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Thu Mar 28, 2013, 10:02 AM

 

Euro zone clamor drowned out Cypriot bank warnings

(Reuters) - Cypriot politicians and bankers were so swept up in the short term benefits of the Mediterranean island's adoption of the euro that they ignored warnings over the resulting lending boom.
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When Cyprus joined the single European currency, Greek and other euro area deposits were reclassified as domestic, leading to billions more local lending, Pambos Papageorgiou, a member of Cyprus's parliament and a former central bank board member said.
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At the time, Bank of Cyprus's 2.4 billion euros of Greek debt was enough to wipe out 75 percent of the bank's total capital, while Laiki's 3.4 billion euros exposure outstripped its 3.2 billion euros of total capital.
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The banks sold down some of their Greek holdings, but then got back into the market as yields rose. "When the Germans were selling, they were buying," said Apostolides, referring to the German banks' 2011 dumping of Greek debt.
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The "haircut" ultimately agreed by European leaders, including Cyprus' president Demetris Christofias, was more than 70 percent, heaping losses of 4.5 billion euros on the banks.
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http://www.reuters.com/article/2013/03/22/us-cyprus-banks-idUSBRE92L0CQ20130322

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Reply Euro zone clamor drowned out Cypriot bank warnings (Original post)
dkf Mar 2013 OP
geek tragedy Mar 2013 #1
dkf Mar 2013 #3
dipsydoodle Mar 2013 #2

Response to dkf (Original post)

Thu Mar 28, 2013, 10:04 AM

1. The perils of an undiversified economy.

 

Cyprus depended on Russian plutocrats' deposits and tourism.

The former is now gone, and depending on the latter means a lot of English tourists coming to booze it up on vacation packages. Something they also have in common with Greece.

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Response to geek tragedy (Reply #1)

Thu Mar 28, 2013, 10:10 AM

3. Or more specifically undiversified investments...putting it in Greek bonds of all things.

 

I can see where too much faith in the idea of a Eurozone did them in. They must have expected a full bailout of Greece.

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Response to dkf (Original post)

Thu Mar 28, 2013, 10:07 AM

2. The irony is

that when Greece made that haircut many here went whoo hoo oblivious to with whom it had a knock effect.

Similarly now in Cyrus the a/cs over 100k which may be hit with a 40% tax are not all Russian deposits. At least one of those a/cs just happens to be a Cypriot 700 million pension fund.

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