Cyprus - what's next?

1. The Cyprus president Mr Anastasiades, consistent with the rhetoric we have been hearing from politicians and central bankers everywhere when trying to justify bailouts, is positioning the bailout agreement, including the unprecedented haircut for depositors, as "the alternative would have been a disorderly bankruptcy and an unthinkable economic collapse" of the island. Two of the three major banks would collapse leaving 8,000 people out of work with a catastrophic cascading effect in the economy and small business shutdowns due to lack of credit. The government would have been unable to pay the 30bn euro to refund all deposits under 100,000 euro that fall under the existing depositor protection scheme in the EU. The collapse would also most certainly mean the islands exit from the eurozone with a re-introduction of a significantly devalued Cyprus pound (40pc).

Mr Anastadiades of course is a hypocrite, yet another narcissist who achieved his life long ambition of getting to be president, a europhile who openly received support from Merkel in his election campaign when she showed up to address his party's conference. He is nothing but a useful tool for the Group Frankfurt. A disorderly bankruptcy of Cyprus is something the EU would never let happen as it would have significant negative ramifications to their entire EU banking system as well as the bond and equities markets. They steamrolled over Mr Anastasiades who basically came to the meeting willing to be steamrolled. Besides, these actions by the EU are not about money, the amounts involved here are fairly insignificant, they are about something a LOT BIGGER. ENERGY.

2. Mr Anastadiades cancelled a meeting that was supposed to take place today with his own ministers as well as a plenary meeting with parliament to brief them on what he agreed to. The meeting was moved to tomorrow afternoon. Mr Anastadiades needs support from the like minded, right leaning DIKO party to pass this through parliament and he is likely making the rounds now ensuring their support. He'll get it too. Although DIKO's leadership at first was very vocal criticizing the negotiated deal, they have since softened their position by saying that Mr Anastadiades had to face "realities on the ground". Rumour also has it that Mr. Anastasiades are already back pedaling and planning to introduce some sort of relief program for those under a certain income threshold and who can least afford to lose some of their meager savings.

3. The banks and cooperatives leadership is meeting today to sort out "technical issues" in implementing the depositors haircut. It is unclear if corporate accounts, trade union accounts, pension fund accounts and  money in commodities trading/derivatives hedging accounts are included in the haircut. I suspect they are also waiting for word from the IMF who now openly advocates capital controls. They are already talking about refusing large (undefined as to what "large" means) withdrawals or transfers. The banks were closed Monday for a regularly scheduled religious holiday and were supposed to re-open Tuesday. The Tuesday re-open is now in doubt, forcing a bank holiday, which will only aggravate the public's anger and panic.

4. The German parliament will meet to vote on the Cyprus bailout. It will pass. It is already heralded as a victory for Merkel in Germany where German tax money is not put at risk in bailing out those who spend beyond their means but, especially in Cyprus, bailing out Russian "black money".

5. What will be the reaction in Italy and Spain? I imagine Grillo has just been handed another lethal weapon to use again EU intrusion and failed policies, building on his already getting stronger anti-EU momentum. It's just a question of time for Spain to ask for emergency help and the Spanish public knows that. So, will the Spaniards front run any bailout agreement which now may in fact contain depositor haircuts and begin a massive withdrawal of their money from the banks? Surprisingly in Greece, where at a time there was a threat of default and exit from the euro, it was corporate and very wealthy money that left the country for safer shores, not the public's money. Has the public at large capitulated and feels helpless in being able to do anything about this horrid imbroglio?