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Borg: Cyprus has a week to avoid collapse

Borg: Cyprus has a week to avoid collapse

Published: 20 Mar 2013 10:19 GMT+01:00
Updated: 20 Mar 2013 10:19 GMT+01:00

Swedish Finance Minister Anders Borg has said that Cyprus has around a week to find a negotiated settlement to its financial travails or face the prospect of meltdown.

"In principle they have only the finance sector and beaches to offer and now the banks are on their way to closure. It is obviously a tough situation," Borg said at a seminar on Wednesday.

Speaking a day after the Cypriot parliament rejected a bailout package which included a controversial proposal to impose a levy on bank deposits, Borg underlined that the crisis across southern Europe remains deep and requires major reform.

While Borg argued that the money was required in order to keep Cyprus's national debt at a manageable level, Borg agreed that the plan to levy a spot tax on savings accounts held in Cypriot banks was far from ideal.

"To levy these sorts of taxes on depositors is very extraordinary from a Swedish perspective," he said.

Borg furthermore added that the proposal has made him even more sceptical of linking Swedish deposit guarantees to the eurozone system.

"Swedish taxpayers shall quite simply not be required to pay for other countries' crisis-hit banks."

Cyprus president Nicos Anastasiades on Wednesday met with party leaders to try to piece together an alternative plan following the rejection of the package put together by the EU, ECB and IMF.

Under the conditions of the deal Cyprus is required to come up with €5.9 billion ($7.6 billion) in order to secure a €10 billion emergency loan.

Anders Borg explained the challenge lies in finding capital for the country's banks, whose assets equate to 900 percent of the country's GDP. He suggested that this can be done either through writing off debts or by capital injection.

According to media reports on Wednesday this search for an alternative source of capital has now shifted Nicosia's attention towards Russia, despite pledges from the eurozone that there is enduring commitment to helping the troubled island nation.

Russians account for between a third and half of the deposits in Cypriot banks and President Vladimir Putin has been scathing in his criticism of the plan to tax savings.

According to speculation in the Russian media, state-owned oil and gas giant Gazprom is mulling an offer to shore up the Cypriot bank balance sheets in exchange for offshore drilling rights.

According to a report in the Svenska Dagbladet (SvD) daily on Tuesday, Swedish banks have received a slew of inquiries from concerned customers of banks in Cyprus and across the region looking for safer havens for their savings.

The inquiries have furthermore come from both ex-pat Swedes and international clients, according to the newspaper's report.

"We can confirm that the number of inquiries from clients in other crisis-hit countries has increased," said Henrik Westman at Handelsbanken to SvD.

Banks in Cyprus have remained closed while the emergency package was being debated and are expected to open again on Thursday amid fears of a looming bank run.

TT/Peter Vinthagen Simpson

Follow Peter on Twitter here.

The Local (news@thelocal.se)

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Your comments about this article

11:33 March 20, 2013 by Abe L
They need to go bankrupt ASAP and be removed from the Euro and Europe as soon as possible. As Borg states, they only have beaches and banking to offer. The banking services can be offered by any of the many other banks in Europe and their beaches are only appealing and will only be filled with tourists when it's dirt cheap to visit.

While they remain in the Euro and EU they will be nothing but a money drain for the other member states and a burden to every tax payer in Europe.
12:33 March 20, 2013 by RobinHood
It's all going tremendously well, isn't it.
13:59 March 20, 2013 by liondens
Comment removed by The Local for breach of our terms.
13:59 March 20, 2013 by ?????
@Abe L

Economics isn't your strong suit, right?

So what more does e.g. Finland have to offer? Nokia? And....?
14:31 March 20, 2013 by just a question
There we go. The perfect countries of the north blaming the poor countries of the south. Because you are better no?

No you are not. Nordics and Germans have the same house bubble. Swedes own more money to the banks than Spaniards, the private debt is bigger. And about corruption, it's everywhere.

So don't go around teaching lessons because next time you will be next and nobody will feel sorry for the North European countries. You should help these South European countries by making it easier to export their products and by offering them jobs. But don't worry everybody will remember what Germans are doing in Europe, again.
14:40 March 20, 2013 by skogsbo
Finland, forest and engineering to start with.

No point in increasing cypriot taxes, they must be the only country that works less and pay less tax than Greece.
15:26 March 20, 2013 by Rogerenden
Don't panic! At the end, our beloved EU will pay anyway.
15:35 March 20, 2013 by grandmary
I just laugh when I hear the idea that some day Northern Europe will be in the same position as Southern Europe. Hahaha. It will never happen. We don't have the same bubble. We don't have the same financial future. WE DONT HAVE THE SAME WORK ETHIC. Of course we owe more money because we have more money. Spanish are all broke! Sleeping all day. We won't give them jobs. Why should we. They can get their own jobs. They are not us and we are not them.
16:19 March 20, 2013 by just a question
grandmary, I normally don't answer to morons. Work ethic? yeah right, don't make me laugh. Spaniards sleeping all day? yes, they work until nine or ten at night. Have you been to Spain? Shops close at nine or ten. But hold your horses, maybe in some years Nordic people is not welcome in Spain anymore and you need to go somewhere else to have some sun and cheap alcohol.
17:44 March 20, 2013 by Migga
@just a question

After the US and the UK, Spain has the most amount of ethinc Swedes living there. They would hardly live there if they weren`t welcome. Why wouldn`t Swedes be welcome in Spain anymore? Because we blame them, go around teaching them lessons, don`t help and don`t offer them jobs? Don`t be ridicolous.
17:50 March 20, 2013 by Vags
Someone would say that after almost 4 years of economic crisis (and counting) EU would have learnt something. And yet they still suggest measures that will eventually help the crisis get bigger and scare away all the potential investors from the south.

So Cyprus has only banks and beaches, says mr Borg. Luxemburg, for example, has only banks. I wonder if Luxemburg was in the same situation, would mr Borg say the same? I wonder how many they would say "Luxemburg is the biggest money laundry in EU, they shouldn't get our tax money". None, I would say. Cause Luxemburg, even if it is a big money laundry, isn't located in the bad and lazy south. So Luxemburgians deserve the others' tax money more than the Cypriots...

Behind the stereotypes, the numbers and words like "tax payer" are people. And the more you see yourselves as tax payers and not as human beings, then EU has every right to see you as statistics. And treat you like that.
18:03 March 20, 2013 by intrepidfox
The problem is that what is happening in Cyprus could happen to us as well. The financial institutes and governments balls up and then the tax payer must pay from their saving as well. When will somebody take the blame for these catastrofies?
19:06 March 20, 2013 by procrustes
Considering that most of the big money in Cypriot banks is dirty (mafia, arms traders), one would think that the USA would jump at the chance to bail out Cyprus--imagine what the FBI/CIA could accomplish with precise inside knowledge of the money moving through that island. The amount of money Cyprus needs wouldn't even dent the CIA budget. The USA could posture as the generous friend to the world while behind the scenes the hard business of bail-out for information could be struck. It would be a win-win, they get vital crime fighting information and with proper management weening Cyprus off the mafia teat they'd get a nice profit.
21:55 March 20, 2013 by Kronaboy

That's the reason why the Germans insisted on the 6 billion lump sum, namely the biggest beneficiaries from an EU bailout would be the Russian criminal oligarchs. However, it should be pointed that a large portion of the Russian money departed to Asia last year when the scale of the Cyprus problem became apparent. The Government of South Cyprus has made a big deal of potential future revenues from the Gas/oil fields, however what they fail to mention is the gas/oil fields are of the cost North Cyprus, and when a joint South Cypriot/ Israeli venture tried preliminary drills last year they were sent packing by a flotilla of Turkish Cruisers. Apart from turning South Cyprus into cheap brothel for fat Germans, I really don't see much of an option for the Cypriots people; perhaps they could claim Asylum in Northern Cyprus?
11:19 March 21, 2013 by SimonDMontfort
@ intrepidfox - well yes: Imagine for a moment if every bank account in Sweden, had, say 10% dipped out of it. I can hardly imagine that the 'sensible Swedes' would say 'Oh well better to lose some of my money than all of it'.

There would likely be a run on the banks, leading to a collapse.

No matter how it's dressed up, a levy is legalised theft. The money government would be taking has been worked for and taxes paid on it before it was saved, (never mind the Russians.)

Once one government uses a 'levy' on savings, when they find themselves short - then other governments would likely follow suit.
11:40 March 21, 2013 by skogsbo
i think in a sublte way, Germany is potentially as Anti EU as many other non Euro countries like Sweden and UK, but it is irreversably (for the moment) stuck with it, because of the Euro. The german people are fed up with bailing out less prudent and often fraudulent southern european governments and Merkel is in effect showing that her country won't bail out Cyprus with German money, unless the people in Cyprus feel some pain too, which kind of makes sense.

So if the only way to bail a country out is to take money direct from people's bank accounts, then the legal and logical solution, is not to bail it and let it collapse. Freddie, Fanny and Lehmans.. we allowed to go, Cyprus is arguable worth much less than any of them!

Either way, the problems in Cyprus are to do with a very poor tax system, fraud, tax avoidance and generally low work ethic, just like Greece, high wages, low tax, early retirement, plentyof holidays, short working day, it was never going to work in the first place.
12:31 March 21, 2013 by Bjorn_
Swedish people have SAAB cars and beautiful women. At summer time they have only SAAB cars, their women are at the beaches with their Cypriot lovers...

Statement of independent Greeks political party leader, mr. Kammenos

I think he is right...

Some more years and not even SAAB will remain for Sweden, Volvo is already bought from Chinese...
12:35 March 21, 2013 by nemesis_now
As a minister of a "civilised" "european" country, he sould be more carefoul in his statements. The swedish have the Saabs and beutiful women. During summer though, the have only Saabs because their women are at the beaches of Cyprus with their Cypriot lovers.
12:37 March 21, 2013 by Bjorn_
Swedish people have SAAB cars and beautiful women. At summer time they have only SAAB cars, their women are with their Cypriot lovers at the beaches.

Statement of political party - independent Greeks - leader mr. Kamenos

I think he is right, and in some years not even SAAB will remain for us, VOLVO is already in Chinese hands...

At least in Cyprus they have warm weather and beautiful beaches...what similar do we have, except cold, gray skies and one of the highest suicide rates in Europe?
13:01 March 21, 2013 by skogsbo
ah the off quoted suicide rates, which is unproven? Swedes were simply the first people to accurately record them. The reason the cypriot lovers are on the beaches is because non of them are working and paying any tax, because they have no industry other than ice creams and sun cream sales? ;)

What does Sweden have, midges and mosiquitos (minus the malari)?
14:14 March 21, 2013 by just a question
One day the Southern European countries will say "That's enough" and the EU will be over. It's already happening. People is hungry in the South European countries, suicide rate has increased because of people being kicking out from their homes. But it's better to go against people than against the power of bankers right? Punish the people more, says Merkel. Right. Greece invented the democracy when Swedes were eating stones for breakfast.

After the EU is over, Swedes and Germans will be invited to stay in their countries and don't look after free surgery in Spain, cheap alcohol, awesome food and warm weather. Swedes will need to stay in Sweden enjoying the perpetual winter and the famous friendliness of their people (ironic)
15:55 March 21, 2013 by cogito
"ah the off quoted suicide rates, which is unproven? Swedes were simply the first people to accurately record them." #20


"Accurate?" From the Soviet-like Central Bureau of Statistics. SCB has always undercounted suicides, in order to improve the image of Sweden.

The rest of your post is ethnic caricature bordering on racism.. Basically, saying Cypriots are lazy and dishonest is like calling Swedes drunks and sluts.
14:10 March 22, 2013 by Migga

What a sad, pathetic and insecure comment. And he is in a position to represent his country? Ridiculous. For you to think he is right is laughable and for you to belive the myth about swedish suicide is just as funny.

@just a question

I love these comments about how Sweden was coverd in ice and the Swedes hiding in caves when others were building civilizations. That may be true but keep that in mind when you think about what Swedes have accomplished after the "ice cleared". In less time they`ve accomplished just as much and sometimes more. Not only have Sweden surpassed those countries in many aspects, some of those countries are now going backwards.


You are right but you yourself have made similar comments about Swedes.
21:09 March 22, 2013 by skogsbo
cogito, you might want to look up the Cypriot tax system, state worker salaries, retirement ages, pension... then come back and tell me I'm wrong. As for Greeks, what other nation give people an extra months pay for having a months holiday, they were working 10months of the year, but getting 13mths pay and this was ALL state workers, sometimes the truth is so painful, people create another -ism, it's certainly not racist, to say that Southern European are incredible bad at pay taxes and work many years less than their northern counterparts. The evidence in and of the Med economies is there to see, they are all hanging on by the skin of their Euro teeth.
08:22 March 23, 2013 by SimonDMontfort
In a nutshell, Cyprus' recent problems are down to two things:

• Spending more than its income, with over-reliance on loans to continue


• Offering guarantees based on the behaviour of private companies (ie their

equivalent of 'Financial Compensation' legislation)

Cyprus is insolvent because it doesn't have enough money - it overspent.

I wonder if the 'Markets' would really prefer the Eurozone to break up...? (leaving the 'Banking Crisis' unresolved. After all, if it IS resolved then someone will be left holding the problem. - which should be a Bank as thats where the problem started.)
02:27 March 24, 2013 by Kronaboy
@just a question

EU isn't over it just needs to get rid off the dead weight like Greece and Cyprus, let's not forget the only reason why Greece even exists is because a bunch of English public school homosexuals thought it would be good idea to have gay Utopia; perhaps if we ask nicely the Turks might be stupid enough to take them back?
06:46 March 24, 2013 by skogsbo
SimonDMontfort, whilst the banks triggered the problem, via over valuing loan packages, the problem was already there. with or without the banks, most people and certainly most governments had borrowed too much. Most countries would still have finished up in the same position they now, but just via a different route, everyone was borrowing and spending too much of other peoples money. You can blame the bankers, but it's the governments that were spending like crazy, without looking at how or where the money the came from, or carrying how they would pay it back. It countries were solvent then the down turn would have had little impact and they wouldn't have massive debt or run an annual deficit.
15:17 March 24, 2013 by Kronaboy

I disagree, it wasn't the banks money the banks were lending before 2008, banks were acting as loan brokers ruthlessly targeting individuals who they knew had no hope of making payments. I do concede that the problem is far more insidious than simple incompetence and is nothing short blatant fraud and has is origins in (obvious to those of us who are old enough to make the connection) that darling company of the 90's ENRON. When ENRON went belly up, their crooked accounts didn't just disappear they simply spread like a virus in the finical sector including into companies like Lheman Brothers bringing with them their crooked methods which they used to cook the books and hide the true scale of the Greek Debt to ensure their entry into the EURO. The Cypriots being the Hellenic zealots they are threw money at the Greeks (bit like the way they give 12 points in the Eurovision song contest despite the fact the Greek song is always rubbish). When 2007/2008 hit, the Germans had no choice but to prop the Greeks to buy time for the Spanish and Italian banking sector to build its resilience. The problem for the Cypriots is the Spanish and Italian banks are now a lot more resilient and there is no way Merkel is going to be throwing money at the Cypriots in an election year.
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