Vladimír Urbánek (Kurzy.cz)
Markets  |  March 21, 2013 10:14:45

What are the possible ways to Cyprus? Capital controls, the sale of natural gas reserves, the agreement with Russia


According to Megan Greene of Maverick Intelligence is not the current precarious situation in Cyprus completely hopeless. Country faces a massive attack on banks and savers outflows, which would likely lead to the collapse of the local financial market and ultimately to ruin. The cornerstone of the recovery would then leave the eurozone and the rescue of the local economy and the financial sector by printing their own money.
The situation seems almost hopeless, yet the game still some fairly interesting card.

One possibility is to promote greater capital controls by the EU. Article 65 of the Treaty on the Functioning of the EU states that capital controls is permitted if it is in the interest of general security. The first forms of such controls are already underway in the form of bank closures and a freeze on bank transfers.Larger capital controls along with another commitment on the part of auxiliary ECB loans supplying ample liquidity can give more space for problem solving.
Cyprus needs to avert bankruptcy find the total resources of about 17 mld.EUR. About 10 billion rescue help is with the "troika". What would be the best solution for the remaining seven mld.EUR?

Promising option seems the "Russian way" having essentially two levels. In the first one would be the easiest to transfer all the losses on uninsured deposits of non-residents who take high until the benefits of the Cyprus tax haven. Deposits up to an EU limit of 100 000 EUR would remain intact. The government, however, has previously indicated that it wants to completely destroy the tax haven status, and therefore, this option appears only as a very unlikely but not entirely impossible.
The second level offers further negotiations with Russia to expand ongoing financial assistance. Direct extension of financial assistance might face resistance the EU, something could be easier to indirect support through the assignment of rights for a strong Russian companies such as Gazprom, which could capitalize the banking system in exchange for the rights to gas production in the region. Even this option is not without obstacles, because the EU wants to reduce its long-term sphere of influence.

Another option is the "Greek way" transmission losses on senior unsecured holders of government bonds. The weakness is the relatively small financial contribution to this path in the order of only a few hundred million euros.
Another option is the "Irish Tour" working using the resources of pension funds, which can bring back only a few hundred million.

Cyprus may also seek additional resources in the reserves of natural gas, which are located at the coast. Unfortunately, most of these provisions are technically difficult extractable and still without the necessary mining infrastructure.
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Jaké jsou možné cesty pro Kypr ? Kontrola kapitálu, prodej rezerv zemního plynu, dohoda s Ruskem

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