Almost all decisions taken by the Eurogroup and the Central Bank of Cyprus
regarding the restructuring of the banking system of Cyprus are wrong. As a
result of these mistaken decisions the Cyprus economy will enter a severe and
long recession. The Government Primary deficit will exceed 600m euro in 2013 and
will be much higher than the 395m euro predicted in the MOU with Troika. Our GDP
will be just above 15 billion and not 16.5 billion as predicted by Troika in the
MOU.
Restructuring of our banking system should never be done in just 4 weeks but over a period of time of 3-5 years. It took our banking system 10 years to accumulate so many mistakes and bad management and therefore more time was needed…..
For the last 1 year I have been recommending to follow the Greek model of Bank restructuring with capital increases done gradually over a 3-5 years timeframe . Unfortunately the Eurogroup and the Central Bank of Cyprus chose a faster path, the Bail in .
Over the last 3 weeks ,Greek bank shares tripled and Pireos Bank had a share price increase of 400%!! The main reason behind these exceptional share price increases was the fact the banks announced that they have found private investors who will participate in the 10% equity increases required now. The rest of the equity increases required will take place in the next years through warrants given now. TROIKA has agreed with this program. Greek banks have a second option available , the issue of co co bonds. (which I recommended for the Cypriot banks many times during the last months)
This crisis will last for many years and as long as government continues with huge deficits there will be no end to it and as mentioned above the recent decisions of the Eurogroup will increase the government deficit.
What is now going on with our banking system is not Restructuring but destruction…….
We must rebuilt our financial and banking system as soon as possible. There is no other industry(except tourism) from which we can have substantial income in the future . Our financial model was correct , it was the management and the supervision of the banks that went wrong…….Our financial system and our gas reserves are the future of our Island.
The theoretical and academic approach of solving the banking crisis in Cyprus followed by our Central Bank and instructed by the Eurogroup will create enormous economic and social problems in Cyprus over the next years……….
Savvas Ttantis FCCA
Restructuring of our banking system should never be done in just 4 weeks but over a period of time of 3-5 years. It took our banking system 10 years to accumulate so many mistakes and bad management and therefore more time was needed…..
For the last 1 year I have been recommending to follow the Greek model of Bank restructuring with capital increases done gradually over a 3-5 years timeframe . Unfortunately the Eurogroup and the Central Bank of Cyprus chose a faster path, the Bail in .
Over the last 3 weeks ,Greek bank shares tripled and Pireos Bank had a share price increase of 400%!! The main reason behind these exceptional share price increases was the fact the banks announced that they have found private investors who will participate in the 10% equity increases required now. The rest of the equity increases required will take place in the next years through warrants given now. TROIKA has agreed with this program. Greek banks have a second option available , the issue of co co bonds. (which I recommended for the Cypriot banks many times during the last months)
This crisis will last for many years and as long as government continues with huge deficits there will be no end to it and as mentioned above the recent decisions of the Eurogroup will increase the government deficit.
What is now going on with our banking system is not Restructuring but destruction…….
We must rebuilt our financial and banking system as soon as possible. There is no other industry(except tourism) from which we can have substantial income in the future . Our financial model was correct , it was the management and the supervision of the banks that went wrong…….Our financial system and our gas reserves are the future of our Island.
The theoretical and academic approach of solving the banking crisis in Cyprus followed by our Central Bank and instructed by the Eurogroup will create enormous economic and social problems in Cyprus over the next years……….
Savvas Ttantis FCCA
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