News update 22/03/2013
Dear all,
A broad selection of articles about Cyprus tonight, as we are headline story. I have tried to select the most constructive ones for you.
There has been progress and we must keep going. The night is darkest just before the dawn.
Καλή σας μέρα.
Λούκας
Europeans in Dark Over Cypriot Plans, Officials Say
By evening, European officials in Brussels had received no detailed information on two of three key bills that were being discussed in the Cypriot parliament and that Nicosia said represent an alternative to a controversial tax on bank deposits, according to three officials involved in the talks. Officials instead had to seek information from news outlets, several of which received leaked copies of the three bills.
How To Fix the Cyprus Bank Disaster in 3 Steps
Here's how Cyprus could save itself in three, easy steps -- with the ECB's tacit support.
1. Merge Cyprus' Big Banks and then Spin Off a Bad Bank
2. Convert Uninsured Deposits to Bank CDs
3. Recapitalize the Bad Bank with Government-Guaranteed Natural Gas Bonds
Cyprus should pull an Ireland, and force the ECB to make a decision. Either the ECB refuses to accept guaranteed natural gas bonds as collateral, and Cyprus gets booted from the euro, or the ECB relents, and the panic subsides.
In other words, make the ECB decide whether the euro is worth printing 5.8 billion euros.
EU bailouts: A vehicle to kick the weak? - Christopher Pissarides on CNN
And anyway, when a large system works well except for its involvement in a single and exceptional event like the Greek sovereign debt write-off, you don't cut off half the system and destroy the sector, causing acute unemployment problems. You try to fix it, with better regulation of risk and other vulnerabilities. But then they shoot the horses, don't they?
Euro zone call notes reveal extent of alarm over Cyprus
Based on leaked Minutes of Eurogroup's teleconference call on Wednesday
Euro zone finance officials acknowledged being "in a mess" over Cyprus during a conference call on Wednesday and discussed imposing capital controls to insulate the region from a possible collapse of the Cypriot economy.
In detailed notes of the call seen by Reuters, one official described emotions as running "very high", making it difficult to come up with rational solutions, and referred to "open talk in regards of (Cyprus) leaving the euro zone".
Can Natural Gas Save Cyprus?
Anastasiades and the parliament reacted with further delays on the vote to approve the plan, making its passage less and less likely with each passing hour. Finally, the government announced what they called Plan B, which “would require state pension funds to hand over about ($5.17) billion of their reserves.” The additional amount could come from Russia in exchange for an agreement freeing Russian companies with money in Cypriot banks from the one-time penalty.
Treasure Island Trauma by Paul Krugman
Now what? There are some strong similarities between Cyprus now and Iceland (a similar-size economy) a few years back.
My guess is that, in the end, Cyprus will adopt something like the Icelandic solution, but unless it ends up being forced off the euro in the next few days — a real possibility — it may first waste a lot of time and money on half-measures, trying to avoid facing up to reality while running up huge debts to wealthier nations. We’ll see.
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