Thursday, March 21, 2013

Cyprus: Day Five (Friday)

Thursday has been mostly a day of limited accomplishments over the whole Cyprus affair.

The EU is basically saying that a decision has to be made, and that there's no real time left to wait this out.  The dire warning?  Basically four days....come to an agreement or just walk away from the EU Central Bank.  For days now....they've flown in some cash and helped to keep the ATM systems operational on the isle.

Cyprus did agree today to restructure their number two bank.  It would have probably dissolved next week, but this deal helps in some minor ways to delay their issues.  On the flip side....if you had an account with can only remove 260 Euro a day, max.  Figure around $320 for an average American.

The odd thing about this restructure? looks like it's going to be two banks in operation.  The one bank will handle the ensured accounts (everything below 100k Euro), and the other?  The exposed folks who have no guaranteeing structure.  It would allow the EU solution to fall into place and help the little guy in Cyprus to survive.  The Russians? can guess their consequences here (lose, lose, lose). 

There's a better and more in-depth report out there on natural gas discoveries.  It's not a huge find, but there's billionaires to be made off it.  The odd thing, after I spent five minutes reading the whole's not even going to be productive for another seven years.  On top of need someone with real cash to come in....take with easy access (no environmentalists in the middle)....and direct the whole operation.  My impression from the whole that Cyprus would like the billionaire a year rolling into their nation, but they really don't have the expertise to run this.  You can sense that they'd like to keep this money on the island.

Oddly enough, there's a Dutch finance minister who came forward and kind of admitted he's the person who dreamed up the tax on accounts idea.  It helps relieve the Germans of some heat, but it's still a nasty shock for folks on Cyprus.

Then there's this oddball idea....grab everyone's accounts....perhaps over a certain size, and just say they are now ten-year CD accounts and you can't really touch the bulk of your money.  There would have to be some rules and some ways to remove part of your money, but it's a fairly interesting idea.  Course, you'd be smart enough to ask if anything could get fixed in ten years or if any profit would ever come out of this ten-year forced CD deal.

For the German side?  Just more speculation, more suggestions, more time passing by.  The market is in a deep pit right now.  The DAX was down around one percent for the day.  It could have been a worse day, but for the whole week so far (up to Thursday)....the numbers are not great.

Finally, I have to mention this situation.  On the isle, there's one slim border which splits the Greek Cypriots and the Turk Cypriots from each other.  The Turks operate their side with about forty percent of the isle....the flat part of the territory.  Some folks would argue, but the Turks probably got the better farming area when the border was established (mostly by threat of violence from both sides).

They may all be Cypriots, but each see themselves with a bloodline which leads either to Greece or Turkey.  Each will claim a sacred view of the island.

For the last decade, there's been this amusing attempt to forge a united island.  There's have to be various guarantees and issues to be worked out.  The EU would like to see a united Cyprus.  For the Turks, it'd help to bring them closer to being accepted into the EU, if an agreement could be worked out.

Today, a somewhat clever but limited plan was put on the table by the Turk Cypriots ....who have no banking issue.  Turkey would step into this mess and hand the Greek Cypriot banking billion Euro. The expectations?  Pretty simple...come back to the 2004 unite-Cyprus plan, agree to pay back the seven billion (it's not a gift), and agree not to object to Turkey coming into the EU (a long desired thing).

This is a fresh new deal that most wouldn't have expected.  The question is....of all the evil people at the table (in the minds of the Cypriot people)....who is the least evil....the Germans, the EU, the Russians, or the Turks?

For those who might be wondering how the split occurred?  A Greek Cypriot will try to spend four hours telling you some long story of woe.  The simple truth is that some Greek political folks got all peppy in the early 1970s.  Seizing power on a united island seemed simple.  Ordinary elections couldn't achieve what they there was to be a coup.  Word got out....the Turks (not the Turks on the island, but the country of Turkey)....just plain said they would not accept a coup and possible deaths of Turk citizens on the island.  So Turkey brought in real military forces.....pushed Greek Cypriots back from the north, and created a line.  Neither group can sit at the same table without telling a long story which is a fair bit of fiction.  The truth is simple....the rest, well, you can guess.

For Friday?  The Russians need to conclude their deal on the natural gas and put real money on the table.  If nothing comes out of that....then the tax deal on accounts might come back or the Turk deal might be discussed.  Come Sunday, the EU is expecting a final resolution, period.  If you had to pick seven days to rock Europe....this has turned into a fairly interesting history and economics class.

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