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Wednesday, March 27, 2013

Cyprus – Who’s to Blame – Brussels? The US Navy?

 

If you listen to the likes of Jeroen Dijsselbloem, (LINK)  you might conclude that the problems in Cyprus were all about the big offshore depositors who flooded the local banks with cash. It you start with the ‘logic’ that the depositors are to blame, then it’s not hard to reach a ‘solution’ with haircuts of 40-80%. I think that whole line of reasoning is bullshit. Brussels and Berlin were more responsible for Cyprus than those evil depositors. I believe the US Navy also had a hand in the collapse.

When were the problems with Cyrpus’s banks made public? Eh, that would be in August of 2011. Why was this situation allowed to run totally amok for so long after that?  Brussels ignored the warning signs.

 

cyprus August 2011

 

Okay, give the technocrats some slack. They were busy with other problems in the summer of 2011. But Brussels ignored this request for help too:

 

cyprus june2012

The folks in Brussels sat on their hands for eight more months before they finally came around to a fix for Cyprus. That delay cost everyone. It cost Brussels – it put all depositors at risk, including the small ones. If Brussels had acted decisively after the official request for a bailout the +100k depositors would not be feeling the 40-80% gouging they are getting today.

Is it possible for  depositors to file a suit against the Troika? Why not? There’s plenty of evidence that suggests it’s the likes of Jeroen Dijsselbloem who are responsible for the extraordinary losses. They fell asleep at the switch. (or it was deliberate – triple damages for that!) The folks who have their fingers burned  have a reputation for not “rolling over”.  I wouldn’t be surprised if someone tries to get Brussels to kick in some cash to soften the blow. At a minimum, Jeroen Dijsselbloem should shut up. He’s making the case for the lawsuit.

 

 

Separately

 

I spoke with a friend in Athens today. He has family who live in Cyprus. Nothing new to report – the country is a shambles.  These people live well south of Nicosia – no access to money, stores running out of goods – no credit cards allowed.

My friend contacted me in July 2011 after his relatives had their windows blown out by a huge explosion on a military base. They were miles away, but still felt the blast. At the time, he stressed that this was a very big deal, a game changer for the country. I wrote about it (Link).

 

Short story: In January 2009 the US Navy intercepted a cargo ship filled with munitions. The vessel had come from Iran, and was headed to Syria. The Navy confiscated the munitions and brought them to Cyprus for “storage”. There was a brush fire, and the whole damn thing blew.

 

The head of the Central Bank of Cyprus had this to say about the July 22, 2011 explosion:

 

There is an imminent threat of Cyprus joining the European Union Support Mechanism, with everything bad that this entails.

 

Every day of inaction increases the problems and risks. We must act today, not tomorrow.

 

Brussels totally ignored this cry for help. Cyprus was forced to go begging to Moscow for an emergency E2.5B reconstruction loan. This was a strategic mistake by both Washington and Brussels.

In preparation for this article I spoke with my friend regarding who he thinks is to blame for the cock-up in Cyprus. He’s biased;  he and his family have lost money (there was Greek money involved in the +100k accounts). So he blames Brussels. He also blames the bankers who made the bad loans/investments;  he lamented that bankers always make bad loans and never pay. He thinks the depositors ignored all the evidence, including the high yielding deposits, so don’t feel so sorry for them either.

But he also included the US Navy as one of those who must share some responsibility. He may have a point. Those munitions should not have been brought to Cyprus. It was an accident left to happen. Thousands of tons of explosives were stored under a tent. There was huge damage to the infrastructure; the blast leveled a power plant.

 

von.cyprus.explosion.CYBC.640x360

Cyprus_Explosion_2011.07.12

 

Would Cyprus have collapsed if the explosion did not take place? Probably, but the accident made it a sure thing. Is the Navy responsible for accidents? Sure it is:

 

navy fire

 

Is there a lawsuit in this story? I don’t know. Connecting the dots between the Navy’s decision to dump confiscated Iranian munitions in Cyprus, to the losses depositors have felt is a bit of a stretch. But then again you stretch when there’s the odd billion at stake. And then there’s the fact that the Navy has some very deep pockets…..

Notes:

- Navy – Don’t blame me. Someone was going to write this one, just happened to be me.

- Readers from Cyprus, others – do you think the Navy had a hand in what you face today? How? Why?

 

You!

 

 

 

Comments

  1. As you point out yourself, the connection to the US Navy is “a stretch”.

    As you also point out, Brussels has known about this problem for at least 18 months — it was not a sudden “emergency” or “crisis”. A true crisis does not give 18 months advance notice.

    The criminals in Brussels sat around and waited and waited, letting the problem get bigger and bigger. Then they LIED to everyone and claimed it was a sudden crisis that required a public bailout.

    Brussels caused this in an effort to scare everyone into more bailouts for a system they know has no future. They (especially Draghi) have known all along that many members of the EU never qualified to join in the first place. Draghi helped structure the off-balance sheet swaps to conceal Greece’s insolvency (and perhaps other countries as well).

    Go ahead and file your silly lawsuits against Draghi or the EU criminals. They control their courts.

    The Eurocrats knew this dog would never hunt — they have known for 20 years. Now they need a scape goat.

  2. Stretch?

    Advanced pilates.

  3. The only emergency was the arrival of the new pro-European president of Cyprus, Anastasiades as a replacement of the anti-European president Christofias, and the Troïka considered him an easy target.

  4. Obama bin Biden says:

    …and letting the Iranian munitions flow freely into Syria? Who would’ve been at fault for that? Decisions got made, but follow up actions should have seen Cyprus get compensated. At the minimum, they should get storage fee and be made whoe for the damages. As a banking issue, it’s a stretch to claim the banks problems are from this explosion.

    • Who should make them whole?

      Why should American children (who get to pay the debts of today’s failed leaders) be held responsible for Iran and Assad’s death policies? The US Navy did not detonate the explosives — that was done by a “forest fire” that the Cyprus government did not control.

      Cyprus already collects “rent” from the US and UK for bases on the island — how many times are you scammers going to try to get paid for the same thing?

      Pay your own bills loosers. Discipline your own government. When the citizens of the US decide we want to discipline politicians, we have plenty of crooks right here at home.

      The next time your country goes to war against itself — don’t ask the British or the US militaries to protect you.

  5. hi bruce,is the troika+USA saying buy Bonds and Stocks and real e …while you can because we like the tax on CASH?

  6. Cyprus forced to open bank branches after 12 days — I think “forced” is a fair statement, as I doubt the Cyprus government would stand much longer if people don’t have grocery / daily expense money. Families still need to be fed, no matter how incompetent government officials behave.

    I am hearing queues of 30+ people at many branches. BBC is reporting a lot of people in line are very angry and screaming “they stole our money!” … but anger is clearly directed at Euro politicians, not bank tellers. No stories of any violence / crowd crushing at branches. It is obvious the crowds waiting to enter banks have absolutely zero trust in the system — they just know that the bank tellers are not to blame, and rioting against the tellers wouldn’t solve anything. The anger for more riots (against the government and/or EU) is definitely there.

    The 300 Euros withdrawal limit per day? Lucky Orthodox Easter isn’t this weekend. And a Dept Motor Vehicles-like bureaucracy to approve all “large” wire transfers off the island (pretty much every commercial transaction) — when the island is not self sufficient in many goods? Even capital controls are executed with clown like stupidity.

    Its anyone’s guess what controls they will try next, but these capital controls (as-is) will not last long

  7. Vasilis - Athens says:

    Bruce,

    Lets get few things straight

    The Banking problem in Cyprus needs €5.8 billion.

    The rest is for the GOVERNMENT BUDGET DEFICIT…!!!

    Few years ago Cyprus’ numbers (Debt/GDP, inflation unempoyment etc.) were amazing.

    The Cypriotic pazzle has many pieces, which connected the last 2-3 years (including what your friend from Cyprus mentioned above-explotion).

    Bottom line is the OIL & NATURAL GAS found south of Cyprus…!!!
    This is known many years ago…
    …and the same applies for HELLAS (ex-Greece)

    DO you know ANY SMALL COUNTRY in the whole world (except Norway), that has such an amount of natural resources…

    …and does not have PROBLEMS with the BIG BOYS…

    They found a way to CORNER CYPRUS and they pulled the trigger…

    …That’s all folks

    Now as far as the depositors loosing some of their money…well my friend I have experience with many of my customers.

    Let me get you back in 2010-2011-2012.
    They were asking me for principal prodection…but they were used in a 3%-5% annual interest rate on their deposits in Hellas (Greece).
    So when I was trying to explain them that their deposits will be MORE safe (not 100%) in the places that they get 0.5% – 1% annually…they went to Cyprus…!!!
    So they did not want to keep their money in Hellas as I told them with the same HIGH annual interest rate, but they wanted to be “safe” and sent them to Cyprus, since it was very convinient to go to a Cypriotic branch in Athens and wire-transfer their money in the SAME BANK in Cyprus. The rest is history.

    That’s why I am in the States for Real Estate because they are looking for yield.
    It is very hard to change people’s minds when they are used to a 20% annnual interest rate in deposits (1980′s with inflation 25%-30%), or 3% to 6.5% or even 7% for 1 year CD in Athens…!!! few months ago…

    bottom line…lets see what will happen in Hellas…

    Deposit rates go down…or Cyprus style issues…???

  8. BK–writes.”Who’s to Blame – Brussels? The US Navy?” “Round up the usual suspects.” Homer says, “Who in hell knows.”
    It is a riddle wrapped in a mystery inside a conundrum. Probably the ignorant stupid population that didn’t pay attention to
    business and allowed the criminals to run things. The people were bought off with freebees (social programs) and are now angry at being duped. Hey! There ain’t no free lunch.

  9. Look! Disasters are built up over a long period to time. They are a culmination of small error that cascade in “Black Swans”. To understand this read the “Chaos Theory”. Because they have many accumulative causes, it is hard to determine which straw broke the camel’s back.

  10. I agree with Homer on Camels.

    The ammo blast was an unfortunate accident. These things happen.

    The Cypriots had cash problems, banks and government. They asked the EU for help on loans and a bail out plan. But in the end they did not accept the terms of the bail out and went to the Russians for a quick fix. The quick fix came, maybe because Cyprus has some gas, but it’s not as simple as everybody suggest to get at it. In the end the Russian fix of Mr Christofias who, indeed doesnt like the EU very much, didn’t work. He left Cyprus in shambles for mister Anastasiades. This man did the honorable thing and tried to find a definite solution. One that would not blow up in another year. The Russians did not want to get more involveved, and possibly loose a lot of money. So this left the EU Troyka.
    The terms were still bad. But Cyprus dug itselve a hole with a banking system to big for the island to fill.
    They did not have a choice. Go banckrupt or accept a hard deal.
    So no mysteries, no complots, sometimes the simple trues is boring.
    sorry.

  11. Bruce:

    OT: There are US ANG reserve units getting called up effective this last weekend. These are specialized units. Only info. on destination is Asia. These folks have been previously deployed, and were not (up to this last week) scheduled for any upcoming out-of-country deployment.

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