I am sitting in our conference room and have assembled the
commanders of our four FWU’s in order to create the game plan for this weekend
and especially for the start of trading on Monday. I ordered each commander to
draw up a combat plan prior to the meeting in order for us to discuss it. This
will give us seven different approaches, one each from the four commanders, one
from my chief of security, one from our CMO and of course my own.
The ECB has given Cyprus a deadline of next Monday at which
point the ECB will withdraw emergency funding for Cyprus (Cyprus Bailout andthe EURUSD Currency Pair). Without the funding the Cypriot banking system will
collapse and Cyprus may be half a step away from a Eurozone exit. A Cyprus exit
from the monetary union will be followed by an exit of Greece as well and
Portugal as well as Italy may flirt with a similar idea. Spain is next on the
list for a full financial bailout.
Cyprus needs to come up with a plan to cough up €5.8 Billion
in order to secure a €10 Billion bailout. Last weekend we witnessed the first
failed attempt to push through a bill in order to force a depositor
participation in the bailout (Cyprus Bailout Rattles Eurozone and GlobalMarkets). The proposal was the work of Germany and they applauded the move on
Monday. The measure was defeated with 36 votes against it and 19 abstentions
while President Anastasiades managed to rally zero yes votes.
The Germans, in a well-known display of cowardness, forced
Cyprus to take their idea and make it public in order to gauge global opinion
from power players. Up until now it was an unwritten taboo to force insured
depositors to participate in a financial bailout. Germany broke that taboo and
drew harsh global criticism as the country once again became the most hated
member of the European community. Interesting how history repeats itself in
such a short time frame.
Cyprus has over €26 Billion of Russian deposits and Germany
insisted Russian participation in the bailout. Russia has openly refused, but
closed door meeting indicated that if Germany together with the EU would be
willing to work closer with Russia they may get on board. Germany, which
decades ago became the female canine of the Kremlin, refused the generosity of
Russia and no deal was reached. Russia already made a €2.5 Billion loan to
Cyprus in order to help the country restructure financially.
Germany was angered over Russia’s refusal and the proposal
to force depositors to participate in the bailout was Berlin’s way of seeking revenge
as the country is left without any allies. The initial proposal called for a
6.6% theft of deposits below €100,000 (deposits below €20,000 would not be
touched) and a theft of 9.9% on deposits above €100,000. The deal was alter
changed to steal much less from deposits below €100,000 and much more from
deposits above €100,000 which was a clear indicator that this proposal was
drafted with the sole purpose to legally steal money from foreign depositors,
mainly Russia.
The Kremlin stated that the treatment was unfair and that
Cyprus started to play a dangerous game which was an indirect warning to
Germany. Cyprus did not want to simply be a pawn in this game and send their
Finance Minister to Moscow in order to ask for a €5Billion loan which was
refused by Russia as the two countries could not agree on terms. Russia did
agree to amend the terms of the €2.5 Billion loan.
In addition Cyprus has suspended talks with the Troika, the
ECB, the IMF and the EC, which angered Germany which in return referred to
current events as a dangerous poker game. Time is running out and multiple
parties seek to broker a compromise. Cyprus may be the spark which will ignite
a global sell-off.
We are working even harder to have a combat plan which we
can execute on our behalf as well as our contractors. I think I am looking down
a very long and eventful weekend with no time for private life. The global
arena is heating up rather fast and different governments seek different approaches
in order to gain the upper hand. Weekend, here we come as others try to answer
the question:
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