Cyprus Bank Deposits to Be Taxed in $13 Billion Bailout

[TLR Is Mental Poison]

Good for them. I dont know what the Euromasters were thinking. They might as well have proposed an air tax

 

[skeetsinternal]

[ame]https://www.youtube.com/watch?v=vzZEtzuRhLg[/ame]

 

[ogc163]

 

[ogc163]

They need to break up that dumbass Euro, Germany is either shook that when the breakup happens everyone is gonna be coming at them sideways or they really are some power hungry b*stards who think they can make this shyt work in the long term.

 

[TLR Is Mental Poison]

They need to break up that dumbass Euro, Germany is either shook that when the breakup happens everyone is gonna be coming at them sideways or they really are some power hungry b*stards who think they can make this shyt work in the long term.

Germany needs the rest of Europe to stay solvent. If they broke up the Euro (southern) Europe's slide would drag Germany with it. Germany is buying other countries time to get their shyt together. I don't think now is the time, as dumb as an idea as the Euro is.

 

[88m3]

Charlemagne
Small island, big finger

Cyprus’s rejection of a bail-out plan raises new doubts about the future of the euro
Mar 23rd 2013 |From the print edition


CALL it the cussedness of an island nation. Beneath the cheeriness of Aphrodite’s sun-kissed island lies the intransigence of the Balkans and the Middle East. On the eve of its accession to the European Union in 2004, the Greek-Cypriot republic rejected a UN plan to reunite with the Turkish-Cypriot north, where the plan was supported. Within the club the Greek-Cypriot government has used and abused EU institutions to wage its feud with Turkey and to lend support to Russia.

This week’s 36-0 vote in the Cypriot parliament to reject a euro-zone bail-out, in protest at a large proposed tax on bank deposits, may be the most momentous act of bloody-mindedness yet, raising new questions about the stability, and even the survival, of the euro. Outside parliament, a demonstrator’s poster summed up the mood: “fukk Europe”. Such defiance from the island will be admired by some, yet it does not alter Cyprus’s predicament. It is bust, and cannot afford to salvage its oversized and insolvent banks (see article). Cyprus is also trying to play the euro zone against Russia, amid rumours that it might be prepared to offer Russia concessions in offshore gasfields or a naval base.

In this section
The trials of François
Silent no more
First steps of the citizens
Focus on growth
Why Spain’s left is in a funk
Poverty protests
Small island, big finger
Reprints
Related topics
European Central Bank
Politics
Financial rescue plans
Political policy
Economic policy
But who really holds the gun—the firing squad, or the prisoner? The question was raised in Greece last year, and leaders decided to keep it in the euro, even at the cost of overt and covert debt-forgiveness. Cyprus is even smaller, accounting for just 0.2% of euro-zone GDP. Yet Eurocrats insist it too is of “systemic” importance. A bank run in Cyprus could start one in other countries with dodgy banks. And the prospect of Cyprus’s exit from the euro would raise doubts about the future of other weak members of the currency.

For now, the Eurocrats say it is up to Cyprus to come up with an alternative plan. Perhaps they think Cyprus will have to come to its senses if it is ever to reopen its banks. And if it remains obstinate, some would see advantage in making an example of the Cypriots. To euro-zone hawks, the spread of moral hazard is the most dangerous form of contagion.

In many ways, the mess in Cyprus comes down to the political symbolism of round numbers. Germany said the euro zone would lend no more than €10 billion ($13 billion) to recapitalise Cyprus’s banks and refinance its debt. The IMF insisted the island’s debt should be kept below 100% of GDP by 2020. And Nicos Anastasiades, the new president of Cyprus, was adamant that any tax levied on big depositors should be kept below 10%. Put crudely, the euro zone and the IMF ensured the bail-out should be accompanied by a bail-in of depositors; but Cyprus chose to inflict much of the pain on grandmothers’ savings so as to limit the losses of Russian oligarchs.

As so often, short-term politics has trumped rational crisis-management. The deal in Cyprus should have been a dry run for the banking union that the euro zone seeks to create. Instead it has raised questions about whether Europeans genuinely intend to break the link between weak banks and weak sovereigns.

Take deposit guarantees. In the early days of the financial crisis the EU raised deposit insurance to €100,000 to prevent bank runs. Now it risks provoking them by seeming to breach that guarantee. National deposit insurance is plainly limited by the solvency of the state. A common deposit-guarantee system in the euro zone makes sense, however much the Germans and Eurocrats may claim it is irrelevant.

Then look at the promise of a common means of winding down troubled banks. Uniform bank-resolution rules were supposed to be adopted in each EU country, and later on a unified system was due to be created for the euro zone. The Cyprus deal makes a mockery of the proposed hierarchy of creditors to absorb bank losses: senior bondholders (few in the case of Cyprus) have been spared but small depositors penalised.

With a proper banking union, other options become possible. One is the orderly wind-down of Cyprus’s two big crippled banks. This would impose heavier losses on large deposits (up to 50%), but protect small savers and shrink the banking sector. Another option would be the direct recapitalisation of banks by the euro zone. And with a less rickety banking system, it would be easier to get tough with rule breakers.

Draghi’s dilemmas
Amid the muddling of European leaders, Mario Draghi, boss of the ECB, has stood out as the prime guarantor of the euro. His conditional promise to buy the bonds of vulnerable sovereigns did much to restore calm last year, though it has never been tested. The ECB, moreover, is being charged with overseeing a new single euro-zone bank supervisor. Its jealously guarded independence is supposed to lend credibility to the system. Yet the more the ECB involves itself in managing the crisis, the more it sullies itself with politics. And having been intimately involved in the botched plan for Cyprus’s banks, and insisted on the protection of senior bondholders, it is reasonable to question whether the ECB is up to the task of bank supervision.

There is another question: now that voters in Italy and MPs in Cyprus have openly rejected the strictures of the euro zone, might the ECB’s magic spell be broken? After all, its bond-buying policy depends crucially on troubled countries submitting to a euro-zone reform programme. The ECB may reach a decisive moment sooner. Cyprus’ banks survive only on the ECB’s emergency liquidity. If there is no deal in Cyprus, the ECB will have to decide whether to follow through on its ultimatum to cut off the money within days. This would cause a messy collapse and almost certainly push Cyprus out of the euro. Mr Draghi has bravely stepped in to defend the weakest members of the euro zone. But would he dare to shoot one of his own?

Charlemagne: Small island, big finger | The Economist

 

[dennis roadman]

on some real shyt, what does the average person do to stem this shyt? 50% cash 50% gold, empty all accounts?

 

[88m3]

Cypriot banks to remain closed despite bailout deal


© AFP
Cyprus's finance minister has ordered banks to remain closed until Thursday despite a €10 billion bailout deal struck early Monday between President Nicos Anastasiades and international finance chiefs to prevent a collapse of the banking system.
By FRANCE 24 (text)

Cypriot Finance Minister Michael Sarris has ordered banks to remain closed until Thursday despite a €10 billion bailout deal struck early on Monday between President Nicos Anastasiades and international finance chiefs aimed at preventing a collapse of the banking system. Cyprus's banks have been closed for the past week to prevent a run on financial institutions.

Cyprus clinched the last-ditch deal with international lenders to shut down its second-largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians, in return for a €10 billion ($13 billion) bailout.

The agreement came hours before a deadline to avert a collapse of the banking system in fraught negotiations between President Nicos Anastasiades and heads of the European Union, the European Central Bank and the International Monetary Fund.

Swiftly endorsed by euro zone finance ministers, the plan will spare the east Mediterranean island a financial meltdown by winding down Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a “good bank”.

Deposits above 100,000 euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and recapitalise Bank of Cyprus through a deposit/equity conversion.

The raid on uninsured Laiki depositors is expected to raise 4.2 billion euros, Eurogroup chairman Jeroen Dijssebloem said.

Laiki job losses

WHAT IS THE EXTENT OF THE DAMAGE FOR THE CYPRIOT ECONOMY?

By Nathalie SAVARICAS reporting from Cyprus
Laiki will effectively be shuttered, with thousands of job losses. Officials said senior bondholders in Laiki would be wiped out and those in Bank of Cyprus would have to make a contribution.

An EU spokesman said no across-the-board levy or tax would be imposed on deposits in Cypriot banks, although the hit on large account holders in the two biggest banks is likely to be far greater than initially planned. A first attempt at a deal last week collapsed when the Cypriot parliament rejected a proposed levy on all deposits.

The plan could deal a fatal blow to the economy. “The troika estimates that this will cause a 10% drop in GDP,” said Nathalie Savaricas, FRANCE 24’s special correspondent in Nicosia.

German Finance Minister Wolfgang Schaeuble said lawmakers would not need to vote on the new scheme, since they had already enacted a law setting procedures for bank resolution.

“It can’t be done without a bail-in in both banks... This is bitter for Cyprus but we now have the result that the (German) government always stood up for,” Schaeuble told reporters, saying he was sure the German parliament would approve.

A senior source in the talks said Anastasiades threatened to resign at one stage on Sunday if he was pushed too far. He left EU headquarters without making any comment.

Conservative leader Anastasiades, barely a month in office and wrestling with Cyprus’ worst crisis since a 1974 invasion by Turkish forces split the island in two, was forced to back down on his efforts to shield big account holders.

Diplomats said the president had fought hard to preserve the country’s business model as an offshore financial centre drawing huge sums from wealthy Russians and Britons but had lost.

The EU and IMF required that Cyprus raise 5.8 billion euros from its banking sector towards its own financial rescue in return for 10 billion euros in international loans. The head of the EU rescue fund said Cyprus should receive the first emergency funds in May.

"Credible plan"

IMF chief Christine Lagarde said the agreement was “a comprehensive and credible plan” that addresses the core problem of the banking system.

“This agreement provides the basis for restoring trust in the banking system, which is key to supporting growth,” she said in a statement.

With banks closed for the last week, the Central Bank of Cyprus imposed a 100-euros per day limit on withdrawals from cash machines at the two biggest banks to avert a run.

DISMAY AND FEAR ON THE STREETS OF NICOSIA AFTER THE DEAL

By Josh Vardey
French Finance Minister Pierre Moscovici rejected charges that the EU had brought Cypriots to their knees, saying it was the island’s offshore business model that had failed.

“To all those who say that we are strangling an entire people ... Cyprus is a casino economy that was on the brink of bankruptcy,” he said.

The euro gained against the dollar on the news in early Asian trading.

Analysts had said failure to clinch a deal could cause a financial market selloff, but some said the island’s small size - it accounts for just 0.2 percent of the euro zone’s economic output - meant contagion would be limited.

The abandoned plan for a levy on bank deposits had unsettled investors since it represented an unprecedented step in Europe’s handling of a debt crisis that has spread from Greece, to Ireland, Portugal, Spain and Italy.

Anxious mood

In the Cypriot capital, Nicosia, the mood on Sunday was anxious.

“I haven’t felt so uncertain about the future since I was 13 and Cyprus was invaded,” said Dora Giorgali, 53, a nursery teacher who lost her job two years ago when the school she worked at closed down.

“I have two children studying abroad and I tell them not to return to Cyprus. Imagine a mother saying that,” she said in a central Nicosia square.

Cyprus’s banking sector, with assets eight times the size of the economy, has been crippled by exposure to Greece, where private bondholders suffered a 75 percent “haircut” last year.

Without a deal by the end of Monday, the ECB said it would have cut off emergency funds to the banks, spelling certain collapse and potentially pushing the country out of the euro.

Under the bailout agreement, Laiki’s ECB funds will pass to Bank of Cyprus and the central bank will “provide liquidity to BoC in line with applicable rules”.

Anticipating a run when banks reopen on Tuesday, parliament has given the government powers to impose capital controls.

Parliament

About 200 bank employees protested outside the presidential palace on Sunday chanting “troika out of Cyprus” and “Cyprus will not become a protectorate”.

In a stunning vote on Tuesday, the 56-seat parliament rejected a levy on depositors, big and small. Finance Minister Michael Sarris then spent three fruitless days in Moscow trying to win help from Russia, whose citizens and companies have billions of euros at stake in Cypriot banks.

On Friday, lawmakers voted to nationalise pension funds and split failing lenders into good and bad banks - the measure to be applied to Laiki. The plan to tap pension funds was shelved due to German opposition, a Cypriot official said.

The tottering banks held 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros - enormous sums for an island of 1.1 million people which could never sustain such a big financial system on its own.

(FRANCE 24 with wires)

Cypriot banks to remain closed despite bailout deal - CYPRUS - FRANCE 24

 

[88m3]

on some real shyt, what does the average person do to stem this shyt? 50% cash 50% gold, empty all accounts?

Well the rough thing is many people who put their money there because they though it would be safe and protected by EU laws. The EU threw that out the window by saying their deposits weren't basically. The EU has a similar set up on deposits as our FDIC.

You could keep cash but the way the Euro has been fluctuating and losing value that's not a great idea.

Gold has been falling in value and it's overvalued imo.

Taxation and EU laws have changed a lot over the last few years.
I'm not sure how easy/safe it is to open accounts in other countries anymore if you don't reside/do business/ pay taxes there.

I think Europeans have to pick one country to avoid double taxation in their home country.

bonds
stock portfolios
trusts/foundations set up in tax havens
high end real estate

are what come to mind for me



might have to ask @alybaba @mbewane


I don't think hl has any uk posters anymore

 

[Ms~Opinionated]

Insane, makes you think twice about holding all of your money in a bank.

Only governments can make theft legal. This is legalized theft.

Instead of people robbing the banks, the banks are robbing the people.

 

[Brown_Pride]

Good for them. I dont know what the Euromasters were thinking. They might as well have proposed an air tax

shhhh don't be giving them ideas.
This will NOT help people save long term. If i were there I'd NEVER put shyt in a bank again.

Short term gains for long term fails

 

[Meta Reign]

like mothafukkas gonna be stupid enough to keep their money in these banks once they open back up. This bank run is inevitable at this point.

 

[Hiphoplives4eva]

Jesus are they trying to create a bank run?

Yes. They are actually attempting to destablize Cyprus's economy in order to pressure them to accept the heinous terms mandated by the EU. The Europeans did a foolsih thing forming that EU. Really a dumb fukking move on the European's part.

 

[FaTaL]

so there only delaying the inevitable?

 

[mbewane]

Well the rough thing is many people who put their money there because they though it would be safe and protected by EU laws. The EU threw that out the window by saying their deposits weren't basically. The EU has a similar set up on deposits as our FDIC.

You could keep cash but the way the Euro has been fluctuating and losing value that's not a great idea.

Gold has been falling in value and it's overvalued imo.

Taxation and EU laws have changed a lot over the last few years.
I'm not sure how easy/safe it is to open accounts in other countries anymore if you don't reside/do business/ pay taxes there.

I think Europeans have to pick one country to avoid double taxation in their home country.

bonds
stock portfolios
trusts/foundations set up in tax havens
high end real estate

are what come to mind for me



might have to ask @alybaba @mbewane


I don't think hl has any uk posters anymore

I personnaly have an account in Belgium and in France, but from what I know you aren't taxed on your bank accounts, but on your revenues. Those can included revenues on financial transactions, but that really doesn't concern the average european like myself. I don't think regular deposits are taxed, "only" financial products. I know for a fact that in Belgium you only declare investments and financial transactions, NOT deposits.

Just to clarify, from what I understand it was not the deposits that were going to be taxed, but the interests generated by those deposits: the line of reasoning was that those interests were artificially too high due to a bloated bank and financial sector and that the one-time tax would bring it down to a "normal" level. So no one was losing their initial deposit.

I could be wrong though of course.