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://news-these-days.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."
Advertisement
You have just read the article News for today's that category by title CYPRUS UNDER THE CLAWS OF THE IMF. You can bookmark this page with a URL http://news-these-days.blogspot.com/2013/01/cyprus-under-claws-of-imf.html. Thank you!
Posted by: Tukiyooo
CYPRUS UNDER THE CLAWS OF THE IMF Updated at :
6:37 PM
Monday, January 7, 2013
Post a Comment