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Scandal Hits Cyprus

By Stephen Lendman - Posted on 02 April 2013


Scandal Hits Cyprus


by Stephen Lendman


Grand theft is official Cypriot policy. Bank account haircuts are authorized. Those above 100,000 euros are targeted.


Depositors may lose much more than initially thought. Minimally it's around 40% of their money. It may be double that amount or more. Potentially it's everything. 


In return, they'll get unsecured IOUs (promises to pay). They'll be converted to bank shares. They may end up worthless.


Small depositors aren't safe. If enough money isn't raised, they're vulnerable. Once thought safe bank accounts are being looted. It gets worse.


Friends of President Nicos Anastasiades got advance word. Cypriot newspaper Haravgi said A. Loutsios & Sons Ltd wired 21 million euros to London. It did so on March 12 and 13. It was days before capital controls were imposed.


Loutsios & Sons is co-owned by the husband of Anastasiades' daughter. The company denied Haravgi's report. Anastasiades said it "attempt(ed) to defame companies or people linked to my family."


It's "nothing but an attempt to distract people from the liability of those who led the country to a state of bankruptcy."


On March 22, London's Daily Mail headlined "Cypriot president 'warned his friends to move money abroad' before financial crisis hit: Leader under fire as he faces just FOUR DAYS to save country from collapse."


"Cypriot president Nikos Anastasiades 'warned' close friends of the financial crisis about to engulf his country so they could move their money abroad, it was claimed on Friday."


"The respected Cypriot newspaper Filelftheros made the allegation which was picked up eagerly by German media."


"The Cyprus newspaper did not say how much money was moved abroad but quoted sources saying the president 'knew about the possible closure of the banks' and tipped off close friends who were able to move vast sums abroad." 


"Italian media said the 4.5 billion euros left the island in the week before the crisis."


On March 25, Reuters headlined "INSIGHT - Money fled Cyprus as president fumbled bailout," saying:


"….(L)arge amounts of euros fled (Cyprus) before and after Cypriot lawmakers stunned Europe by rejecting a levy on all bank deposits."


"No one knows exactly how much money has left Cyprus' banks, or where it has gone." Minimally it was many millions. Perhaps it was much more. Insiders got advance word. They took full advantage. Others weren't as lucky.


On March 31, AFP said Cypriot politicians "had loans written off by the island's three biggest banks, two of them at the heart of the financial meltdown."


"Lawmaker Mavrides, meanwhile, confirmed that a committee appointed by President Nicos Anastasiades would investigate a list published by Greek media of Cypriot politicians who allegedly had loans forgiven."


"The Bank of Cyprus, Laiki and Hellenic Bank reportedly forgave millions of euros in loans over the past five years to lawmakers, companies and local company authorities, newspapers in Greece said."


"The allegations would likely be discussed in parliament next week, Mavrides added."


Expect more whitewash and coverup than revelations. What's reported is likely true. Politicians often get special favors. Advance word let privileged insiders shift money offshore. They did so in time.


On March 31, the Financial Times headlined "Scramble to find Cypriot cash escape route," saying:


The hunt's on. In recent weeks, at least three people tried fleeing "with more than 200,000 euros in cash on their person." They were caught. Funds were confiscated.


Limassol police stepped up security. At issue is stopping people trying to get funds offshore by boat.


Unidentified Cypriots called Russian businessman Sergei Tyulenev. They did so the day capital controls were imposed. They offered help to shift more than one million euros from Laiki Bank to Hellenic Bank. It's relatively safer.


He explained a catch. He'd have to pay 200,000 euros up front. He refused. Eurocrats raised concerns. Politically connected depositors moved cash out in time. Others got funds out after banks closed.


An unidentified Eurocrat said:


"There are some dubious capital outflows out of Cyprus as we speak. I'm sure it's 'the friends,' and the friends are not only Russians."


Before crisis erupted, many foreign depositors exited. They smelled trouble. They moved funds offshore in time. The handwriting's been on the wall for months.


In February alone, about 18% of Cypriot deposits moved to other Eurozone countries. Central Bank of Cyprus figures confirm it. Since last June, Cypriot deposits fell 41%.


Hours before capital controls were imposed, large sums exited Laiki Bank and Bank of Cyprus.


On March 31, The New York Times headlined "As Banks in Cyprus Falter, Other Tax Havens Step In," saying:


"(F)inancial centers across Europe and beyond are promoting their own skills at keeping money hidden and safe."


A Malta law firm said:


"We are aware of the economic problems facing Cyprus at the moment. We would like to propose an avenue of action for your consideration: offering corporate relocation to Malta."


Switzerland, Luxembourg, the Cayman Islands, Dubai, Singapore, and other tax havens made similar offers.


Swiss-based Gonthier Group emailed Cypriot firms working with foreigners. It suggested they offer clients an investment "vehicle which is extremely low-profile, not classified as a bank account or trust and thus very much under the radar of national fiscal authorities."


Turkey controls northern Cyprus. It's promoting its own banks. It does so as a safer alternative.


Nicholas Papadopoulos heads parliament's finance and budgetary affairs committee. "We are being thrown to the wolves, and now the wolves have responded," he said.


Limassol lawyer Andreas Marangos said Cypriot banking "is finished." At stake is the island's main industry and tens of thousands of jobs. Expect unemployment to soar. 


Protracted Depression looks certain. An entire economy is being destroyed. Cypriot economics Nobel laureate Christopher Pissarides is right saying when the IMF gets involved, there's always blood on the ground.


On March 31, Cyprus Mail accused President Anastasiades of failing "to introduce an honest, reality-based, political discourse." He said what people wanted to hear.


He sounded like his predecessor. He's not up to the challenge. He panders to privileged Cypriots. He offers false hopes and breaks promises. He hasn't prepared Cypriots for hard times.


They "need to know they have a leader who is aware of the crushing difficulties we face, but he has a plan to help the country get back on its feet eventually."


He's got none. Cyprus' future remains hugely challenged. For most Cypriots, it's bleak.


Today Cyprus. Tomorrow Euroland. FT's Wolfgang Munchau says "Economics will catch up with the euro."


"(A)t what point (is it) economically rational for a country to leave the eurozone?" It's an "imperfect banking union." Public and private sector debts are unsustainable in troubled countries.


They're better off going it alone. Insured depositors in Spain, Italy, Portugal and Greece aren't safe. For sure, Cypriot ones aren't.


Spain looks next up for a bail-in. Its banking system is broke. It faces protracted Depression. 


It's "logically irrational for any Spanish saver to keep even small amounts of savings in the Spanish banking system. There is no way that the Spanish state can guarantee the system without defaulting itself."


Spain's best chance is exiting the Eurozone. The same goes for Greece, Italy and Portugal. Economics may not be the main driver. "Politics may trump economics." Longterm, "you cannot operate a monetary union in the face of economic logic."


One size fits all Eurozone rules don't work. Imposing them reflects financial tyranny. Surrendering monetary and fiscal control assures trouble. 


Cyprus' virus is spreading. Ordinary people will be harmed most. Insured savings aren't safe. Euroland looks most vulnerable. Take the money and run is policy.


Depositor haircuts are authorized. Canada did the same thing. It's a short leap to America. They're coming. Expect them. 


Stephen Lendman lives in Chicago. He can be reached at 


His new book is titled "Banker Occupation: Waging Financial War on Humanity."


Visit his blog site at 


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The scandal is about those with insider knowledge who pulled their money just in time befor ethe banks closed. Other than that, I don't get what the problem is supposed to be.


When the US banks were deemed too big to fail and were saved with taxpayers' money, the left cried foul. Now when a bank is allowed to fail, and its shady billionaire clients stand to lose some of their (largely ill-gotten) savings that they had channeled out of their own countries to avoid paying taxes or to hide illicit transfers, how is this a problem again? Isn't this the right thing to do?


Deposits up to 100k Euro are guaranteed by the EU, and it looks like they will be safe. Any bank may fail, and everyone is aware of that when they put their money in. If you run your business in Russia or Germany but keep your profits in a no-questions-asked Cypriot bank account, you deserve exactly what you get. You cheated and lost, cry me a river!


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