Monday, March 25, 2013
Team Macro Man offer their translation of the Eurogroup Statement on Cyprus. The original is in italics.
The Eurogroup has reached an agreement with the Cypriot authorities on the key elements necessary for a future macroeconomic adjustment programme. This agreement is supported by all euro area Member States as well as the three institutions. The Eurogroup fully supports the Cypriot people in these difficult circumstances.
4th Reich Eurogroup have finally pulled a moth eaten 3 legged rabbit out of the hat. The Eurogroup agrees with itself even if Cyprus is not at all happy with it. We fully support the Cypriot people through the difficult circumstances we have foisted on them (but not that much because it was their fault).
The programme will address the exceptional challenges that Cyprus is facing and restore the viability of the financial sector, with the view of restoring sustainable growth and sound public finances over the coming years.
We will restore the financial sector from being a multibillion Euro earner for Cyprus into a neutered annex of the Bundeathstar (sorry Bundesbank) over the coming years (coming years = 0 to infinity).
The Eurogroup welcomes the plans for restructuring the financial sector as specified in the annex. These measures will form the basis for restoring the viability of the financial sector. In particular, they safeguard all deposits below EUR 100.000 in accordance with EU principles.
We welcome our own plans. Please note or even praise us for standing by the deposit guarantee of E100k. As it is part of EU wide law, there is no way would we have ever suggested otherwise.
The programme will contain a decisive approach to addressing financial sector imbalances. There will be an appropriate downsizing of the financial sector, with the domestic banking sector reaching the EU average by 2018. In addition, the Cypriot authorities have reaffirmed their commitment to step up efforts in the areas of fiscal consolidation, structural reforms and privatisation.
We will downsize any EU economic sectors we don't like to EU averages (excepting the German Industrial sector or anything else German). As, by definition, half the sample must be over the average, if we insist on all those over the average downsizing to the average we should be able drive the average to our ultimate target of zero.
The Eurogroup welcomes the Terms of Reference for an independent evaluation of the implementation of the anti-money laundering framework in Cypriot financial institutions, involving Moneyval alongside a private international audit firm, and is reassured that the launch of the audit is imminent. In the event of problems in the implementation of the framework, problems will be corrected as part of the programme conditionality.
We will plug the competitive advantage that Cyprus had in the banking sector by introducing online Anti Money Laudering training for all bank staff . Problems will be corrected by insisting on an 80% pass mark over three attempts.
The Eurogroup further welcomes the Cypriot authorities' commitment to take further measures. These measures include the increase of the withholding tax on capital income and of the statutory corporate income tax rate. The Eurogroup looks forward to an agreement between Cyprus and the Russian Federation on a financial contribution.
We are glad that Cyprus is at last doing what we tell them and look forward to them doing what Russia tells them too. As long as it involves Russia bunging in some money too.
The Eurogroup urges the immediate implementation of the agreement between Cyprus and Greece on the Greek branches of the Cypriot banks, which protects the stability of both the Greek and Cypriot banking systems.
Can you please make sure this doesn't screw up Greece again? If it does it will be Cyprus's fault. Or Greece's. But not ours.
The Eurogroup requests the Cypriot authorities and the Commission, in liaison with the ECB, and the IMF to finalise the MoU at staff level in early April.
And can Cyprus actually sign the agreement this time, preferably by April, rather than wriggling out of it at a later date as they usually do?
The Eurogroup notes the intention of the Cypriot authorities to compensate potential individual victims of fraudulent practices, in line with established legal and judicial procedures, outside the programme.
If you are mugged at the ATM trying to get your E100 out call the police, not us.
The Eurogroup takes note of the authorities' decision to introduce administrative measures, appropriate in view of the present unique and exceptional situation of Cyprus' financial sector and to allow for a swift reopening of the banks. The Eurogroup stresses that these administrative measures will be temporary, proportionate and non-discriminatory, and subject to strict monitoring in terms of scope and duration in line with the Treaty.
Once again this is a unique situation. Like Greece, Ireland, Portugal, Italy and Spain were all unique. Financial problems in the EU are like fingerprints - They are all unique but everyone has at least one but more likely ten. Administrative measures are temporary and in no way should be considered "temporary" as in the administration of Vichy France.
Against this background, the Eurogroup reconfirms, as stated already on 16 March, that – in principle - financial assistance to Cyprus is warranted to safeguard financial stability in Cyprus and the euro area as a whole by providing financial assistance for an amount of up to EUR 10bn. The Eurogroup would welcome a contribution by the IMF to the financing of the programme. Together with the decisions taken by Cyprus, this results in a fully financed programme which will allow Cyprus’ public debt to remain on a sustainable path.
We would rather not have had to donate anything but have been forced to hand over E10bil. Having done all the leg work its only fair that the IMF bung in their lump too. And Russia but that's a long shot so we won't mention it again.
The Eurogroup expects that the ESM Board of Governors will be in a position to formally approve the proposal for a financial assistance facility agreement by the third week of April 2013 subject to the completion of national procedures.
We want this tied down asap before someone changes their mind.
Following the presentation by the Cyprus authorities of their policy plans, which were broadly welcomed by the Eurogroup, the following was agreed:
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.
Laiki to the Abattoir
2. Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time.
The three tons of entrails will be left to rot in the corner and the one gram of edible meat will be put in the freezer.
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 bn Euros of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalisation has been effected, and may subsequently be subject to appropriate conditions.
A small part of the good meat will be seasoned with E9bil and served at the table of BoC, the rest will be left in the freezer.
4. The Governing Council of the ECB will provide liquidity to the BoC in line with applicable rules.
The ECB will provide liquidity under the usual conditions (like those applied by most payday loan companies) and of course default will mean the bailiffs popping round again.
5. BoC will be recapitalised through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders.
We will make the BoC look stronger by switching real money for monopoly money.
6. The conversion will be such that a capital ratio of 9 % is secured by the end of the programme.
We will back engineer everything to fit our own rules.
7. All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation.
All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation unless we change our minds.
8. The programme money (up to 10bn Euros) will not be used to recapitalise Laiki and Bank of Cyprus.
Because there won't be much left over after we have paid all our admin and implementation teams we will sending over to run this scheme.
The Eurogroup is convinced that this solution is the best way forward for ensuring the overall viability and stability of the Cyprus financial system and its capability to finance the Cyprus economy.
We think this is a really good idea of ours and is in fact so good we should consider using it as a template for all banks in the EU. But no-one is to mention that. Mr Dijsselbloem included. Oh shit he hasn't has he?