Monday, March 18, 2013

Cyprus: Day Two? (Tuesday)

Cyprus will end up being page one news for the entire week in Germany.

The current timeline?  Pause for a bank holiday, and don't expect anything to open until Thursday at the earliest.  They might even make it Friday before the banks open.

The current tax theme?  The Cypriots are thinking over a deal where the little guy with 100k Euro or less....would only pay around 6.5 percent, those with an account of 100k Euro to 500k Euro....would pay around nine percent, and those with 500k Euro or more....would pay out close to fifteen percent.  This would be greatly different from the EU proposal....mostly to help the little guys in Cyprus survive.

The Russians?  Well, this becomes an interesting episode.  There's several numbers floating around now about how much the Russians actually have in Cypriot banks.  The numbers go from $19 billion to $30 billion.  The banks won't say precisely, and the Russians are very careful not to say anything in public.  They would be the big losers out of this invented tax deal.

The legal implications?  This got brought up today in several cases.  The EU has never used a tax like this before, and it's a newly invented thing, with no legal basis.  Some think that a court case will erupt and that the EU might be forced to pay the money back eventually (figure five years for any case to conclude in an EU court).

Mafia involvement? Well, this got brought up too.  There's enough hostility by the Russians....that they might want to bring some heavy mafia folks into the picture to intimidate Cypriot political folks or bankers on the island.  I myself....might go as far as suggesting some mafia folks showing up in Brussels and intimidating some EU folks.  To lose three to four billion Euro....just won't sit well with anyone.

How the banks survive now?  Don't expect any national bank to survive with clients.  The Russians will pack and go.  It's already suggested that they are preparing to move into Switzerland, Luxembourg, and the Baltic states.

As for pay-back?  This is the more curious part of the bigger story.  I imagine a number of Russians are looking straight at German political figures and gauging the fall election.  You could see a fair amount of money thrown at the Alternative Party and the Linke Party.  There could be some direct comments tossed at the CDU.

For Tuesday?  I'd expect another one percent loss in stocks, and a continual trend on the Euro weakening.....maybe with the dollar improving.

The Russian deal on the table to loan money to fix the issue....but they want all the gas rights for Cyprus (to include off-the-coast).  Fracking to an unlimited state?  Maybe, you just don't know.

Finally, there has to be some Italians sitting and wondering if their assets might be under threat in a year or two.  Thoughts of removing their safely deposited money? You just don't know.

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