Cypriots are in panic, which is caused by the local government’s activities. Local banks were to resume work this morning. However, the authorities are delaying their decisions. The next reopening day is March 20th.
More and more experts assume that the government will keep delaying the resolution as banks will remain closed for a long period than a couple of days. Simultaneously, the authorities will try to calm down depositors and bond holders.
How long will they conceal the evident? If depositors rush to withdraw funds, this will be a nuclear attack for Cyprus ’s banking system. Obviously, it will start a chain reaction and will eventually ruin the country’s entire financial system.
For reference sake, on March 16th the Cyprus government announced that all bank deposits would become taxable (even though this would be a one-time tax). This measure is aimed at allocating €6bn.
The one-time tax will concern all the existing bank accounts, whether they were opened by citizens or foreigners. According to unofficial sources, €20bn stored in local banks belongs to Russians.
This is an obligatory condition for Cyprus if the country wants to receive another tranche from international lenders, which are the IMF and the EU. Without it, Cyprus may see an uncontrolled default.
Obviously, the market is tense and fragile. Therefore, it is better to abstain from trading until the situation clarifies.
The price has slightly recovered after yesterday’s gap. According to , even though the currency pair may keep recovering up to 1.3, the mid-term bias is still bearish. Therefore, we may see another major downswing below pattern 28.
