Friday 22 March 2013

Dreaming of a Dutch Sandwich

Dutch Finance Minister reflecting on his recently-digested Dutch Sandwich.  

It is difficult to understand just how far German hypocrisy about the purported Cypriot “Russian money laundering machine” will go. This is ostensibly the reason the puritanical German Parliament, a total stranger to money laundering and tax avoidance, cannot vote for the Cypriot bailout.

Yet it is worth remembering recent history:  

·       When Cyprus was asked to join the bail-outs of Greece, Ireland, Portugal and Spain, its money was good and its participation welcomed, among others by Angela Merkel during her visit to Nicosia.

·       When the German government rammed the PSI 1 and 2 “haircuts” of Greek government bonds, resulting in a loss of over EUR 4 billion to Bank of Cyprus and Laiki, the Cypriot government voted in favour. Cypriot money was acceptable then.

But when Cyprus applies for a EUR 10 billion bank recapitalisation, of which EUR 4 bln was due to the GGB write-down and EUR 6 bln is non-performing loans, suddenly Cyprus has become the mafia capital of the European Union. At least according to Germany, The Netherlands and Finland. 

The numbers are so absurd as to beggar belief: Germany is risking trust in the entire EU banking system by forcing deposit holders to “bail in” for the amount of EUR 6 billion.

It’s also worth remembering that:

·       No similar depositor bail-in condition was implemented for Irish or Spanish banks

·       The European Stability Mechanism and EFSF are available and have capital

·       The only reason the “Russian money laundering” issue rose was because the German SPD started to make an electoral issue out of this – and the CDU quickly followed suit.

The charge of money laundering and Russian deposits is totally hypocritical: there are far larger Russian deposits and holdings in Switzerland, Luxembourg, and London.

Moreover, the size of the Cypriot offshore sector is puny compared to that of The Netherlands (another stalwart Eurozone hypocrite). Perhaps Wolfgang Schauble should look up the meaning of a “Dutch sandwich”. Some articles which may help him understand the real scale of “tax avoidance” in The Netherlands are seen below:

There is an expression that people who live in greenhouses should not throw stones. Someone should perhaps warn the Dutch Finance Minister.

© Philip Ammerman, 2013


  1. Thank you for shedding some light on the real Cypriot situation. Here in the USA we get the usual bull shit from the so called media, who can no longer sniff out the real story.

  2. Rarely ever read such a populistic article. It's always easier to point out a fall guy than to accept that Cyprus is not treated like the others because of its difference. And the Cypriot money that was flowing for the other countries was not real money but debts. Cyprus should start blaming the others and search the reason in their own politics, bank sector and management. And the money laundring issue might not be higher than in Switzerland, London Luxembourg but that doesn't justify that it's endangering the system less. At least those three are able to cover it and not let it make their states (and the state is the people!) go bankrupt...

  3. Anonymous, your comments reveal that you do not understand the situation in Cyprus.

    a. Cypriot money "flowing for the other countries" is round-tripping, mainly by Russian companies. It is not debt: it is internal transactions between the companies. Cypriot sovereign debt is low; the Cypriot loan-to-deposit ratio is acceptable.

    b. Money laundering is defined by the World Bank as:

    Money laundering is, however, a fundamentally simple concept. It is the process by which proceeds from a criminal activity are disguised to conceal their illicit origins. Basically, money laundering involves the proceeds of criminally derived property rather than the property itself.

    There is no evidence of money laundering in Cyprus: not a single authority has proven this or claimed this, and the OECD FATF and Euroval point out that Cyprus is in compliance. Far more so than Germany, which is currently being sued by the European Commission for lack of adherence to money laundering standards.

    Do not confuse "round tripping" or SPVs by major companies (Russian and European) such as Gazprom, Itera, FXPro, Columbia Ship Management, and others as money laundering. This is not only wrong, it is slanderous. And as my article explains, The Netherlands (among others) actually does this to a far greater extent.

    You would do well to get the basic facts straight. Reading this blog may help, if you bother to clear your own preconceptions first.

  4. Interesting info on Russian deposits, what is your source? Do you have one?