Whether out of complete stupidity or pressure from the IMF or Brussels (I suspect all three) Cyprus to sell around 400 mln euros worth of gold to partially fund its bailout.
Cyprus has agreed to sell excess gold reserves to raise around 400 million euros and help finance its part of its bailout, an assessment of Cypriot financing needs prepared by the European Commission showed.
The draft assessment, obtained by Reuters, also said that Cyprus would raise 10.6 billion euros from the winding down of Laiki Bank and the losses imposed on junior bondholders and the deposit-for-equity swap for uninsured deposits in the Bank of Cyprus.
Nicosia would get a further 600 million euros over 3 years from raising the corporate income tax rate and the capital gains tax rate.
Out of the total Cypriot financing needs of 23 billion euros between the second quarter of 2013 and the first quarter of 2016, the euro zone bailout fund will provide 9 billion euros, the International Monetary Fund 1 billion and Cyprus itself will generate 13 billion, the assessment said.
Road to Hyperinflation
Raising taxes in the middle of a recession is bad enough. Cyprus actually needs a lower tax rate to attract business following its banking debacle.
Selling gold is downright idiotic. Gold backing can prevent a currency from going completely worthless. Should Cyprus leave the eurozone, its small holding of gold would at least put some bid on its currency.
Selling of gold and hiking of corporate taxes puts another noose through the nose of Cyprus (just what the nannycrats in Brussels wants and precisely what the average Cypriot should fear).
A Greek-like implosion with massive unemployment and endless recessions is on the way.
Mike “Mish” Shedlock