Cyprus surprise - Cypriot depositors to take a 'haircut'

N1AK

Mr_Mumble wrote: »

3. No vote in the Cypriot Parliament because wording has changed and there will be no 'tax'/'levy' imposed. The perversity of this is even starker when you consider the Dutch, Finnish and German parliaments will get to vote on this deal!

The Dutch etc are being asked to provide billions of €s to bail out a fragile economy. The Cypriots are about to go bankrupt and are being offered money on very favourable terms; there is no other option that wouldn't lead to both banks collapsing and everyone losing their money. So what would be the point in a vote? Vote to choose between the complete destruction of your economy and the slightly less complete destruction isn't exactly a hard choice in rational terms.

The Cypriot people have shown throughout this crisis that they have no comprehension of the fact that this crisis is their responsibility; even if only because they are a democracy and responsible for those they elect. The constant supply of Cypriots to interview who are adamant there is no economic issue, that it's all political and they are being punished for no reason, They would literally bankrupt themselves in their ignorance to avoid paying a small amount instead.

N1AK

CLAPTON wrote: »

unlikely that they were the two alternatives

The Cypriot parliament rejected a small 'tax' on people holding under €100k and a slightly larger tax on those holding over. It sucked but it would have gotten them the deal without the destruction of major deposit holders at the two largest banks. They rejected it without a single vote in favour in what is likely to be remembered as one of the worst failings of democratic leadership in modern history.

I have no doubt that the original proposal, although flawed, was incomparably better than what they have ended up creating instead.

CLAPTON

N1AK wrote: »

The Cypriot parliament rejected a small 'tax' on people holding under €100k and a slightly larger tax on those holding over. It sucked but it would have gotten them the deal without the destruction of major deposit holders at the two largest banks. They rejected it without a single vote in favour in what is likely to be remembered as one of the worst failings of democratic leadership in modern history.

I have no doubt that the original proposal, although flawed, was incomparably better than what they have ended up creating instead.

The first proposal was never a solution to a country with a banking sector 400% of GDP with massive bad debts.

The bail out was to allow the government to continue to pay it's bills and did not address the issue of bailing out the bankrupt banks.

The proposal never addressed the issue of how bankrupt banks could continue to operate.
It was a classic 'kicking the can down the road'
OK the Government pretended that it would work.

If it were really as easy as you say that the government would be putting that case to the people again... if you can see how amazing it is I'm sure the Cypriots would do so also.

The reality is Cyprus is bankrupt, both the government and the banks.

The government income was largely dependant upon the cash flow from the banks; lots of the jobs were dependant upon the banks.
There was never the prospect that the plan A would allow that to continue as if nothing had happened.

The government and people are in denial.

bryanb

Haven't read all the posts so apologies if my Q has already been answered.

Does the 100,000 euro guarantee cover all deposits ie business accounts as well as private savers?

ruggedtoast

Considering the type of people that stand to lose out in this restructure, if I were in the Cypriot government I would be more than a little anxious about my personal safety in the years to come.

They've basically just ripped off the Russian mob to the tune of billions.

HAMISH_MCTAVISH

N1AK wrote: »

The Cypriot parliament rejected a small 'tax' on people holding under €100k and a slightly larger tax on those holding over. It sucked but it would have gotten them the deal without the destruction of major deposit holders at the two largest banks. They rejected it without a single vote in favour in what is likely to be remembered as one of the worst failings of democratic leadership in modern history.

I have no doubt that the original proposal, although flawed, was incomparably better than what they have ended up creating instead.

Yep, that about sums it up.

Cyprus has just completed the largest ever act of "cutting off your nose to spite your face" in recorded history.

Mr_Mumble

N1AK wrote: »

The Dutch etc are being asked to provide billions of €s to bail out a fragile economy. The Cypriots are about to go bankrupt and are being offered money on very favourable terms; there is no other option that wouldn't lead to both banks collapsing and everyone losing their money.

I was making a tongue-in-cheek reference to how the Dutch were disenfranchised over the EU Constitution vote where they said no (along with the French and Irish). Since I'm in an argumentative mood though ...There really was an alternative. Leave the Euro and stiff the Dutch et al on the ECB money. The "favourable terms" are through necessity and gave Cyprus leverage. The Eurogroup is lending an extra 10 billion Euros but for that they secure at least 9 billion Euros that would have been lost if Cyprus balked. The Eurogroup got the better end of this deal.

The Cypriot people have shown throughout this crisis that they have no comprehension of the fact that this crisis is their responsibility

They aren't responsible for the 80% decapitation their banks took on Greek government debt.

The reason Cypriot banks took an 80% loss on Greek government debt was because the Greek government absorbed its bank debt and kept depositors whole. It's kinda perverse that Cypriot deposits are being taken to keep Greek deposits at 100%.

mcfisco

bryanb wrote: »

Haven't read all the posts so apologies if my Q has already been answered.

Does the 100,000 euro guarantee cover all deposits ie business accounts as well as private savers?

Deposit Guarantee Schemes will protect all deposits held by individuals and small, medium-sized and large businesses. However, deposits of financial institutions and public authorities will not be covered.

http://europa.eu/rapid/press-release_MEMO-10-318_en.htm?locale=en

HAMISH_MCTAVISH

From Peston this morning...

So here is the Cyprus "rescue" in a nutshell:

-An economy that will be starved of credit, and will therefore shrink rapidly and very painfully for citizens

-An economy whose main industry, offshore banking, is being shut.

Although there may be some relief that smaller savings no longer face a 6.7% levy, Cypriot citizens may over time end up feeling more than 6.7% poorer as a result of this so-called bailout.

HAMISH_MCTAVISH

From Peston this morning...

So here is the Cyprus "rescue" in a nutshell:

-An economy that will be starved of credit, and will therefore shrink rapidly and very painfully for citizens

-An economy whose main industry, offshore banking, is being shut.

Although there may be some relief that smaller savings no longer face a 6.7% levy, Cypriot citizens may over time end up feeling more than 6.7% poorer as a result of this so-called bailout.