Cyprus Update: Bailout/Bail-in is a total failure
- Published on Tuesday, 30 July 2013 19:58
- 0 Comments
Here are some of the recent economic headlines coming out of Cyprus. Click on the headline links to read the full stories.
On the progress of the bailout/bail-in itself:
The Finance Ministry and the Troika appeared to be converging on an agreement on the haircut of uninsured deposits over 100,000 euros in the Bank of Cyprus at 47.5%.
On bank deposits:
On the local real estate market:
On its vital tourism industry:
The economy has not yet reached bottom. Expect unemployment to rise and match the record rate in Greece. The real estate market has had a record drop recently but expect it to fall further. Cypriot banks are bankrupt and deposits will continue to leak out. Price controls implemented in March only made matters worse for banks.
What’s most concerning to us is how naive the rest of the EC citizens are on the Cyprus bail-in. The headline above mentions a haircut of 47.%% on uninsured deposits. However, negotiations are on-going and this rate will continue to rise until these depositor get nothing back but a few pieces of paper stating they have equity in a failed institution in return for their deposits.
The Cyprus bail-in was not a one-off deal and it will be used as a blueprint for other countries. Cyprus will also need another bailout soon. Look at Greece to see how well off it is after three bailouts… It has already spent 75% of its bailout cash. What’s next?