The Cyprus/bank/bailout story is big. Really big . Too much for me to handle in my own voice just now. So I'll just provide a few links, following chronological order, in this post and the next.
The above photo is Cyprus' finance minister, Michael Sarris.
By February 28, Cyprus was clearly 'next up,' the new center of the ever-shifting limelight in Europe's traveling crisis over banks and sovereign debts. The new president of Cyprus, Nicos Anastasiades, said that day that though Cyprus would have to negotiate terms of a bail-out, "no reference to a haircut on public debt or deposits will be tolerated."
A big EU meeting in Brussels began on March 3d, and involved a good deal of discussion of the matters that Anastasiades had tried to wish off the table.
Skipping ahead a bit ... by March 14th, EU officials, as well as those from the IMF, were in round-the-clock talks on a bail-out of Cyprus that would include a depositor sacrifice, known politely as a bail-in.
On Saturday, March 16th, Adam Levitin, of the estimable blog Credit Slips, summarized the ways in which Cyprus had gotten itself into a mess.
The weekend of March 16-18, 2013, will retain a certain infamy in the history of the Eurozone and its banks. Representatives of the government of Cyprus seemed on that Saturday to have reached agreement with the EU and IMF -- an agreement including a "one-off tax" on bank accounts, including small depositors whose deposits are below the supposedly sacrosanct insured level.
It was a long weekend. Monday, the 18th, was a bank holiday on Cyprus. One might think that had provided the government with some breathing room. Not enough, though. Seeing early reaction on Sunday, the government shut down the ATMs and ordered banks to stay closed until Thursday!
Meanwhile, some were trying to frame this all as a nasty-Russian-oligarch story.
When Parliament did get a chance to consider the matter, the members voted with their constituents and against the EU. Bravo!, I have to say.
By Wednesday, Reuters was calling this the worst crisis to hit Cyprus since the Turkish invasion of 1974.
So: what's Plan B? Mr. President?
By Wednesday, the banks had been told to stay closed "for as long as we need to conclude an agreement."
On Thursday, the European Central Bank announced an ultimatum: unless Cyprus finds a way to raise the necessary monies (what the Troika of the ECB, the EU, and the IMF decide should be domestically generated), they'll lose access to emergency funds. That, in turn, could precipitate a Cypriot exit from the Eurozone.
So, caught between the Troika and its own Parliament, the Cypriot govt and central bank were furiously looking for a way to raise 5.8 billion euros without administering a haircut to insured depositors.
On Friday morning the wire services were reporting that Germany was taking a tough line. "I still believe we will get a settlement, but Cyprus is playing with fire," said Volker Kauder, leader of the country's Christian Democrats.
We will break off our tale here and resume tomorrow.
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