So much for €100,000 protection - Cyprus bailout

ColdIron

Via zerohedge

The Cypriot cabinet has declared Tuesday a bank holiday, for fear of capital flight, and this may even be stretched to Wednesday, as depositors are certain to withdraw huge sums from the Cypriot banks after the haircut imposed.

Nicosia postponed from Sunday to Monday the tabling in Parliament of the bill including the measures for the Cypriot bailout – including a bank account haircut and a tax hike on interest and corporate earnings – but the European Central Bank insists on a rapid voting because there are already signs a domino effect will follow across European lenders and markets from Monday.

There is genuine fear of market unrest on Monday morning when stocks may crumble in the eurozone and bank accounts in other southern European bank may suffer.

Skai radio reported on Sunday that the Bank of Greece has sent between 4 and 5 billion euros to Cyprus in order to help Cypriot banks respond to cash requirements by their clients

http://www.zerohedge.com/news/2013-03-17/cyprus-bank-holiday-extended-through-tuesday-confusion-spreads

mulronie

Frankly what's happening in Cyprus is doing is no different to what's been happening here. They have a one-off tax of 10% on the value of their savings; we've had an annual 2.5% tax on savings (inflation) for 4 years.

The only difference I see is that the Cypriot government is up-front about the tax, whereas our tax has been imposed by the BoE and the Treasury without a single vote in parliament and without many people even realising.

typistretired

I just feel sorry for my friends that bought a villa to retire out there and now there life long savings are going to be reduced. Never understood why the USA weren't made to compensate banks in other countries when all the banking mess started over there.

pioneer

mulronie wrote: »

Frankly what's happening in Cyprus is doing is no different to what's been happening here. They have a one-off tax of 10% on the value of their savings; we've had an annual 2.5% tax on savings (inflation) for 4 years.

The only difference I see is that the Cypriot government is up-front about the tax, whereas our tax has been imposed by the BoE and the Treasury without a single vote in parliament and without many people even realising.

And they haven't had inflation in Cyprus for the last 4 yrs ?

Who are you kidding.

Hominu

mulronie wrote: »

Frankly what's happening in Cyprus is doing is no different to what's been happening here. They have a one-off tax of 10% on the value of their savings; we've had an annual 2.5% tax on savings (inflation) for 4 years.

So your saying the price of goods and services has never increased in Cyprus then? I would tend to disagree.

mulronie

Hominu wrote: »

So your saying the price of goods and services has never increased in Cyprus then? I would tend to disagree.

Obviously I need to clarify what I said. When I said inflation was a tax, I really meant that the value of your savings is being taxed whenever inflation is higher than your interest rate. Apologies for not being clearer (although it is a basic economic concept I shouldn't assume people instinctively understand).

Of course they have inflation in Cyprus (1.6% in Feb 2013 for instance). However the interest rates available to deposits (even under the EUR100k guarantee) have exceeded inflation throughout the last few years. Laiki, for instance, were last week offering 5.33% for 3years on EUR50,000.

My argument is that the average Cypriot depositor has actually enjoyed increasing value of his savings over the last 4 years. We in Britain have not - so while the Cypriots have now had their savings taxed in a one-off transparent hit, we Brits have had ours taxed surreptitiously through inflation consistently exceeding interest rates.

mark55man

And the point is these extra interest rates are only available by the conscious assumption of risk in moving your money from UK to clearly riskier areas.

That is why I think it is false pleading to start complaining that a risk occurred in a risky place, and almost hypocritical to say that there should be no loss as the risks where not understood. if you are savvy enough to go looking for international investment opportunities you should be honest enough to take the pain when they unravel.

grizzly1911

mark88man wrote: »

And the point is these extra interest rates are only available by the conscious assumption of risk in moving your money from UK to clearly riskier areas.

That is why I think it is false pleading to start complaining that a risk occurred in a risky place, and almost hypocritical to say that there should be no loss as the risks where not understood. if you are savvy enough to go looking for international investment opportunities you should be honest enough to take the pain when they unravel.

Presumably accepting the exchange risk too.

grizzly1911

pioneer wrote: »

And they haven't had inflation in Cyprus for the last 4 yrs ?

Who are you kidding.

Hominu wrote: »

So your saying the price of goods and services has never increased in Cyprus then? I would tend to disagree.

They haven't had the same level of forced devaluation, causing additional inflation for key imports, fuel, energy, food that we have had forced upon us.

EUR/$ down 13%, £/$ down 25%.

ColdIron

Clearest explanation of the situation I have seen yet

This Crazy Cyprus Deal Could Screw Up A Lot More Than Cyprus...
http://www.businessinsider.com/cyprus-bailout-risks-europe-bank-runs-2013-3