Καλημέρα σας.
I attach a very brief selection of news below about last night's events. The dust has not settled yet, so it's too early to make conclusions.
I have also taken the liberty to include the psychological theory of Kubler Ross, which addresses the 5 stages of grief, following the loss of a loved one or a strong life shock, this case economic.
Cyprus society, including ourselves, will be going through these stages, and I believe it's important to find coping mechanisms to address these as well as help those around us.
Regards,
Loukas
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Detail of EU/IMF bailout agreement with Cyprus
Following is the detail of the deal in a statement from euro zone finance ministers.
1. Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework.
2. Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time.
3. The good bank will be folded into Bank of Cyprus (BoC), using the Bank Resolution Framework, after having heard the Boards of Directors of BoC and Laiki. It will take 9 billion Euros of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalization has been effected, and may subsequently be subject to appropriate conditions.
4. The Governing Council of the ECB will provide liquidity to the BoC in line with applicable rules.
5. BoC will be recapitalized through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders.
6. The conversion will be such that a capital ratio of 9 % is secured by the end of the program.
7. All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation.
8. The program money (up to 10 billion Euros) will not be used to recapitalize Laiki and Bank of Cyprus.
Discussion paper on the debt write-down tool – bail-in
An paper from the EU which outlines the basic thinking of EU behind bailing in deposits in banks in order not to rely on tax payers to save the banking systems.
Last-minute Cyprus deal to close bank, force losses
Cyprus clinched a last-ditch deal with international lenders to shut down its second-largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians, in return for a 10 billion euro (8 billion pounds) bailout.
Cyprus: It’s not over yet
Kubler Ross - The 5 stages of grief
The stages an individual goes through following a strong shock like death of family member, illness, or the current strong financial shock.
(1) Denial — "I feel fine."; "This can't be happening, not to me."
(2) Anger — "Why me? It's not fair!"; "How can this happen to me?"; '"Who is to blame?"
(3) Bargaining — "I'll do anything for a few more years."; "I will give my life savings if..."
(4) Depression — "I'm so sad, why bother with anything?"; "I'm going to die soon so what's the point?"; "I am broke"
(5) Acceptance — "It's going to be okay."; "This is my current reality, I may as well work through it."
I believe that Cyprus society is somewhere between (2) and (3) right now.
(2) Severe anger with those who caused all this
(3) Search for alternative solutions, possible impossible at this stage, which might take us out of the pain we are in regardless of the cost - for example a fire-sale of Natural Gas to Chinese, Russians, Americans or return to the pound, not considering the real costs of a disorderly default.
