It appears the ‘deal’ to default/restructure the banks has been designed to bypass the need for parliamentary votes, since it is theoretically not a tax.
While we have little color on what kind of carnage the President of Cyprus had to accept to his fellow countrymen, the news is that :
- *CYPRUS, TROIKA REACH AGREEMENT IN PRINCIPLE, EU OFFICIAL SAYS
- *DEAL MADE AT DINNER WITH DRAGHI, LAGARDE, VAN ROMPUY, BARROSO
The terms, unsurprisingly what zee Germans wanted, are:
i) Laiki to be wound down;
ii) Bank of Cyprus to survive but with deposit haircuts, and
iii) deal would see secured deposits in Laiki moved to Bank of Cyprus.
In other words, a deal far worse then the original on proposed by the Eurogroup last week – when the banks still existed. The key appears to be the ‘saving’ of the insured depositors (crucial to avoid a pan-European bank run) and the crushing of the ‘whale’ depositors.
S&P 500 futures and EUR are surging, Gold is dropping modestly.
We await final confirmation of the final terms of the final deal once the Cypriot people wake up (and don’t forget the ECB ‘standard of living’ rules).
The Cypriot Parliament still has to vote for this – and not one of them voted for it last week.
Filling the ‘Cyprus’ Gap
There is talk that there may be no need for the government to vote for this – since it is not a ‘tax’ but a bank restructuring. It seems they have kept it in the bankers… the ECB (in its independent way) tells the Cypriot NCB what it should do, the Cypriot central bank then restructures its bank how it sees fit – good/bad bank and haircuts where it sees fit – this then gets around need for vote from government AND any possibility of a European Union law (on taxation) being broken…
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