Thread: Cyprus Bailout - Savings Tax

So, looks like the IMF is demanding a tax on peoples savings as a condition of a bank bailout. It's proposed a tax of 6.75% for anyone with savings of under 100,000 Euros, and 9.99% for anyone with savings above 100,000 Euros.

Now, this obviously goes against the banks guarantees for amounts up to 100,000 Euros and sets a very dangerous precedent - will the same now happen in Ireland, Spain, Portugal et al...????

To stop runs on the banks the Cypriot government has closed all banks until Thursday untilafter the decision is finalised on Wednesday. Jesus, I'd be losing the plot if I had my money in Cyprus right now.

Cyprus bailout: 'people are panicking, they're afraid of losing their money' | World news | The Guardian

Cyprus bailout: 'people are panicking, they're afraid of losing their money'

Cypriots tell of shock finding government had seized up to 10% of savings – despite promise deposits would be safe

Under the palm trees of Larnaca's waterfront promenade, George Kyprou was staring out to sea and scratching his head. "I don't know what to do," he said. Like most Cypriots, he was astonished to wake up one bank holiday weekend morning to discover the government had seized up to 10% of everyone's savings from their bank accounts without warning.

Kyprou, 62, born in Larnaca, had worked most of his life as a chauffeur and driver in England, proudly buying his London council flat and scrimping to put aside money in Cyprus for when he returned for holidays and eventually to retire. "I'd put aside £50 here, £20 there, all my life," he said. Over decades, he had built up around €6,000 (£5,200) in a Larnaca account. "It was a state building society; I assumed it was safe."

But now, as depositors holding less than €100,000 are made to pay 6.75% and those with more than €100,000 9.9% as part of a €10bn (£8.7bn) bailout agreed in Brussels, Kyprou stands to lose €400 overnight. "That's a lot for someone like me," he said.

When he heard the news on Saturday morning, he rushed to the cashpoint and queued with others who were panicking and trying to take out as much money as they could. The media reported a run on ATMs that were depleted by mid-afternoon. But with Cyprus taking immediate steps to prevent any money transfers over the weekend, ordinary savers realised there was little they could do to lessen the blow.

On Sunday the parliament of Cyprus postponed a crucial debate and vote on the move until Monday, without giving a reason. Banks will remain closed for several days because of the holiday.

In Larnaca, the third largest city on the tiny eastern Mediterranean island, the queues at cashpoints had shrunk by Sunday night but the mood was one of shock, anger and injustice.

Only three weeks ago, Cyprus voted in elections where, for once, the island's defining issue of its 40-year-old division into the Greek-speaking south and the Turkish north was overtaken by more urgent worries. The country of 1.1 million people had been ravaged by its worst economic crisis since the 1970s, with unemployment at a record high of 15% and fears of meltdown in a bloated banking sector which was more than eight times the size of the nation's economy.

The Conservative winner Nicos Anastasiades promised at least that savers' deposits were safe. This weekend he accepted bailout terms that turned that promise on its head.

Stelios Zinga, a truck driver in his late 50s, had joined the cashpoint queues. "People are panicking, they're afraid of losing their money, they don't feel they can trust banks anymore," he said. "The problem with this levy is that it is the cautious, working-class people who are being made to pay."

His work as a driver had already suffered from the economic downturn, and he now felt it would plummet. The classic Cypriot education ethic, where hard-saving parents supported their children studying abroad, would feel the strain, he said. "My son is studying chemical engineering in Edinburgh. I'm worried I won't be able to get money to him."

Christiana Konteati, 26, a lawyer, who finished a degree in London three years ago, said: "We're really worried that this is only the beginning: next will come salary cuts, austerity, rising unemployment and very likely people going abroad to work."

She said the younger generation didn't have savings to fear for but a large part of her graduate friends were unemployed including a translator, a marketing graduate, a physicist and an accountant.

One flabbergasted Larnaca bank employee, 28, was grabbing a coffee before returning to the rolling TV news he said the nation was glued to. He found the bank levy an "extraordinary" surprise. "Are we the guinea pigs? There's a feeling they are trying this out on us before they do it elsewhere. Let's see how the markets react."

Further along the promenade, some bristled at the charge in Europe that Cyprus, flush with Russian cash, was a conduit for money-laundering and that the European decision-makers felt the rich Russian depositors should be made to pay. More than 25% of bank deposits and about one-third of foreign investments in Cyprus come from Russia.

So many Russians now live in the port city of Limassol that it has been dubbed "Limassolgrad". "We need foreign investment and it could now shrink," said one student, arguing that most savers in Cyprus were Cypriots.
Many felt resentment at the EU and its financial decision-makers would grow.

Others wondered whether a better solution to the nation's financial woes was the recent discovery of gas deposits that amounted to more gas than Cyprus could use in over a century, and which it hopes to begin exporting by 2018, potentially meeting a major part of the EU's annual demand.

As always, the emotional resonance from the island's bloody division 40 years ago, was never far from the surface. One retired teacher who had to flee her village in the north in 1974, said: "They're taking money, but at least now I have a home and clothes to change into. Back then, we had nothing. Cyprus will come through this somehow."

This is going to set the cat amongst the pigeons. It will spread to savers in other countries withdrawing deposits and an uncontrollable wild fire in the Euro zone.

Fairly big decision to make. Surely this will spook everyone?

Russian leader Putin has spoken about his displeasure,as Russians have sunk Billions into Cypriot banks,and He may be just another rush en to the bank.

Originally Posted by wasabi

Russian leader Putin has spoken about his displeasure,as Russians have sunk Billions into Cypriot banks,and He may be just another rush en to the bank.

that's basically what the EU is saying, it's to worry the Russians

Cyprus is money laundering central, dodgy companies, particularly Russians, they setup dodgy Bank accounts with dodgy money

basically the EU will be saving "illegal" money deposited in Cyprus banks,

the tax is probably to force Cyprus officials to clean their act regarding Banking guidelines, and in that regard, the tax on savings is considered a "reduced" tax on money that escaped the legal taxation system

if bank officials were to identify the dodgy Russian money, they might have a deal, but until then, it's everyone on the same level

Originally Posted by Thormaturge

" a bloated banking sector which was more than eight times the size of the nation's economy. "

Cyprus is the new Switzerland without the solid banking security and the prestige, a lot of dodgy money

banks there are probably on the verge of collapse, bank run or not, so it's definitely NOT safe

Think of it as a bigger version of Iceland banking sector,

Cyprus said its banks would stay closed until Thursday as politicians from Nicosia and Brussels scrambled to row back on plans that triggered outrage around the world.

Stock markets fell in Asia and Europe as traders reacted to Cyprus’s €10bn (£8.6bn) bail-out plan, which included a raid on all bank deposits. Under the deal, agreed by Cypriot ministers in the early hours of Saturday morning, a levy of 6.75pc would be imposed on bank savings of up to €100,000. Deposits over this level would be hit with a 9.9pc tax.

Billions of pounds were wiped off the value of banks across Europe. In the UK, Royal Bank of Scotland plunged 5.1pc but finished down 3.4pc, Barclays fell 4.7pc and closed down 4.4pc, and Lloyds slid 2.8pc before closing 1.3pc down. Markets in America fell in early trading.

“The madness of this decision about Cyprus is unfathomable,” David Kotok at Cumberland Advisors in the US told investors. “Europe has found a new way to shoot itself in the foot.”



Nicos Anastasiades, the president of Cyprus, said the deal was needed to avert a “disorderly bankruptcy”. But a vote in the Cypriot parliament to approve the deal was postponed amid a run on cash machines in Cyprus and international uproar. The vote is scheduled for 4pm on Tuesday.


Panicos Demetriades, the governor of Cyprus’s central bank, told parliament: “I suggest we work on the numbers again, if we don’t we will be unable to rebuild trust among depositors because we have broken our contract with them.” The rethink calmed traders and caused stock markets to recover some losses by the close. But investors and analysts remained troubled.

Tristan Cooper, a fixed income sovereign credit analyst at Fidelity, said: “The craziest thing about the Cyprus announcement is the huge potential cost of undermining the spirit of the bank deposit guarantee for what is a small saving in the overall scheme of European finances. Even if policymakers now row back from taxing small depositors in Cyprus, the damage has been done.”

Analysts at Credit Suisse said: “These events are likely to weaken the pro-EU political centre in yet another country. As elections in Greece and Italy have shown, the risk the economic and financial crisis is exposing is a steady rise in support for new and radical political parties in the periphery, for whom membership of the euro is not a necessity. Such a trend now looks inevitable in Cyprus.”

In a statement on Monday night, the EuroGroup said that Cyprus must guarantee deposits below €100,000.

The deposit tax was aimed at raising €5.8bn as part of the bail-out agreement and was apparently requested by Germany and a group of creditor countries. Sources said the plan was designed to ensure EU funds were not used to bail out foreign depositors. As well as British servicemen, holiday reps and expatriate pensioners, Cypriot banks have attracted thousands of Russian clients but have gained a reputation for harbouring money launderers.

Over the next week, some of the weaker economies are planning to tap the bond markets for cash. Greece plans to sell €1bn of bonds tomorrow and Spain has a short-term auction, followed by the sale of 10-year debt on Thursday. It is Portugal’s turn on Wednesday and Italy’s on Monday.

daily telegraph, 19 march.

this is just another desperate measure by germany and france to keep their silly currency afloat. whilst it is true that the cypriot banking system is a haven for russian and others to launder their money, it is a retirement haven for many ordinary people too. this theft from their bank accounts is illegal, ill thought out and will do nothing to stabilise a situation that is probably beyond salvation anyway.

cant be too long before violence and mayhem returns to europes streets as the people tire of their mostly well fed, well remunerated and wholly corrupt undemocratically chosen eu bosses, lead the continent into a downward spiral of discontent, poverty and anger.

the european leaders really are the silliest and most pompous people on the planet.

The backtracking has started but the thought is in everyone's mind. Savings in a bank are safe? The cats out of the bag, act now and stay solvent.

Apropos of all this though, this is quite interesting:

By the way, if you’re wondering why investors left so much money in troubled Cypriot banks, here’s a trivia question: Would you have been better off leaving your money in a bank in the United States or in Cyprus over the last five years?

The answer: You would have been better off in Cyprus, even after the bailout, when your money was “confiscated.” If you had 100,000 euros in a Cypriot bank account over the last five years, where the interest rate has averaged about 5 percent, you would have about 127,600 euros today. Even after the bailout, which would require you to give up 10 percent of your deposit — 12,760 euros — you would be left with 114,840 euros. The American bank? The $100,000 you deposited at Bank of America five years ago is about $105,100, at the going rate of about 1 percent interest a year.

A Bank Levy in Cyprus, and Why Not to Worry - NYTimes.com

The Cypriots screwed it up, let them and foreign investors pay themselves, at least in part, for the mess. Beats tax payers in Germany and France bailing them out without a service in return. The bank guarantees are for the case a bank collapses, whole different issue.

Originally Posted by AntRobertson

where the interest rate has averaged about 5 percent,

on what planet ?

I think it would be a mistake to bail out Cyprus, a big mistake

Originally Posted by Rainfall

The Cypriots screwed it up, let them and foreign investors pay themselves, at least in part, for the mess. Beats tax payers in Germany and France bailing them out without a service in return.

The problem here is that since UK government employees and servicemen based in Cyprus will be hit for this "tax" the UK government has offered to re-imburse them. Thus the British taxpayers will be contributing to the Cyprus bailout plan. Very decent of them.

Originally Posted by Butterfly

^^ yeah, putting your precious Gold in a safe at the bank would change the situation

IF, you had done that and the banks had searched all the deposit boxes for sure, but surely even you wouldn't be so dumb?

Originally Posted by Rainfall

The bank guarantees are for the case a bank collapses, whole different issue.

You may find that the banks are technically insolvent and thus are in need of a bailout. Hence the stepping in of the Euro zone banking authorities with their type of "assistance".

I think it's just robbery, it's my money in the bank, they simply steal it, just as if they were stopping people on the street and confiscating a percentage of money from their pockets.
I would be livid.

Peter Schiff and others on Cyprus, banking and the possible coming bank trends.

Peter Schiff 2013 - Peter Schiff schools CNBC fools about the insolvency of US Banks... - YouTube

Originally Posted by AntRobertson

Apropos of all this though, this is quite interesting:

By the way, if you’re wondering why investors left so much money in troubled Cypriot banks, here’s a trivia question: Would you have been better off leaving your money in a bank in the United States or in Cyprus over the last five years?

The answer: You would have been better off in Cyprus, even after the bailout, when your money was “confiscated.” If you had 100,000 euros in a Cypriot bank account over the last five years, where the interest rate has averaged about 5 percent, you would have about 127,600 euros today. Even after the bailout, which would require you to give up 10 percent of your deposit — 12,760 euros — you would be left with 114,840 euros. The American bank? The $100,000 you deposited at Bank of America five years ago is about $105,100, at the going rate of about 1 percent interest a year.

A Bank Levy in Cyprus, and Why Not to Worry - NYTimes.com

Quoting the New York Times - Mega Lolz.

You seem to forget who their owners are 55555555555555555555

Fuck me sideways Ant - a propaganda message saying "Oh, it's not so bad you know. You'll still be up".

Originally Posted by OhOh

Savings in a bank are safe?

Argentina about 15 years or so due to economic difficulties froze all bank accounts for a period of time and then if I am correct basically exchanged accounts denominated in dollars for government bonds

Originally Posted by Koojo

I think it's just robbery, it's my money in the bank, they simply steal it, just as if they were stopping people on the street and confiscating a percentage of money from their pockets.
I would be livid.

Good doggy, thats exactly what I have been saying.

Just how desperate does the situation have to be that a European government is freezing a country's bank acounts in readiness to steal money from them?

First they print funny money, then the bailouts, and now this. What next?

Originally Posted by Butterfly

^^ yeah, putting your precious Gold in a safe at the bank would change the situation

At least you are consistent in your misreading of anything concerning gold