DE
FACTO LOSS OF SOVEREIGNTY: CYPRUS MAKES BIG CONCESSIONS FOR BAILOUT
By Christian Reiermann and Markus
Dettmer via DS
CYPRUS wants help from the EUROPEAN
UNION'S bailout fund. But the price for the billions in emergency aid money is
high. The country will effectively lose its sovereignty.
WILL
CYPRUS FACE THE SAME FATE AS ARGENTINA?
Dimitris Christofias had a serious
look on his face as he turned to the cameras and spoke of what a
"gut-wrenching" decision it was, but added that it was also a
"necessary evil." The CYPRIOT president was not giving his people
good news.
His staff realized how bad it would
be when Christofias, in his televised address, reminded viewers of his
country's darkest hour, the TURKISH invasion of northern CYPRUS in 1974.
Although CYPRUS is not about to
suffer the same fate, it is already clear that in return for billions of Euros
for the debt-ridden country from the EUROPEAN bailout fund, the
"troika," made up of the European Commission, the European Central
Bank (ECB) and the International Monetary Fund (IMF), will essentially take
control of the Mediterranean island.
Could it be that the troika in reality focuses on taking control of Cyprus’s proclaimed hydrocarbon findings?
Could it be that the troika in reality focuses on taking control of Cyprus’s proclaimed hydrocarbon findings?
For further information on related topics see:
Background Information:
European Union
The European Union is also supportive of the aforementioned, since
it agonizes for its energy security and a potential discovery of new reserves
by a Eurozone country such as Cyprus further strengthens its energy planning.
French and German companies especially, being the dominant players in the
European energy corporate environment, estimates they will be able to acquire
concessions and strengthen their businesses worldwide. Europe will face an
issue with natural gas imports sometime after 2020 due to rising consumption,
decreasing North Sea reserves and increase in demand by the rest of the world.
The CYPRIOT government and
representatives of the troika negotiated for almost five months over the terms
of a bailout package, worth at least €17.5 billion ($22.8 billion). The
negotiations produced the draft version of a 30-page Memorandum of
Understanding (MoU), in which the troika dictates to CYPRUS what steps it will
have to take in the coming years, down to the smallest detail.
Under the deal, civil servants and
politicians, including cabinet ministers, will have to fly in economy class
when traveling within EUROPE in the future. Exceptions apply to the president
of the country and the president of the parliament. Spending on foreign trips
will be trimmed. The privilege senior bureaucrats have to buy cars duty-free
will be eliminated. And the salaries of civil servants and lawmakers will be
frozen until 2016.
BLAMING THE BANKS
When representatives of the troika got
down to the nitty-gritty of imposing rules, no detail seemed too small for
them. For instance, they have prescribed new hours of operation for government
offices. In the future, public offices will open punctually at 8 a.m. Starting
Sept. 1, 2013, public servants and other government employees will work within
a regulated flextime program. According to the MoU draft document, this will be
"37 1/2 hours per week, 7 1/2 hours per day."
The euro rescuers also addressed
government revenues. The tax on fine-cut tobacco will go up drastically from
€60 to €150 per kilogram, while the beer tax will increase to €6 per degree of
alcohol and hectoliter. The troika also believes that a tax increase of 7 cents
per liter is appropriate for diesel fuel and gasoline.
Citizens will be especially hard-hit
by the planned 2-percent increase in the value-added tax, bringing it up to 19
percent. The troika (IMF, ECB and World Bank) is also calling for
cuts in the healthcare sector, as well as reduced pensions.
Background Information:
IMF
Christofias left no doubt as to who
he blames for the disaster, saying: "It's true that the decisions of bank
executives and the miserable control by the CYPRIOT CENTRAL bank have cost CYPRUS
billions of EUR." The amount of the aid package corresponds almost to the
country's entire economic output in a year. According to the troika's plan, by
2016 CYPRUS'S national budget will be cleaned up enough that the country can
hopefully make do without new debt.
CREDITORS TO TAKE LOSSES FIRST
CYPRIOT banks are also expected to
make a contribution. Crisis-ridden institutions will no longer be supported
solely by injections of cash from the EUROPEAN bailout fund. This time, the
banks' creditors are also expected to pay up. "With the goal of minimizing
the cost to taxpayers, bank shareholders and junior debt holders will take
losses before state-aid measures are granted," the MoU draft reads. This
means that creditors of CYPRIOT banks won't just be able to withdraw their
money. Instead, their claims will be converted into bank shares.
In taking this step, the troika is
avoiding a potential embarrassment. Substantial sums of RUSSIAN capital are
deposited into CYPRIOT banks, and some of it is probably of dubious origin. It
would be difficult to explain to the EUROPEAN public why its taxes are being
used to rescue wealthy oligarchs. Now, people who had previously invested their
wealth into yachts, cars and football clubs will be forcibly turned into bank
owners.
Background Information:
See 11 Feb 2012 article published by
Geopolitical
Analysis and Monitoring, http://geopoliticsrst.blogspot.com.ar/2012/02/eastern-mediterranean-sea.html
:
MUCH NEEDED ECO-
FINANCIAL BOOST FOR CYPRUS AFTER RUSSIA’S BAILOUT, BUT WITH GEO STRATEGIC
IMPLICATIONS
During 2009 and 2010, CYPRUS and
ISRAEL discovered enormous natural gas deposits off their shores in the
Mediterranean Sea. And in late 2011 NOBLE ENERGY, the firm contracted by CYPRUS
with exploring for gas in its waters, announced a discovery of gas estimated at
5-8 trillion cubic feet of natural gas there. This discovery
could not come at a better time for CYPRUS, which in 2011 endured a slippage in
its fiscal ratings, was shut out of international capital markets, hit by a
large munitions blast, and was finally forced to accept a RUSSIAN bailout.
All told, the discoveries by both countries amount to 33 trillion cubic feet of
gas (ca. 1 trillion cubic meters). And the U.S. Geological Survey estimates
that the Levant Basin, where most of these discoveries have occurred, may hold
122 TCF (3.4 tcm).
And
TURKISH THREATS DEEPLY
DISTURB CYPRUS AND RUSSIA
However, TURKEY’S threats against
CYPRUS and ISRAEL due to their exploration and drilling for gas in the Eastern
Mediterranean caused concern in RUSSIA. Moscow recently organized a large loan for CYPRUS
to sustain it against a crisis should GREECE default because so many RUSSIAN
accounts are held in CYPRUS’ banks and then reinvested in RUSSIA or used to
launder the elite’s money by cycling it out of RUSSIA into the global banking
system. Clearly,
Moscow cannot allow CYPRUS to go under. Turkish threats
therefore deeply disturb both CYPRUS and RUSSIA.
CYPRUS FUNCTIONS AS AN
OFFSHORE FINANCIAL CENTER FOR RUSSIA,
At the same time, CYPRUS will have
to rebuild its financial sector in the coming years, along with drastically
improving regulations and intensifying the fight against money laundering and
tax evasion.
The president wasn't willing to end
his address without giving his fellow CYPRIOTS at least some words of comfort
and hope. After the TURKISH invasion, he said, the country was rebuilt. And added,
today Cyprus can hope for a new "economic miracle."
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