<B>Europe has asked: what will it all look like when the cash dries up? Now we know the answer: Cyprus.</B> By Richard Spencer, Nicosia6:50PM GMT 22 Mar 2013 Eurogeddon is sweeping the island. Its leaders are still working to avert catastrophe, but for residents, it had already struck. Unlike a Hollywood film, there is no stampede out of town. No-one can afford to waste the petrol. The motorway that traverses the island connecting Paphos in the west to Limassol and Larnaka in the east and the capital Nicosia in the north is nearly deserted. To say there was no Friday afternoon bustle would be an understatement. Every shop along a strip on Archbishop Makarios Avenue in central Nicosia reported to have had not a single customer all day. "People just don't have the money," said Georgia, a lingerie saleswoman. To say there was no Friday afternoon bustle would be an understatement. She is a living example of the spectre of financial disaster shadowing the continent. She trained as a kindergarten teacher in her home city in Greece - but kindergartens have shut in its austerity drive and she lost her job, before moving to Cyprus. Now, like most of Nicosia's residents, she has no idea what will happen next. "I never expected this would happen," said Despo Pambaka, a customer services manager. "They are trying to take our lives, our money. This is not the Europe that we went into. Germany showed her real face." Miss Pambaka shows the intractability of Cyprus's crisis and why Germany is so reluctant to come to its rescue. She said she had an outstanding mortgage of 200,000 euros. She is just 28, and her annual salary is 18,000 euros. That mismatch of income and debts is Cyprus's problem. Her boss, Nitsa Sarka, a senior manager, who has worked for the bank for 39 years, said she had a mortgage of 230,000 euros despite a gross salary of just 4,000 euros a month. Significantly, her "provident fund" - the pension and social security fund - was held as security against the mortgage. It is hardly surprising that Cypriots are battening down the hatches. They are preparing for worse: even more stringent capital controls will also be in place by the time the banks reopen, under the new plans. http://www.telegraph.co.uk/news/wor...streets-of-a-country-closed-for-business.html
Wow what a topsy turvy world new employee makes18k euros(350% more than the boss) and has a mortgage of 200k 1100% of annual income. boss only makes 4000euros what does she work an hour a day or they pay more skilled people like crap? oh btw 7500% of annual income . yes that's right 75 yrs to pay the (principal only)at her rate of pay. I sure hope that's a 300 yr contract. last I heard japan had 99 yr mortagages 20 years ago. Sorry for them but unless there are serious journalistic errors that's just insane. I suppose if this valuation scheme is the norm there's no assets offsetting the liabilities even if the bond holders don't get squat. So the depositors are destined to lose big anyway.
We taught the world all about subprime mortgages and they learned well. The whole of Europe is probably in a mortgage 10x their income.
"Miss Pambaka shows the intractability of Cyprus's crisis and why Germany is so reluctant to come to its rescue. She said she had an outstanding mortgage of 200,000 euros. She is just 28, and her annual salary is 18,000 euros." Sounds like Calgary, just multiply the numbers by 1.5 and call them dollars. Very few young, single people in this town can afford a townhouse, much less a house, without renting a room out.
I see 2 scenarios 1) bailout happens anyway with depositor haircut:Russia annexes them. 2)No bailout : Russian billionaires buy cyprus 5-6% on the dollar. I wonder what the whole island is worth. 3) bernake leases them a printing press through IMF.
Or the government confiscates all the Euros in the banks and replaces them with the new national currency - the Cypriot dollar.
That's the same as #2) But I'm not sure germany wants to fight against the Russians on behalf of the ECB. No one in cyprus govt is going to openly vote for depositor hair cuts. I can tell you if i were ex-KGB and you stole my money... don't buy an annuity without survivor benefits.
No kidding. If the russkies take a haircut, someone will pay. You can understand why the germans don't want to bail out russian mobsters or subsidize an outlaw offshore banking venue. Still, you'd think there would be some value in preventing the russians from taking over Cyprus. At the same time, it shows how corrupt Russia is. If it wasn't, wouldn't they be leaping at the chance to get their hands on the banking records of a bunch of people who had been evading russian taxes?
There's no such thing as an outlaw banking venue. On that same note it's depressing that we are dependent upon Russia and China to repeal the power grab of FACTA.