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Wednesday, March 20, 2013

Cyprus:"It's now or never"...

..sang Elvis some 50+ yrs ago.
The political elite in Cyprus knew for a long time that Cyprus had to come up with about 6 bln. to supplement the loan from EZ+IMF, that could not be significantly more than about 10 bln.
Why? Because that 10 bln. loan makes total sovereign debt just sustainable (or not) . The government in Cyprus is looking for these funds now, as they were of the opinion that Cyprus, being a systemic risk for the EZ, would in the end enjoy  full funding of the 16 bln. with loans from the EZ+IMF. Reckless thinking? Probably, but more likely inadequate and/or hubristic preparation for the negotiation climax.
Today, the ECB Governing Council will most likely put further ELA for the Cypriot Banks on auto pilot, which means that recapitalization of the banks must be agreed before they open for business again.
The EZ+IMF do not  "blink"first.

Ben Hall and Peter Spiegel at the FT wrote the definitive column for the current situation in Cyprus.

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