banks, that’s all this is,” he said of the demands Cypriot account holders cough up to contribute to the bail-out.

Stavros believed Europe’s hard-line stand on depositor contributions to the refinancing was an attempt to move money from Cyprus into other European countries.

“The Germans talk about dirty money from Russia in Cypriot banks but when you use their matrix for determining the amount there is more in Germany or the Netherlands than in Cyprus,” he claimed. “They see us as a small country and they can send a message to the Russians through our suffering.”

The final deal implemented by the Cypriot government, and agreed with the EU, saves ordinary Cypriots the severity of a raid on their savings while targeting the big money that has arrived on the island. Things will not be the same when banks reopen on Thursday.

“All of the confidence will be gone from the Cypriot banking system now regardless of what happens next,” he said fatally.
That was certainly the view of Andriyanova Natalia Patsalidou a Russian living in Cyprus for over a decade and working in financial services.

“For the past two days I’ve done nothing but answer emails from clients in Russia seeking to move their entire accounts,” she said at a protest in front of the Cypriot parliament on the Monday following Anastasiades’s Saturday announcement.

Many Cypriots are sympathetic towards Russia, whose political support during the partition of the island and shared Christian Orthodox faith offers a stronger tradition of loyalty than with Western Europe.

“The Russians have always helped Cyprus,” said Paris Mavronikis, a 26-year-old lawyer, who attended last week’s protests in front of the Cypriot parliament. “They helped us become a leading economic centre so why should we throw them away? We are throwing investors out of Cyprus.”

Panayiotis Stavrindis, who in addition to his university work engages in political activism and commentary, explained the people’s rejection of the government’s original plan in a collective psychological context.

“There is a great disappointment and sense that in Brussels they don’t care about how people will be made to suffer,” he said. “This is not what the people believed in when the European project was launched after the Second World War. We were sold the idea of solidarity.”

He sees dangers in the use of stereotypes to justify the imposition of harsh economic treatment on Europe’s weaker economies.
“We have to stop stereotyping. It’s the worst thing we can do. First we had the ‘lazy Greek’. Now we are the ‘Cypriot money launderer’. Who’s next the Italians and the Spanish?”

In Cyprus, with a militarised population (every male is conscripted to the army) and a convenient ‘other’ in the form of Turkish Cypriots, Stavrindis sees the emergence of extremist politics as a serious threat.

“Things are changing and moving very fast. In times of conflict and crisis, new and dangerous ideas come to the front. The nationalist movement and the bigotry that is hidden during the prosperity years emerge,” he said.

Stavrindis cites the Golden Dawn in Greece as an example of the movements currently gaining momentum in Europe’s economic periphery. “They offer people a sense of dignity and being able to stand on their feet through bigotry and strong language,” he said. “In the past few years they have gone from two and a half percent to around 15 percent in popularity. They’ve gone from being a clique of criminals to part of the normal political establishment.”

The youth of Cyprus, Stavrindis says, have been raised on myths – with an identity gained from the separation of the island and its Turkish and Greek populations. He describes people in their early 20s as possessing “an exaggerated sense of their economic and political safety”.

“The young generation today grew up with physical and psychological walls of separation. They saw these as evidence of how much better off we were without the Turkish Cypriots. The first wall to fall apart was the prosperity delusion.”

For Cypriots of an older generation, the shock of reverting to more simplistic expectations is challenging many assumptions taken for granted a few years ago.

“I told myself I was safe but I don’t feel safe now,” says Maria Polli, a working mother of five and resident of Nicosia. “It is a strange feeling when you don’t know what tomorrow will bring.”

Polli is struggling to find the money to continue living in her rented family home. She works as an assistant to a manager at a pharmaceutical factory and her husband runs a business fixing computers, making between €60-100 on a good day.

In Cyprus, a country which contributed to each of the other four EU member states’ receiving bailouts, there is a sense of abandonment.

“We thought to be a member of the EU would mean each member would help each other. But they don’t care,” she said. “Now they’re pushing us, they’re threatening us.”

She sees many people as not ready for the changes about to come into their life, resulting from economic hardship.

“People had faith in money,” she said. “It came so suddenly and we lost the meaning of being human beings. It’s good to have a smack in the face to realize the meaning of real life.”

Stavrindis asks similar questions about the needs of people and the origins of their expectations.

“Can we live by spending less and reading more? Producing our own goods and consuming less exotic commodities? Do we need holidays in Disneyland or is a tent on a remote beach with some good food and music enough?”

The luxury of time to consider these questions may well have disappeared.

http://www.counterpunch.org/2013/03/...nty-in-cyprus/

[Bundi]

Re: Cypriots Stunned ..ngs Cuts

The average guy on the street is not you or I. Most people are too concerned with living their life, partying or vacation to care about what happened in Cyprus and to think it could happen to them.

I work at an investment firm where most of the people believe that bonds will not be affected as much as people think in a rising rate environment.

We just had a meeting where our "director" of research returned from investment meetings in Socal and stated that the funds there believe the US will be energy independent not in 10 years (as is the average projection) but in 5 years.

....................

I don't have words.

You were saying...
http://www.youtube.com/watch?v=Xzt3EcIo5tk

http://www.youtube.com/watch?v=z7usCHnZ-8c

[don]

the Kill Shot - Greek Bond Write-down ?

By ANDREW HIGGINS and LIZ ALDERMAN

NICOSIA, Cyprus — When European finance chiefs explained their harsh terms for rescuing Cyprus this week, many blamed the tiny Mediterranean nation’s wayward banking practices for bringing ruin on itself.


But the path that led to Cyprus’s current crisis — big banks bereft of money, a government in disarray and citizens filled with angry despair — leads back, at least in part, to a fateful decision made 17 months ago by the same guardians of financial discipline that now demand that Cyprus shape up.


That decision, like the onerous bailout package for Cyprus announced early Monday, was sealed in Brussels in secretive emergency sessions in the dead of night in late October 2011. That was when the European Union, then struggling to contain a debt crisis in Greece, effectively planted a time bomb that would blow a big hole in Cyprus’s banking system — and set off a chain reaction of unintended and ever escalating ugly consequences.


“It was 3 o’clock in the morning,” recalled Kikis Kazamias, Cyprus’s finance minister at the time. “I was not happy. Nobody was happy, but what could we do?”


He was in Brussels as European leaders and the International Monetary Fund engineered a 50 percent write-down of Greek government bonds. This meant that those holding the bonds — notably the then-cash-rich banks of the Greek-speaking Republic of Cyprus — would lose at least half the money they thought they had. Eventual losses came close to 75 percent of the bonds’ face value.


The action had an anodyne name — private-sector involvement, or P.S.I. — and, it seemed at the time, a worthy goal: forcing private investors to share some of the burden of shoring up Greece’s crumbling finances. “We Europeans showed tonight that we reached the right conclusions,” Chancellor Angela Merkelof Germany announced at the time.


For Cypriot banks, particularly Laiki Bank, at the center of the current storm, however, these conclusions foretold a disaster: Altogether, they lost more than four billion euros, a huge amount in a country with a gross domestic product of just 18 billion euros. Laiki, also known as Cyprus Popular Bank, alone took a hit of 2.3 billion euros, according to its 2011 annual report.

http://www.nytimes.com/2013/03/27/wo...gewanted=print

[charliebrown]

Re: the Kill Shot - Greek Bond Write-down ?

I assume that at 9:00 AM the next morning of Oct 2011, the bank was then insolvent. Was it left to operate in that state? was some mystery capital infusion made?
Did it take about 15 months for the market to wake up and take action? Question B: what is the next bank that is stuffed with Greek bonds, and by transitivity what is the next bank stuffed with Cypres bonds?