{"id":19435,"date":"2013-01-10T02:22:52","date_gmt":"2013-01-10T01:22:52","guid":{"rendered":"http:\/\/feedproxy.google.com\/~r\/zerohedge\/feed\/~3\/JDhnt8xnPvA\/story01.htm"},"modified":"2013-01-10T02:22:52","modified_gmt":"2013-01-10T01:22:52","slug":"russian-black-money-threatens-to-boot-cyprus-out-of-the-eurozone","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/breaking-news\/russian-black-money-threatens-to-boot-cyprus-out-of-the-eurozone\/","title":{"rendered":"Russian \u201cBlack Money\u201d Threatens To Boot Cyprus Out Of The Eurozone"},"content":{"rendered":"
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Wolf Richter\u00a0 www.testosteronepit.com<\/a>\u00a0 www.amazon.com\/author\/wolfrichter<\/a><\/p>\n

German Bailout Chancellor Angela Merkel, who is trying to avoid any tumult ahead of the elections later this year, has a new headache. Cyprus, the fifth of 17 Eurozone countries to ask for a bailout, might default and exit the Eurozone under her watch. Using taxpayer money or the ECB\u2019s freshly printed trillions to bail out the corrupt Greek elite or stockholders, bondholders, and counterparties of decomposing banks, or even privileged speculators, is one thing, but bailing out Russian \u201cblack money\u201d is, politically at least, quite another.<\/p>\n

Cyprus is in horrid shape. Particularly its banks. Their \u00e2\u201a\u00ac152 billion in \u201cassets\u201d are 8.5 times<\/em> the country\u2019s GDP of \u00e2\u201a\u00ac17.8 billion. \u201cAssets\u201d in quotation marks because some have dissipated and because \u00e2\u201a\u00ac23 billion<\/a> in loans, or 27% of the banks\u2019 entire credit portfolio, are nonperforming. That\u2019s 127% of GDP! And then there are the Russian-owned \u201cblack-money\u201d accounts.<\/p>\n

A \u201csecret\u201d report by the German version of the CIA, the Bundesnachrichtendienst (BND) was leaked last November, revealing that any bailout of Cyprus would benefit rich Russians and their \u00e2\u201a\u00ac26 billion in \u201cblack money\u201d that they deposited in the now collapsing banks. The report accuses Cyprus of creating ideal conditions for large-scale money laundering, including handing out Cypriot passports to Russian oligarchs, giving them the option to settle in the EU. Much of this laundered money then reverses direction, turning minuscule Cyprus into Russia\u2019s largest foreign investor [read… \u00a0The Bailout of Russian \u201cBlack Money\u201d in\u00a0Cyprus<\/a>].<\/p>\n

Now Cyprus needs \u00e2\u201a\u00ac17.5 billion\u2013just about 100% of its GDP\u2013of which \u00e2\u201a\u00ac12 billion would go directly to the murky and putrid banks. The package should be wrapped up and signed on February 10 at the meeting of the European finance ministers.<\/p>\n

\u201cI cannot imagine that the German taxpayer will save Cypriot banks whose business model is to abet tax fraud,\u201d grumbled<\/a> Sigmar Gabriel, chairman of the opposition SPD that has been a supporter of euro bailouts; and Merkel, hobbled by opposition within her own coalition, had relied on them to get prior bailouts passed. \u201cIf Mrs. Merkel wants to have the approval of the SPD, she must have very good reasons,\u201d he said. \u201cBut I don\u2019t see any….\u201d<\/p>\n

The Greens are resisting the Cyprus bailout for the same reasons. And 20 members of Merkel\u2019s own coalition are categorically opposed to it. For the first time, Merkel has no majority to get a bailout package passed. The opposition smells an election advantage.<\/p>\n

Before the German finance minister can vote in the Euro Group of finance ministers for disbursement of bailout funds, he must seek parliamentary approval. The German Constitutional Court said so, inconveniently. But without his yes-vote, which weighs 29%, the qualified majority of 73.9% cannot be reached. The bailout disbursement crashes. That\u2019s what Cyprus is contemplating.<\/p>\n

Fearing defeat, sources within the government now made it known that they wouldn\u2019t even present a bailout package unless Cyprus agreed to \u201cradical reforms,\u201d including massive privatizations of the bloated state sector\u2013precisely what communist President Dimitris Christofias has ruled out.<\/p>\n

The Russian \u201cblack money\u201d is so unpalatable that even the bailout-happy President of the EU Parliament, Martin Schulz, got cold feet. Before a bailout package could be put together, he said, \u201cit must be disclosed where the money in Cyprus is coming from.\u201d<\/p>\n

Markus Ferber, head of Merkel\u2019s coalition partner CSU, demanded a guarantee that \u201cwe help the citizens of Cyprus and not the Russian oligarchs.\u201d In addition, he wants Cyprus to reform its naturalization law. If Cyprus wants to get bailed out, he mused, it must make sure \u201cthat not everyone who has a lot of money can get a Cypriot passport.\u201d<\/p>\n

Foreign Minister Guido Westerwelle (FDP), who is no Eurosceptic, hammered<\/a> home that the Cyprus won\u2019t get special treatment. The European community is \u201cready for solidarity, but only in return for real structural reforms,\u201d he said. \u201cGreece didn\u2019t get a blank check, Cyprus won\u2019t either.\u201d And those reforms included \u201cbanking transparence.\u201d They\u2019re all out there now, griping about German taxpayers bailing out Russian \u201cblack money.\u201d<\/p>\n

Having learned a lesson from Greece, Cyprus has gone on a charm offensive to persuade the other 16 Eurozone countries that its \u201cblack money\u201d problem has evaporated and that more reforms aren\u2019t necessary. On Monday, Central Bank President Panicos Demetriades invited the finance ministers to a dog and pony show that would explain the banking sector and the perfectly legit activities of the Russian funds.<\/p>\n

If Greece is any guide, Merkel will vociferously demand more reforms and transparence in the banking sector. The February 10 deadline might pass. Cyprus will come up with a list of promises. Gradually the rhetoric will change. Words like \u201cprogress\u201d will show up. \u201cBlack money\u201d will disappear from the media. This might even culminate with a heartwarming meeting in Berlin between Merkel and Christofias. And suddenly, voting against<\/em> the Cyprus bailout, once a safe bet, will become politically risky. It worked before. It might work again. If not, Cyprus with all its \u201cblack money\u201d might become the first Eurozone country to go bust.<\/p>\n

The European Commission issued its report on bank bailouts, the \u201c2012 State Aid Scoreboard.\u201d Turns out, the amount that the 27 EU states had handed to their banks amounted to \u00e2\u201a\u00ac1.6 trillion. 13% of GDP\u2013to bail out bank stockholders, bondholders, and counter parties, and enrich privileged speculators. Read…. The EU Bailout Oligarchy Issues A Report About\u00a0Itself<\/a>.<\/p>\n

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Wolf Richter   www.testosteronepit.com<\/a>   www.amazon.com\/author\/wolfrichter<\/a><\/p>\n

German Bailout Chancellor Angela Merkel, who is trying to avoid any tumult ahead of the elections later this year, has a new headache. Cyprus, the fifth of 17 Eurozone countries to ask for a bailout, might default and exit the Eurozone under her watch. Using taxpayer money or the ECB’s freshly printed trillions to bail out the corrupt Greek elite or stockholders, bondholders, and counterparties of decomposing banks, or even privileged speculators, is one thing, but bailing out Russian “black money” is, politically at least, quite another.<\/p>\n

Cyprus is in horrid shape. Particularly its banks. Their €152 billion in “assets” are 8.5 times<\/em> the country’s GDP of €17.8 billion. “Assets” in quotation marks because some have dissipated and because €23 billion<\/a> in loans, or 27% of the banks’ entire credit portfolio, are nonperforming. That’s 127% of GDP! And then there are the Russian-owned “black-money” accounts.<\/p>\n

A “secret” report by the German version of the CIA, the Bundesnachrichtendienst (BND) was leaked last November, revealing that any bailout of Cyprus would benefit rich Russians and their €26 billion in “black money” that they deposited in the now collapsing banks. The report accuses Cyprus of creating ideal conditions for large-scale money laundering, including handing out Cypriot passports to Russian oligarchs, giving them the option to settle in the EU. Much of this laundered money then reverses direction, turning minuscule Cyprus into Russia’s largest foreign investor [read…  The Bailout of Russian “Black Money” in Cyprus<\/a>].<\/p>\n

Now Cyprus needs €17.5 billion—just about 100% of its GDP—of which €12 billion would go directly to the murky and putrid banks. The package should be wrapped up and signed on February 10 at the meeting of the European finance ministers.<\/p>\n

“I cannot imagine that the German taxpayer will save Cypriot banks whose business model is to abet tax fraud,” grumbled<\/a> Sigmar Gabriel, chairman of the opposition SPD that has been a supporter of euro bailouts; and Merkel, hobbled by opposition within her own coalition, had relied on them to get prior bailouts passed. “If Mrs. Merkel wants to have the approval of the SPD, she must have very good reasons,” he said. “But I don’t see any….”<\/p>\n

The Greens are resisting the Cyprus bailout for the same reasons. And 20 members of Merkel’s own coalition are categorically opposed to it. For the first time, Merkel has no majority to get a bailout package passed. The opposition smells an election advantage.<\/p>\n

Before the German finance minister can vote in the Euro Group of finance ministers for disbursement of bailout funds, he must seek parliamentary approval. The German Constitutional Court said so, inconveniently. But without his yes-vote, which weighs 29%, the qualified majority of 73.9% cannot be reached. The bailout disbursement crashes. That’s what Cyprus is contemplating.<\/p>\n

Fearing defeat, sources within the government now made it known that they wouldn’t even present a bailout package unless Cyprus agreed to “radical reforms,” including massive privatizations of the bloated state sector—precisely what communist President Dimitris Christofias has ruled out.<\/p>\n

The Russian “black money” is so unpalatable that even the bailout-happy President of the EU Parliament, Martin Schulz, got cold feet. Before a bailout package could be put together, he said, “it must be disclosed where the money in Cyprus is coming from.”<\/p>\n

Markus Ferber, head of Merkel’s coalition partner CSU, demanded a guarantee that “we help the citizens of Cyprus and not the Russian oligarchs.” In addition, he wants Cyprus to reform its naturalization law. If Cyprus wants to get bailed out, he mused, it must make sure “that not everyone who has a lot of money can get a Cypriot passport.”<\/p>\n

Foreign Minister Guido Westerwelle (FDP), who is no Eurosceptic, hammered<\/a> home that the Cyprus won’t get special treatment. The European community is “ready for solidarity, but only in return for real structural reforms,” he said. “Greece didn’t get a blank check, Cyprus won’t either.” And those reforms included “banking transparence.” They’re all out there now, griping about German taxpayers bailing out Russian “black money.”<\/p>\n

Having learned a lesson from Greece, Cyprus has gone on a charm offensive to persuade the other 16 Eurozone countries that its “black money” problem has evaporated and that more reforms aren’t necessary. On Monday, Central Bank President Panicos Demetriades invited the finance ministers to a dog and pony show that would explain the banking sector and the perfectly legit activities of the Russian funds.<\/p>\n

If Greece is any guide, Merkel will vociferously demand more reforms and transparence in the banking sector. The February 10 deadline might pass. Cyprus will come up with a list of promises. Gradually the rhetoric will change. Words like “progress” will show up. “Black money” will disappear from the media. This might even culminate with a heartwarming meeting in Berlin between Merkel and Christofias. And suddenly, voting against<\/em> the Cyprus bailout, once a safe bet, will become politically risky. It worked before. It might work again. If not, Cyprus with all its “black money” might become the first Eurozone country to go bust.<\/p>\n

The European Commission issued its report on bank bailouts, the “2012 State Aid Scoreboard.” Turns out, the amount that the 27 EU states had handed to their banks amounted to €1.6 trillion. 13% of GDP—to bail out bank stockholders, bondholders, and counter parties, and enrich privileged speculators. Read…. The EU Bailout Oligarchy Issues A Report About Itself<\/a>.<\/p>\n

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