"Those who fail to plan, plan the to fail", a common saying. Well it seems that the Euro Bureaucrats did it again!
How many times did we hear that there was no plan B? For the ones that thought it was some sort of pressure so that Cyprus would accept the bail-in, think again. They actually never had a plan B. That's all folks!
And only after a short while, already the ECB says that it will continue to provide liquidity to Cyprus. Aahahahhah! Merkel, who is saying that Cyprus should talk with Troika instead of Germany, is learning (at least we hope) what is a multi-round game. Yes, life is not a single round game, it is a multi round thing.
Well, now either Europe fulfills its promise and let Cyprus burn, or it helps Cyprus no matter today's decision. Either scenarios destroy Europe credibility and will increase the current crisis.
In the first scenario, for sure Cyprus will have to turn to non European funds, like..... russian money. No doubt Russia has a lot of money, as oil and gas continues to be pumped across Europe. A more troublesome idea would be turning to middle east. As we all now Cyprus history that would be unlikely, but desperate times mean desperate measures. As I often said, if Greece wasn't bailout out we risked intervention from uncommon capital sources. Remember that the principal buyers of portuguese recent privatized companies come from one single country, China, which is not by any means a near by neighbor (although the relationship of the countries has more than five centuries of history).
In the second scenario, we will actually wait for the ... third scenario, as I cannot see the incompetent European politicians to come up with a viable plan. Meanwhile, it is only probable that we will assist a bank run, precisely of the deposits above 100K, since depositors that have more than 100K have the knowledge, financial fire power and will to come up to alternative geographies. However, unwinding 60bn plus of foreign investment (read; from russia) will certainly take a while. Whatever how it will play, any bank run will turn Cyprus banking system into a time bomb, with a very short fuse. If a bank run exists ( i would bet people with turn to their mattresses) , it is probable that it would be a fast one, mimicking the planned bank freeze, but this time is not for only a few days.
With investors in Portugal, Spain and Italy already simulating and planning scenarios, things can eat up. (The Euro Bureaucrats are the only ones you have only a Plan A, every body else runs simulations and alternative scenarios). A Flight to Quality is already under way, and evaluating alternatives like Norway, Canada or Singapure are no more a far distant option. More trivial and fast to execute options like US or UK are already being executed.
Like Einstein said "Only two things are infinite, the universe and human stupidity, and I'm not sure about the former.". Not planning for the expected rejection in Cyprus's parliament for the total annihilation of the essence of the banking system has nothing to do with universe dimension.....
The Euro Bureaucrats pointed and fired a gun at Cyprus parliament. But surprise, surprise, and gun has no ammunition. They can reload the weapon. But who are they? ECB? EU? IMF? ECB already said that it will provide enough liquidity to Cyprus under the current rules, for whatever that means.....If only EU citizens would understand how good this soap opera is, we could save some money importing TV shows from Brazil and US.
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