The countercyclical Cypriot asset

The only new arrivals [in the Cypriot economy] were foreign exchange companies, such as MoneyGram, which Cypriots might soon use to send their savings out of the country or to receive money from relatives living abroad.

From the FT here is more, none of it good news.

Comments

HA. "We think differently"

No kidding. "We think differently" = We prefer thinking a reckless, unsustainable economy will last forever... and we think we will just hyperinflate to 'fix' everything should the need arise.

The vultures arrive.

Who, the euro folks or Moneygram?

And bloody expensive they are.

Could not access the article, as it is gated. There's a lot of news unreported on the Balkans. For example, re transferring money using Moneygram, Western Union, etc: the Greek government (and Cyprus I bet is the same) places a restriction of 5000 Euro every 2 weeks on the amount of money you can export out of GR, unless you can prove to the Western Union agent that you have a compelling reason (and lots of forms must be filled out). So if you have 500k in euro that would take you 500/5 = 100 bi-weeks or 200 weeks or about four years. So in practice I've heard what people do is set up accounts with 20 or more relatives, and that cuts this example to 10 weeks, which is doable.

Oh, "doable" is assuming you don't get caught, recall Spartan ethics for you classicists. Because the fine is forfeiture of assets, a fine, and possible jail time depending on the amount.

Couldn't a Greek account holder simply withdraw the full account balance, drive up to, I don't know, Austria, and deposit it into an account there? I suppose it could be risky from a theft perspective, but it's possible, no?

Cash deposits like that tended to be something more Swiss oriented specialty (though Austria did have truly anonymous accounts, which are being phased out). Switzerland not actually being in the EU, or sharing information information with it willingly.

Larger amounts of cash, beyond the very low tens of thousands (at best) in a tolerant place like Germany, receive very precise scrutiny when intersecting with a bank as a new customer.

MoneyGram is not likely to transfer money out of Cyprus in violation of the capital controls.

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“Ms Antoniou said. “Probably this thing never should have existed.**”

Mr Papadopoulos lamented the fact that, bound to the euro, Cyprus did not have the option to print money and devalue the currency to readjust its economy.

“We cannot be Germans,” he said, echoing Ms Antoniou. “Personally, I think we should take the money and then in five years – or as soon as we can – we should get the hell out.”

Good Diagnosis. Good plan!

***Especially w/o a banking union and a monetary authority that will at least keep ndgp growing steadily.

Question? Can ECB lend enough to the rump banking sustem in Cyprus to keep domestic credit from falling?

'Can ECB lend enough to the rump banking sustem in Cyprus to keep domestic credit from falling?'

Probably - but they are likely only to want to do it after they are sure that the money is truly being used for domestic credit.

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