CLUBMED AUSTERITY: Quantifying the lies + Eurozone basks in Cyprus victory

How Schäuble and Barroso lied about Cypriot sustainability, and Draghi lied about eurozone wage differentials

The Slog: I’m indebted to an Irish Slogger for pointing out to me this piece from 2011 providing strong statistical evidence of Brussels-am-Berlin mendacity on the subject of Cypriot bank viability. Talking of the (then) latest Athens bailout and bond uncertainties, the report states very clearly:

‘The global loan-to-deposit ratios of Bank of Cyprus and Hellenic are largely satisfactory….[but]…The major factor affecting bank stability and operations in 2011 has been the impairment and write-down of Greek Government Bonds. Laiki has the largest nominal value of GGB on its books, at EUR 3.084 bln, followed by the Bank of Cyprus with EUR 2.088 bln.’

So here we see vindication of The Slog’s assertion that the only reason a ‘largely satisfactory’ banking system got into trouble was because of B-am-B’s insane policies towards Greece. What’s more, like good complaint little boys, the Nicosian banks listened closely to the results of the mid-2011 European Banking Association (EBA) second stress test results: as a result of this stress test, the two banks BoC and Laika agreed to recapitalise with the objective of reaching core tier 1 capital of 9% by 2012.
In due course, the Bank of Cyprus implemented a recapitalisation in 2011, bringing core tier 1 capital to EUR 2.9 billion (after a Greek bonds write-down) and thus achieving a ratio of 9.6%. Laiki had a core tier 1 rate of 8.2%, but then its 50% Greek bonds write-down screwed up the valiant attempt….another consequence of dick-brained B-am-B obsessions. More detail on that one:
‘On October 26th 2011, the Eurozone partners, the International Monetary Fund (IMF) and the European Central Bank  (ECB) agreed to a second bail-out package for Greece worth EUR 130 billion. This includes EUR 30 bln to facilitate the 50% PSI deal.’
As a direct result of this, the report concludes under Evident Risks and Risk Analysis:

‘Cyprus finds itself in the eye of a short-term financial shock….

In the short term, the government needs to undertake further austerity measures, and has also implemented revenue-generation measures which will negatively impact Cyprus’ status as an international business center.’

As we Romans say, quod erat demonstrandum.

In turn, a highly valued Greek source of inestimable courage alerts me to an excellent critique of Signor Mario Dracula’s late-night presentation to the europillocks, revealed here some days ago. It runs like this:

‘Draghi’s presentation contains a simple but fatal error – or should that be misrepresentation? The productivity measure is expressed in real terms. In other words it shows how much more output an average worker produced in 2012 compared with 2000. So far so good. However, the wage measure that he uses, compensation per employee, is expressed in nominal terms.

‘In other words the productivity measure includes inflation, the wage measure does not. But this is absurd. Real productivity growth sets the benchmark for real wage growth. In a country where real wages increase in line with productivity, the shares of wages and profits in national income will remain constant. By contrast, when nominal wage growth tracks real productivity growth, which is apparently the role model suggested by the ECB President, the share of wage income in national income will permanently decrease. Moreover, real wages will decline continuously, if price inflation is higher than nominal wage growth.’
I have threaded at the site to say, “Isn’t this what Mario wants anyway?” Beyond that, no further comment is necessary: what we have here is the standard leger de main we have come to expect from europols and technocrats.

EC rape of Cyprus gets into gear….AFTER the Russian money has left.

Source

banzai7

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Eurozone basks in Cyprus victory

The Slog: Today saw Spanish and Italian bonds weaken considerably, and a continuing fall in the value of Italian and Spanish stocks (off by 4.5% and 3.5% in the last week).
The Euro v US Dollar rate had a teensy rallyette, but was last seen languishing at a horrendous 1.2854 to the Buck. In mid February it was 1.3563.
European bond spreads are now wider than they’ve been for five months. European bank bonds are also at a five-month low.
So it’s all going really rather well, as a Whitehall mandarin might say.
In Athens, Greece’s Piraeus bank announced that it will acquire the branches of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank in Greece for €524m.  The branches of these banks will open on Wednesday March 27th 2013, and all operations will be performed as usual. If anyone knows WTF this means in terms of good or bad news, could they please write to me at the usual address: I’m an old man, and I get confused from time to time.

Meanwhile – as regards the island of Cyprus itself – Morgan Stanley is opining that Cyprus has just left the Eurozone. The reasoning goes like this: In order to reopen Cypriot banks (now rererererescheduled for Thursday) Cyprus will need to impose strict capital controls to prevent a bank run. This is merely another way of saying that a euro in a Cypriot bank  isn’t worth the same as a euro in a German bank, since the latter has far more mobility. Ergo sum, Nicosian euros are in a sort of limbo between the eurozone and Britain.
This is the Morgan Stanley view in summary:

‘It looks like the eurozone policymakers are keen to keep Cyprus in the eurozone, even though, as a result of these capital controls, Cyprus is effectively no longer a full member of the eurozone. In other words, while it formally stays within the currency union, a euro in a bank deposit in Cyprus is not the same as a euro in another member country. Only once all capital controls are lifted again will Cyprus’s full euro membership be restored.’

Like I said, I’m confused. But I will leave the last word to this seemingly objective site which, I suspect, is an oasis of sanity in this European Gobi-sized desert of derangement:

‘Cyprus has few sources of capital besides its capacity as a banking shelter, so Brussels required that the country raise part of the necessary funds from its own banking sector — possibly by seizing money from certain bank deposits and putting it toward the bailout fund. The proposal has not yet been approved, but if enacted it would undermine a formerly sacred principle of banking in most industrial nations — the security of deposits — setting a new and possibly destabilizing precedent in Europe.’

The Portuguese Government today echoed this same sentiment. As of Thursday it’s a unique one-off, by Sunday it’s a template, and on Monday it’s a precedent. A thousand years of constitutional development telescoped into four days. Only in the European Union of Sorry Shithead Reconciliation (USSR).

Source

Angelo: Not sure about... "Cyprus has few sources of capital besides its capacity as a banking shelter" ...how about, halloumi cheese, pitta bread, olive oil, potatoes, shoes, jeans, beverages, gold, copper, tourism...?   ...gas, oil, silver, rare earth metals, fishing, the Cyprus rally... Cyprus always had a good economy after independence and before the euro because the people are industrious. There was never poverty after the English colonials retreated and until the TROIKA attacked!