EUCOM Economic Analysis - Part I

[Firn]

This mirrors my impressions:

11.09 Reuters has seen the notes made during an emergency conference call of eurozone finance ministers revealing the level of panic being felt over Cyprus.
One official described emotions as running "very high" admitting this made it difficult to come up rational solutions, and referred to "open talk in regards of Cyprus leaving the eurozone".

The call, among deputy finance ministers or senior treasury officials, as well as officials from the ECB and European Commission, was shunned by the Cypriot representatives, a move seen as ominous by their counterparts. The French representative is recorded as saying:

'The Cypriot parliament is obviously too emotional and will not decide on anything, if Cyprus does not even feel that they can attend the call it is a big problem for us.'

The emotions are indeed running high, after the jubilation of the heroic 'no' there is now the expected disperation in the streets. Many really didn't saw it coming, didn't they? And most can hardly be blamed for that even if a look at the Cypriot balance sheet, labour costs, housing bubble and bank rates should have made one shudder. But a bubble is a bubble for the very reason that it is a bubble.

17.07 More on the protests happening outside the Cypriot parliament this evening, where anxious bank workers have gathered. Joe Lynam of the BBC tweets:

BBC_Joe_Lynam Joe Lynam BBC Biz

The road outside #Cyprus parliament is now closed because soon to be jobless Laiki bank workers were attacking politicians

Shocking scenes and so sad.

lemasabachthani lemasabachthani
*CYPRUS POPULAR BANK HAS FEW HOURS OF LIQUIDITY LEFT: OFFICIAL

The social media certainly helps to spread the panic around. When will we see banks open again? And how should the economy work without liquidity?

17.34 Reuters reports that Cyprus' Popular (or 'Laiki') Bank has announced restrictions on cash machine withdrawals of €260 per customer daily.

Obviously the banks are faced with an unprecedented demand for cash at the ATMs with everybody desperate to get as much cash as possible as more and more shopkeepers are only accepting that. We are seeing a classic bankrun by modern means all over Cyprus. Every day that passes liquidity will get horded as much as possible and drained from the banks and the economy. With no international bank lending to practically dead Cypriotic banks and the ECB not willing to infuse liquidity without a plan the whole banking system + the economy will go down very quickly.

Why did the Cypriotic politicians do nothing, why were they so stupid and proud to say no?

alexralph Alex Ralph
At Laiki Bank branch in Mayfair. Little activity. One Russian accented gentleman on mobile talking about bank split and asking for lawyer.

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