The Curious Conundrum of Cypriot ATM's

Why are Cypriot ATM's throwing out so many Portuguese printed Euro's?

Since the financial crisis broke, a curious & some might say paranoid acquaintance in Cyprus has taken to checking the country identifier codes on Euro notes. He makes sure that anything issued by a PIIGS printing press gets spent first with Angela's Euros staying firmly at the back of the wallet.

Common sense he says, tells him that the percentage of notes from each country should be correlated to (a) who issues the most (b) where visitors come from.

So,  he theorises, he should expect plenty of German ones, quite a few French & Italian & lots of Greek.

When the banks closed in Cyprus, the ATMs were being topped up daily and all the notes were German. That makes sense, they flew in a Jumbo full of them.

Once the banks re-opened the composition of notes issued stabilised in a curious pattern. My acquaintance always take the maximum & does so frequently, (emptying his accounts there with a view to severing all dealings with local institutions),  thus the sample is quite good.

He usually withdraws €300 which is delivered as 15 X €20. 3 or 4 of those 15 notes will be German, 1 or 2 will be from any other Euro state, most often Greece.

Here's the weird bit. At least 10 of them will be Portuguese. Every time. It's not unusual for him to receive more.

Portugal is a small economy so shouldn't issue many notes in the Europe wide scheme of things. There are no direct flights between Cyprus & Portugal. He has have never met a Portuguese citizen there yet they’re apparently awash with Portuguese Euros with no apparent as to how or why they are getting there.

Unless........ There are some potential explanations. None of them good and I emphasise, none of them has any basis in evidenced based proof, except for the proliferation of Portuguese banknotes in Cyprus.

Summarised, they are;

Version 1 (Limited corruption)

The Portuguese are illegally printing notes way over and above what they are admitting to the ECB. Cyprus & Portugal are both “flexible,” enough that each country could find the required senior politician, banker & lawyer at each end to wash the money.

Version 2 (Full On Black Ops in which the ECB/Troika are complicit)

This is founded on the assumption that the bailout in Cyprus, and perhaps in Portugal is formally deemed doomed to ultimate failure and the banking systems in both must collapse entirely and the country/countries will exit the Euro.

It is often said that if a country exits the Euro then € holdings on deposit will be rebased to the new currency, effectively a massive haircut on everyone including those with sub €100K in the bank. It's important to note that whilst Cyprus technically has the ability to print notes the presses are private companies in France & Holland so they have no scope to pull a number like that outlined in conspiracy theory 1 above.

What is rarely if ever mentioned in the overnight euro exit scenario is that there must surely be legitimate grounds for legal challenge if a depositor can prove that they paid in physical Euros issued by a solvent state then they can say they are ineligible for conversion to the new trash currency. You can have a USD or GBP account at a bank in Cyprus. Nobody for a second suggests that those would be compulsorily converted into CY£, so intuitively it'd be equally wrong to suggest that an account full of German Euros should be converted into a less good currency. So they need stats showing that a high % of the Euros people pay in are from a less good issuer, (perhaps the one that the ECB bounces on the same day that they trigger Operation Olive Fire). Perhaps not even this. They know full well that everybody in Cyprus is emptying their accounts & filling home safes with notes. Perhaps they just want to be sure that these cash stockpiles are largely denominated in low quality issuer paper so when people show up after Euro exit they are holding Escudos not Deutschemarks and so they don't escape the devaluation haircut.

Paranoid loony tunes fool or someone who has stumbled on something which although might be correct optically, with so many box fresh Portuguese printed notes coming out of the ATM’s, nonetheless has a very pedestrian explanation? If the answer was more nefarious it does seem to be a very unsophisticated way of approaching a challenging problem.

It's probably nothing but I'd be interested to hear any input.