Cyprus President To Rehn: "I Told You Tax Wouldn't Pass. Regards To Mrs Merkel"

Submitted by Tyler Durden on 03/18/2013 18:17 -0400

• default
 
• European Central Bank
 
• European Union
 
• International Monetary Fund
 
• Reuters

Update: German chancellor, Cypriot president discussed Cyprus rescue, official says.Merkel told Anastasiades that Cyprus can negotiate on rescue     package only with troika: official.

To say that the tensions within the European "Union" are getting unbearable would be an understatement.

First, courtesy of Reuters, we get a detailed narrative of what happened before this Saturday's announcement of a deposit levy, where we learn that the deposit confiscation was initially Joerg Asmussen's idea, and we also learn that Atanasiades stormed out in anger when he learned what was about to happen.

Under a promise which still appears on the website of the Central Bank of Cyprus, deposits in its banks are insured up to 100,000 euros. Cyprus has about 30 billion euros in insured deposits, a large amount for a country of just 1 million people.

But because of its status as an offshore financial hub for foreigners - including large numbers of rich Russians - it also has 38 billion euros in uninsured deposits in bigger accounts.

Cyprus could have offered full protection to those with insured deposits up to 100,000 euros and still reached the 5.8 billion euro target by taxing uninsured deposits at a rate above 15 percent

According to three sources, European Central Bank board member Joerg Asmussen and euro zone finance ministers' representative Thomas Wieser had worked on a plan that would require just that - a high levy on only uninsured deposits.

But when the plans were presented to Anastasiades, several participants said, he balked at any suggestion that uninsured depositors should pay more than 10 percent.

Since his limit meant uninsured depositors would pay no more than 3.8 billion euros, those with small savings would have to pony up the other 2 billion euros.

The meeting was contentious, participants say. Schaeuble, Dutch Finance Minister Jeroen Dijsselbloem and negotiators for the ECB, EU and International Monetary Fund broke off several times to talk separately with the Cypriots.Other ministers hung around in the corridors, playing games on their mobile phones.

In the early hours of Saturday morning, Dijsselbloem, who serves as head of the euro zone minister's group, proposed that uninsured depositors pay 12.5 percent, a level which would require insured depositors to pay only 3.5 percent or so.

Anastasiades stormed out of the meeting in anger. He returned only when senior negotiators told him that if he left, Cyprus would have to default and shut its banks altogether.

Finally he agreed to the levy, but insisted on capping the fee for uninsured depositors at no more than 9.9 percent.

Exhausted officials did the sums. To raise the other 2 billion, insured Cypriot depositors with small accounts would have to pay a 6.75 percent levy on their savings. The deal was done.

Turns out it wasn't. Moments ago Kathimerini reported what happened later today, after aswe first reported it became clear that the Cypriot parliamentary majority had swung againstthe deal, and shows that the bad blood between the Cypriot leader and Germany's Merkel is now boiling:

Cypriot President Nicos Anastasiades held a telephone conversation with European Economic and Monetary Affairs Commissioner Olli Rehn on Monday night to inform him that there might not be enough parliamentary support for a deposit tax on the island.

Cypriot MPs were due to debate on Tuesday a tax on deposits but it looks like Anastasiades will not be able to get enough votes to approve the one-off levy, which was decided at Eurogroup meeting in the early hours of Saturday.

Anastasiades is also reported to have spoken to German MEP Elmar Brok, a member of Chancellor Angela Merkel’s CDU party who is close to the German leader.

According to Mega TV, Anastasiades is reported to have said to Rehn and Brok: “When I warned you that there would not be a parliamentary majority to pass the agreement, you didn’t want to listen. Give my regards to Mrs Merkel.”

We eagerly wait to hear back what message Frau Merkel has for the Cypriot leader now that the entire plan to punish Russian billionaires and generate political brownie points for Angie come September, while in the process using innocent Cypriot savers as collateral damage, is about to fall apart.

Incidentally, why is any of this happening? Because a few rich eurocrats have decided that this is what is "fair."

They know best...