Epidemiology of Cyprus infection

On Sunday, the eurozone expectedly decided to help Cyprus for 10 billion euros. Deposits in banks with the amount of less than 100 thousand euros still will not “cut”, but those that are higher will be taxed with thirty percent tax.

Cyprus expropriation was a surprise only for people who are not very good with economic history. The fact that Cyprus is doomed was known for a long time. For example, I also wrote on this subject back in July 2011 on the Banki.ru portal. The situation with the “Treasure Island” is typical for a small financial center, which has close economic ties with a large neighbor, in this case with Greece. As soon as the latter begins to trouble, wait for them in a small partner. This relationship is standard and has a lot of examples in history. Let me remind you only the last, most vivid case. This is a story with Argentina and Uruguay, funny with Greece and Cyprus.

The beginning of the 21st century in Argentina was not the best time for the country. The situation was approximately the same as in the present Greece - the country confidently went to default. The population and business, of course, felt what was happening, and in 2000-2001, a massive outflow of capital began from the pre -end of Argentina. The depositors shot deposits in Argentinean banks and transferred them to accounts to the banks of the neighboring Uruguay. Uruguay, by the way, was then a kind of Cyprus for neighboring Argentina and Brazil - the same reputation of a stable regional financial center, a minimum of regulation, lack of socialist and populist experiments, respect for private property and law, low taxes, cheap legal and accounting services.

The Argentine government has long and painfully fought with its own economic crisis, but, unlike the present Greece, there was no one to save it. In 2001, the situation worsened to the limit. Struggling with the outflow of capital, the government eventually froze deposits for 12 months, allowing to withdraw only small amounts (the so -called Corralito policy, literally a “corral” from Spanish). Now the same corral is introduced in Cyprus - all banking transactions are limited.

The population of Argentina responded with a riot and riots on Corralito. Then the Argentine default followed, and at the beginning of 2002, the government announced the refusal to refuse the Argentine peso to the dollar, after which Peso was sharply devoted to the latter, and the dollar deposits in banks were forced to Peso at a significantly lower rate than pre -crisis (“Pressosion”). As a result of forceding, the depositors lost almost two -thirds from the deposits in dollar terms. So the Cyprus authorities have something to think about - the possible exit of the country from the eurozone as a result of the failure of an agreement on the help of Eurotroshka Cyprus can do much more than the “haircut” of deposits by 6.75–9.9%. European officials showed condescending and softness to Cyprus, but in Nicosia they clearly did not understand this.

Let us return to our second partner in financial tango - Uruguay. After all the home entertainments, the Argentines of En Masse rushed to take off their contributions in Uruguay - people needed a cache after default and devaluation in their country. Further - more fun. The scale of the raid on Uruguayan banks of the “hungry” Argentinean investors turned out to be monstrous. Uruguay is a small country with relatively Argentina, approximately the same as Cyprus regarding Greece, but the financial sector is hypertrophic, not as much as in Cyprus, but still. Argentinean investors presented 38% of the amount of all deposits in Uruguayan banks for the first half of 2002. What a stable and reliable Uruguayan banking system could not stand - there was an acute liquidity crisis, I already had to ask for Uruguay to ask for help from the IMF. Well, of course, there was a restriction on the withdrawal of money from banks - first non -residents, then residents, bankruptcy and nationalization of the largest banks, a tough crisis, devaluation and a drop in GDP by almost 20%.

Of course, the situation of Argentina and Uruguay is far from an accurate analogy of the case of Greece and Cyprus. History is never repeated. But rhyme provides enough. For example, Cyprus has experienced a very serious influx of depositors from Greece in the last 3 years-as the statistics of the Central Bank of Cyprus shows, the share of depositors is not Cypriots, but the eurozone residents increased from 1 billion euros at the end of 2009 to 6 billion euros at the end of 2012. It was mainly Greek money. Exactly the same dynamics as that of Uruguay with Argentina.

There are other parallels - one of the two largest Cypriot banks - Laiki (Popular) Bank - belongs to the Greeks, namely the Marfin Investment Group group. Of course, this bank is now the most problematic in Cyprus, it has the most garbage Greek assets on the balance. (By the way, yesterday it was decided to divide it into a “good bank” and “bank with problem assets”). The same was with the Uruguayan offshore: the two largest banks-Banco Galicia Uruguay and Banco Comercial-belonged to the Argentines and had a bunch of Argentinean assets, which immediately became problematic after the default Buenos Aires.

So the mechanism of the transmission of the crisis turned out to be similar. Although in the case of Uruguay the main reason was the raid of Argentinean depositors, and the quality of the Argentine assets of Uruguayan banks was secondary. In the case of a Cyprus raid of Greek investors, it did not occur at all, but the quality of Greek assets killed Cyprus banks. The fact is that, unlike Argentina, Greek banks European lenders after the default of Athens in March 2012 still saved. The release of Greece from the eurozone and the "drachmization" of deposits did not occur. At least for now.

Author: Correspondent of the magazine "Kommersant".