Bailout of Cyprus to cost depositors 10% immediately

Discussion in 'Markets & Economies' started by Caput Lupinum, Mar 16, 2013.

  1. Caput Lupinum

    Caput Lupinum Well-Known Member Silver Stacker

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    European finance ministers have agreed an 8.7bn bailout for Cyprus which includes all Cypriot bank customers handing over up to 10% of their savings.

    Cyprus becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the eurozone for financial help amid the region's debt crisis, but also faces a possible run on its banks as depositors try to avoid losing up to 10% of their savings.

    The savers, half of whom are thought to be Russian, will raise almost 6bn. It is the first time a bailout has included such a measure.


    http://www.guardian.co.uk/world/2013/mar/16/cyprus-eurozone-bailout-anger
     
  2. long88

    long88 Member

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    what about debt ?
     
  3. JulieW

    JulieW Well-Known Member Silver Stacker

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    NEWSPEAK for 'theft':

    NEWSPEAK for 'new slave class established'

     
  4. Caput Lupinum

    Caput Lupinum Well-Known Member Silver Stacker

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    I'm tipping Slovenia will be the next country to require a bailout.
     
  5. JulieW

    JulieW Well-Known Member Silver Stacker

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    Time to revisit this piece:

    [youtube]http://www.youtube.com/watch?v=I5QwKEwo4Bc[/youtube]
     
  6. southerncross

    southerncross Well-Known Member Silver Stacker

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    I bet the pollys and banksters got their money out already.
     
  7. JulieW

    JulieW Well-Known Member Silver Stacker

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    http://venitism.blogspot.com/
     
  8. Caput Lupinum

    Caput Lupinum Well-Known Member Silver Stacker

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    It could be interesting to see what happens not only Tuesday in Cyprus to see whether depositors decide they no longer believe the rest of their savings are safe in the banks and there's a bigger bank run than the eurocrats expect, but the rest of the eurozone in particular the PIIGS where it has become apparent that depositors savings are no longer off limits to eurocrats if anyone bothers to still hold their savings in banks in these countries anymore. Could see a lot of capital flight to the likes of Germany on Monday
     
  9. hawkeye

    hawkeye New Member Silver Stacker

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    ^ I know I wouldn't and I'd be looking for somewhere else to put it. I can't imagine why these eurocrats would not realise the same thing, that a great many people would lose faith in the banking system there if they know they can have a percentage of their savings stolen at any time.

    But wow, makes you wonder what's coming next... Nothing seems off-limits.
     
  10. AngloSaxon

    AngloSaxon Active Member

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    I saw this on BBC news before bed - had to stay up longer to come here regarding this. How horrifying. Tax not on income but tax on savings. Once this is introduced, why not tax on any capital just because government needs it.

    The BBC said this was a 'one off levy'. Once off a year maybe.

    Regardless of how rich or poor Russians with savings in Cyprus are, why do they deserve to lose 10% for the problems of the EU? Imagine if New Zealands government had problems and decided to take 10% of depositors funds in ANZ (it's a stretch I know). Why wouldn't they - it's been done somewhere else in the world before.

    How long before welfare proponents demand this tactic of governments to pay for new demands. "The Australian Welfare Council demands the government provide motorised wheelchairs for every drug addict whose life choices have rendered them unable to ever work again. This can be paid for by a one off levy of 5% of all depositors savings." Or: "The Australian Greens demand Julia Lizzard raise a once off levy of 6.7% of the value of all commercial property to pay for public transport to eradicate the scourge of personal automobile ownership".

    It was just yesterday someone here on SS said they predicted the collapse of a small or medium size bank would unravel the EU's mess and probably affect the world. Well every bank in Cyprus, does that count as small or medium?

    Also this will just make everything worse for Cyprus. No one will add to their savings now, they will demand their salaries in cash and throw the cash into the black economy so that it can't be taxed.

    No good can come of this.
     
  11. Caput Lupinum

    Caput Lupinum Well-Known Member Silver Stacker

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    If eurocrats were concerned about the PR of bailing out Russian mob money (which would have been withdrawn well before now), they wouldn't be taxing the sub 100k crowd which is your everyday Cypriot saver. This to me stinks of an experiment to see whether future bailouts can be conducted to include depositor haircuts depending on contagion. This really seems such an odd move by the EU considering they are "trying" to sure up confidence in the eurozone.
     
  12. Stackman

    Stackman Member Silver Stacker

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    This is what I was thinking too. They are trying it out on a "small" country like Cyprus to see how it goes.
     
  13. Caput Lupinum

    Caput Lupinum Well-Known Member Silver Stacker

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    The Cypriot government is now sweating over a possible rejection by the island's parliament of the shocking set of measures imposed on Nicosia for the eurozone to bail its economy out of a likely default, announced in the early hours of Saturday.

    The Cypriot government is preparing the bill to be tabled in Parliament probably on Sunday in an emergency session, as everything will have to be voted by Monday night for Cypriot banks to open on Tuesday.

    President Nicos Anastasiades is to meet with party leaders at 8.30 p.m. on Saturday evening, before an emergency cabinet meeting on Sunday afternoon, in his effort to rally support for the measures following the huge reaction they have generated in Cyprus. They entail the immediate haircut of all bank accounts, the increase in tax on interest and on corporate incomes and a number of tough privatization projects.

    The question is whether the Cypriot House of Representatives will approve of the bill given that the two main parties that supported Anastasiades in the presidential election, the Democratic Rally (DISY) and the Democratic Party (DIKO) do not have an overall majority. They account for 28 out of the plenary's 56 members, but among the DIKO deputies is also Nicolas Papadopoulos, a dissident who recently resigned from vice-president of the party in disagreement with its support of Anastasiades.

    The bill might also get the support of some deputies from minor European Party (EVROKO), while the presidential adviser Giorgos Vassiliou, a former president himself who is in touch with many people in the Left, has been enlisted to try and convince some deputies to vote in favor of the bill. However AKEL, the main party of the Left, has signaled its opposition to the measures.

    At 5 p.m. central bank governor Panikos Demetriades started a meeting with the island's top bankers.

    Sources from Germany confirmed that had the bailout package not included a Cypriot bank account haircut it would never make it through the German parliament.

    http://ekathimerini.com/4dcgi/_w_articles_wsite1_1_16/03/2013_488208

    I think I'll be adding to my stack on Monday :p
     
  14. Maxwell

    Maxwell New Member

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  15. radiobirdman

    radiobirdman Active Member Silver Stacker

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    Looks like we are all going to be turtled in the end. another good reason to hide your wealth
    Lumpy mattresses here we come
     
  16. Caput Lupinum

    Caput Lupinum Well-Known Member Silver Stacker

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    Statement by the President of the Republic Mr Nicos Anastasiades
    16/03/2013



    It is well known that the deep economic crisis and the state of emergency in which the country has found itself did not come about in the last fortnight since we have undertaken the administration of the country.

    The state of emergency and critical nature of the times do not allow me, as they do not allow anyone, to embark on a blame game.

    In the extraordinary meeting of the Eurogroup, we faced decisions that had already been taken and came across faits accomplis through which we were faced with the following dilemmas:

    On Tuesday, March 19 we would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy.

    A possible choice of the catastrophic scenario option would have the following consequences:

    1. On Tuesday, March 19, immediately after the holiday weekend, one of the two banks in crisis would cease to operate, since the European Central Bank, following the decision already taken, would terminate the provision of liquidity. The second bank would suspend its work, and neither could avoid collapse. Such a phenomenon would instantly lead 8.000 families to unemployment.

    2. The State would be obliged to compensate depositors in response to the obligation regarding guaranteed deposits. The capital required in such a case would amount to about 30 billion euros, which the State would be unable to pay.

    3. A proportionate amount corresponding to the deposits of thousands of depositors for deposits over 100.000 Euro, would be led to a vicious cycle of asset liquidation, and these depositors would suffer losses of over 60%.

    4. Such an uncontrolled situation would push the whole banking system into collapse with all the attendant consequences.

    5. Thousands of small and medium enterprises, and other businesses would be driven to bankruptcy due to their inability to trade.

    As a result of the above, the service sector would be led to a complete collapse with a possible exit from the euro. That, in addition to the national weakening of Cyprus, would lead to devaluation of the currency by at least 40%.

    The second choice was the controlled management of the crisis, through the decisions taken and which can be summarized as follows:

    1. Ensuring the liquidity of the banks and the rescue of the banking system through their recapitalization.

    2. Rescuing 8.000 jobs in the banking sector and thousands of others which would be lost as a corollary of not maintaining the operations of banks.

    3. Total rescuing of deposits, with just the exchange of a small percentage of savings with shares of the two banks. Currently, these shares do not have their full value, but with the economic recovery they will repay most it not all of the amount that will be cut.
    4. This option results in a drastic reduction of public debt, makes it manageable and sustainable and relieves future generations from the burden of repayment.

    5. It saves provident and pension funds and avoids taking other tough measures such as wage and pension cuts that were put on the negotiations table.

    6. It avoids further recession and the risk of the vicious circle of a second memorandum.

    We are not aiming to gloss over the situation. The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures. It's a decision that leads to the historic and permanent rescue our economy.

    In the next few hours we will all have to take responsibility. Tomorrow I will address the Cypriot people.


    http://www.moi.gov.cy/moi/pio/pio.nsf/All/C7131DA40FCE0827C2257B30005411D5?Opendocument
     
  17. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    The fact that the Cyprus Government is openly acknowledging that they cannot honour their own deposit guarantees is telling.
     
  18. Clawhammer

    Clawhammer Well-Known Member Silver Stacker

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    If I was a Cypriot... I'd be out in the street smashing windows and setting fire to every bank and government building I could find. And low betide any police, security guards or do-gooders that stood in the way.

    This'll cost them more than just 10% of their savings or their political positions... :(
     
  19. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    Note: In 2008 Iceland only reneged on the deposit insurance for foreign account holders (who were mostly British and Dutch with their govt's helping them) not on their own citizens.

    Apparently Italy levied a similar tax on all bank deposits in the '90s but was (in comparison) a tiny 0.06%.
     
  20. Caput Lupinum

    Caput Lupinum Well-Known Member Silver Stacker

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    [youtube]http://www.youtube.com/watch?v=D-GpP8IRuu0[/youtube]
     

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