After the botched attempt by scheming unelected Eurocrats to impose bank deposit levies in order to bail out the banking system, which had been foiled by the Cyprus Parliament, the EU now threatens to kick Cyprus out of the Union, followed by proposed measures to impose capital controls.
The European Union gave Cyprus till Monday to raise the billions of euros it needs to secure an international bailout or face a collapse of its financial system that could push it out of the euro currency zone.In a sign it was at least preparing for the worst, the Cypriot government sought powers on Thursday to impose capital controls to stem a flood of funds leaving the island if there is no deal before banks reopen following this week's shutdown.
So same dog but with a different collar.
Principally, capital controls would represent the same assault on property rights.
Notes the Zero Hedge: (bold and italics original)
As Europe wakes up to what could be a tumultuous day, Handelsblatt reports that the ECB has decided that, due to the "great danger" of a bank run once they reopen next week, it will enforce capital controls independently of Cypriot (elected) officials. With perhaps a nod towards negotiating some ELA funding for Cypriot banks next week (if the government accepts this ECB-enforced 'program'), the rather stunning restrictions on people's private property include:-Freezing Savings - no time-frame (it's not your money anymore)-Make bank transfers dependent on Central Bank approval (a money tzar?)-Lower ATM withdrawal limits (spend it how we say?)The capital controls will be designed "so that citizens have access to sufficient cash to go about their lives." So, there it is, a European Union imposed decision on just how much money each Cypriot can spend per day. Wasn't it just last week, we were told Europe is fixed?
Another interesting aspect the geopolitical consequence from the unfolding events in Cyprus.
While I have earlier noted that unresolved ethnic rivalries, conflicting territorial claims that covers energy resources with neighbors, and the realignment of alliances and rivalries within east Mediterranean region may trigger a regional military conflict, Russia’s heavy stake in Cyprus could also spark a military conflagration.
Nearly a third or $19 billion of the 70 billion euros in deposits in Cyprus banks are reportedly held by Russians (supposedly from oligarchs to alleged mafias to political money).
According to CNBC
One Russian bank, Alfa Bank, estimates that $70 billion of illegal capital flight from Russia in the past two decades may have found its way to Cyprus.Moody's rating agency said last week Russian banks had about $12 billion placed with Cypriot banks at the end of 2012 and has estimated that Russian corporate deposits at Cypriot banks could be around $19 billion."We think that the $19 billion exposure is mostly wholesale - ie corporate," Eugene Tarzimanov, Senior Credit Officer at Moody's in Russia, told Reuters.Some of Russia's largest banks have some credit exposure to Cyprus. VTB, Russia's second-largest bank by assets, had $13.8 billion in assets and $374 million through its Cypriot subsidiary, Russian Commercial Bank, at the end of 2011.
Political pressure has allegedly been building up for the Russian government to intervene
From latest reports, the Cypriot banks might open on March 26th at the earliest. That’s two weeks after being shut down. That’s two weeks of unmet financial obligations, ie government employee salaries, public works financing, unpaid pensions etc etc…Expect unrest on the streets of MoscowThe EU/Germany are certainly aware that 95% of all Russian money goes through the Cypriot banks. Certainly they were well aware of the consequences this would lead to. Is this the first salvo in the new world war??
Dennis Gartman of the eponymous The Gartman Letters made a recent germane comment at the CNBC “Don’t Mess with the Russian Mafia”.
Next week will be very interesting.