A run on the banks has started in Cyprus

[Richarddbeck]

Cyprus Government is seizing savings accounts to pay for government spending. This has caused a run on the banks in Cyprus. This could be the first domino in the collapse of the Euro and then the dollar.


https://www.youtube.com/watch?v=YhrzstyoojY

[NWPilgrim]

Actually, I heard it is to bail out the two largest banks in Cyprus, not the govt. Just as TARP in the us bailed out banks "too bug to fail," so in Cyprus the govt agreed with EUZ to confiscate a percentage of all bank deposits, give that €10 billion to the eurozone, and in turn the EUZ will give €6 billion bailout to the two banks. It is mot a bailout to the govt itself.

[Richarddbeck]

on it's face yes but... The Cyprus banks own the Cyprus government debt. These banks need to be bailed out because investors are seeing the bad debt on their books and are pulling out. Now those banks need to be bailed out. Also there seems to be enough push back against the confiscation to get this entire deal stopped. We'll have to wait and see.

^ is my understanding. I'm not all knowing so I could be wrong. :)

[msomnipotent]

From what I heard, Russians are beyond pissed off because they have been using Cyprus as a tax haven. They feel that this move is more about getting their money than bailing out the banks. I also heard that the US is "watching this with great interest". I bet to gauge how Americans would react to the same thing! Not to mention that this money, I believe up to 100,000 Euros, is supposedly insured. I guess it is insured from theft from everyone but the government. This sets a truly ugly precedent.

I also heard that the banks are closed until Thursday and the ATM's are already out of money.

[Richarddbeck]

They where saying the banks are not going to open until they know they will not collapse. who knows when that will happen.

[ak474u]

Makes ya wonder why granny kept her cash in a mason jar huh?

[bacpacker]

Here is a few links to various news outlets about where this is all started from. I also found a article last night from 2011 that basically forecast this exact scenario.

http://www.zerohedge.com/news/2013-03-16/everyone-shocked-what-just-happened-and-why-just-beginning

For Everyone Shocked By What Just Happened... And Why This Is Just The Beginning
Tyler Durden's picture
Submitted by Tyler Durden on 03/16/2013 18:28 -0400

Today, lots of people woke up in shock and horror to what happened in Cyprus: a forced capital reallocation mandated by political elites under the guise of an "equity investment" in insolvent banks, which is really code for a "coercive, mandatory wealth tax." If less concerned about political correctness, one could say that what just happened was daylight robbery from savers to banks and the status quo. These same people may be even more shocked to learn that today's Cypriot "resolution" is merely the first of many such coercive interventions into personal wealth, first in Europe, and then everywhere else.

For the benefit of those people, we wish to point them to our article from September 2011, "The "Muddle Through" Has Failed: BCG Says "There May Be Only Painful Ways Out Of The Crisis", which predicted and explained all of this and much more. What else did the September BCG study conclude? Simply that such mandatory, coercive wealth tax is merely the beginning for a world in which there was some $21 trillion in excess debt as of 2009, a number which has since ballooned to over $30 trillion. And with inflation woefully late in appearing and "inflating away" said debt overhang, Europe first is finally moving to Plan B, and is using Cyrprus as its Guniea Pig.

For those who missed it the first time, here it is again. Somehow we think many more people will listen this time around:

Restructuring the debt overhang in the euro zone would require financing and would be a daunting task. In order to finance controlled restructuring, politicians could well conclude that it was necessary to tax the existing wealth of the private sector. Many politicians would see taxing financial assets as the fairest way of resolving the problem. Taxing existing financial assets would acknowledge one fact: these investments are not as valuable as their owners think, as the debtors (governments, households, and corporations) will be unable to meet their commitments. Exhibit 3 shows the one-time tax on financial assets required to provide the necessary funds for an orderly restructuring.

For most countries, a haircut of 11 to 30 percent would be sufficient to cover the costs of an orderly debt restructuring. Only in Greece, Spain, and Portugal would the burden for the private sector be significantly higher; in Ireland, it would be too high because the financial assets of the Irish people are smaller than the required adjustment of debt levels. This underscores the dimension of the Irish real estate and debt bubble.

In the overall context of the future of the euro zone, politicians would need to propose a broader sharing of the burden so that taxpayers in such countries as Germany, France, and the Netherlands would contribute more than the share required to reduce their own debt load. This would be unpopular, but the banks and insurance companies in these countries would benefit. To ensure a socially acceptable sharing of the burden, politicians would no doubt decide to tax financial assets only above a certain threshold—€100,000, for example. Given that any such tax would be meant as a one-time correction of current debt levels, they would need to balance it by removing wealth taxes and capital-gains taxes. The drastic action of imposing a tax on assets would probably make it easier politically to lower income taxes in order to stimulate further growth. (See Exhibit 4.)

Curiously, not even BCG expected the initial shot across the bow to be so bad that everyone, not just those above the €100,000 threshold would be impaired. Alas, that is the sad reality in Europe, where as the chart above shows, a total of €6.1 trillion with a T in additional wealth confiscation tax is coming.

Oh, and US of A... fear not - your turn is coming too: with a price tag of €8.2 trillion in wealth tax pending as of 2009. This number is now somewhere north of €15 trillion.



http://www.businessinsider.com/cyprus-bailout-deal-2013-3lion.

Europe Announces Stunning Bailout For Cyprus — Bank Depositors To Get Instant 10% Tax Before Banks Reopen This Week
Roderick Thomson, Agence France Presse | Mar. 16, 2013, 6:28 AM | 30,408 | 34

Eurozone leaders and the IMF on Saturday announced an unprecedented levy on all deposits in Cypriot banks as the sting in the tail of a 10-billion-euro bailout for the near-bankrupt government in Nicosia.

Intended to apply to everyone from pensioners to Russian oligarchs alleged to have billions stashed away in what officials say is a bloated Cypriot banking sector, the "stability levy" immediately raised a flood of concerns among finance experts over a possible bank run in bigger eurozone economies, where fragile public finances are also under scrutiny.

Dutch Finance Minister Jeroen Dijsselbloem, after chairing some 10 hours of talks to strike the deal with counterparts including International Monetary Fund head Christine Lagarde and the European Central Bank's Mario Draghi, said the "upfront, one-off" tax is expected to raise 5.8 billion euros on top of the loans still to be finalised by eurozone parliaments.

The levy will see deposits of more than 100,000 euros in Cypriot banks hit with a 9.9 percent charge when lenders re-open their doors on Tuesday after a scheduled bank holiday on Monday. Under that threshold and the levy drops to 6.75 percent.

Top ECB official Joerg Assmussen said the only way to drive down what was originally requested as a 17-billion-euro rescue was to claw back money from the Cypriot banking sector, which is estimated to hold assets worth five times the country's economic output.

"In order to have burden-sharing, you extend the tax base," Asmussen said. "To residents and also to non-residents."

Lagarde said she would recommend that the IMF board now agree to chip in what one diplomat said could amount to another billion euros ($1.3 billion) in loans.

Lagarde said "the exact amount is not yet specified and will take a little bit of time" to arrive at.

Officials including the EU's economy and euro commissioner Olli Rehn also cited "positive" parallel talks with Russia on possibly easier terms on a 2.5-billion-euros loan it gave to the Cypriot government.

Cyprus Finance Minister Michalis Sarris will reportedly fly to Moscow for talks Monday about extending that loan, due to be repaid in 2016.

Under the deal, the Cyprus government will also have to hike corporate tax to 12.5 percent from 10 percent and sell off state assets so as to help balance the public finances.

"As it is a contribution to the financial stability of Cyprus, it seems 'just' to ask a contribution of all deposit-holders" to the rescue, Dijsselbloem said.

"The challenges we were facing in Cyprus were of an exceptional nature," the Dutchman said, under tough questioning from journalists at a press conference after the meeting in Brussels.

"We did what we had to," said French Finance Minister Pierre Moscovici on exiting the talks.

"It's something that compared to other possible outcomes, is the least onerous," said finance minister Sarris,

This arrangement notably meant his government "avoided salary and pension cuts" for public sector workers, he said.

Cyprus accounts for just 0.2 percent of the combined eurozone economy but officials said it had to be bailed out to safeguard the principle that no eurozone state could be allowed to default and so compromise the credibility and integrity of the single currency.

A "withholding tax" will also be imposed at source on interest earned in Cypriot banks in a further hit .

The talks had dragged on as the Cypriot government fought its ultimately doomed battle to avoid a "bail-in" or haircut, which it argued would trigger a run on its banks and ricochet on through the wider eurozone financial system.

Cyprus President Nikos Anastasiades attended the talks.

The Cyprus price tag is very small compared with two rescues for Greece worth some 380 billion euros ($496 billion), Ireland's 85 billion euros, Portugal's 78 billion and 41 billion for Spanish banks.

Russians are among the biggest investors in Cyprus, and hardline lenders like Germany had pressed for months for a clampdown on banks' alleged involvement in money laundering.

The total annual output of the Cypriot economy is 17 billion euros, and the IMF was concerned that a bailout on that level would take the country's debt burden to unsustainable levels.

Copyright (2013) AFP. All rights reserved.



http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/16/why-todays-cyprus-bailout-could-be-the-start-of-the-next-financial-crisis/

Why today’s Cyprus bailout could be the start of the next financial crisis

Posted by Neil Irwin on March 16, 2013 at 4:18 pm

It is a bad day to have your money deposited in a bank in the Mediterranean island nation of Cyprus. And it may just mean some bad days ahead for the rest of us.

Early Saturday, the nation reached an agreement with international lenders for bailout help. Part of the agreement: Bank depositors with more than 100,000 euros ($131,000) in their accounts will take a 9.9 percent haircut. Even those with less in savings will see their accounts reduced by 6.75 percent. That’s right: Anyone with money in a Cypriot bank will have significantly less money when the banks open for business Tuesday than they did on Friday. Cypriots have reacted with this perfectly rational reaction: lining up at ATM machines to try to get as much money out in the form of cash before the money they have in their accounts is reduced.

What makes this important for people who couldn’t locate Cyprus on a map is this: It is one of the 17 nations using the euro currency, the fact that it’s a lot closer to Beirut than to Paris notwithstanding. European officials have spent the past six years moving heaven and earth to ensure that no depositors with the continent’s banks suffer a loss despite the financial strains the banks have been under.

Most dramatically, the Irish government in the fall of 2008 backstopped its banks, putting its public finances through a wringer. Even as the Greek economy has fallen into depression and Spanish bank losses on real estate have reached dangerous levels, the European Central Bank and the continent’s government have ensured that bank deposits were safe. They have feared that if depositors in any country were forced to take losses, it would spark a destructive cascade of withdrawals across Europe.

So is Cyprus different?

In a lot of ways, it is separate from the rest of the euro zone, and not just geographically. Its population is a mere 1.1 million (the Greek population is 10 times as large). It has an unwieldy banking system with liabilities equal to eight times its economic output, versus 3.5 times for the euro zone as a whole. Many of those deposits are held by wealthy Russians who use Cyprus as a convenient place to park money.

Those are the reasons the IMF has insisted on losses for depositors — those, and the fact that rescuing Cyprus’s finances without the 5.8 billion-euro contribution represented by depositors’ losses would have meant a bailout approximately equivalent to the country’s annual economic output, too much for the fund to stomach.

“The challenges we were facing in Cyprus were of an exceptional nature,” said Jeroen Dijsselbloem, the Dutch finance minister who helped engineer the plan, according to the Financial Times. “Therefore, unique measures were determined to be necessary.”

The European Central Bank will now be on high alert, monitoring activity in Greece, Spain and beyond for evidence that the Cyprus precedent will result in new runs on those nations’ banks. Expect a flood of central bank liquidity into those nations if there is any hint that depositors across Europe seem to be thinking that Cyprus is the new normal and that their seemingly safe bank deposits could be reduced 10 percent without warning.

The best the rest of the world can hope for is that Cyprus’s case is sufficiently unique that it won’t spark panic in Athens and Madrid (or in Lisbon, Dublin and Rome).

For the past six months, the global financial markets have become increasingly complacent, convinced that the euro-zone crisis is, for practical purposes, over. Cyprus is the test of whether that is correct, or whether the complacency was instead misplaced.

In other words, if there is going to be a new wave of crisis in Europe, historians will be able to trace its starting point back to today’s Cyprus bank bailout.


As kind of a follow up, Most all markets opened down this morning, with Asia and Europe ending down. A lot of discussions on the talking head news shows are centering on the Russian money that is deposited in Cyprus and how pissed Putin is. It just makes me wonder, other than runs on the banks in various parts of Europe, what else is going to come from this.

[izzyscout21]

Ive got to be honest, im interested to see how this turns out. I'd be one pissed off dude if i woke up to that mess. This is definitely something to keep current on.

[bacpacker]

Here is another article related to the bailout in Cyprus. There is quite a bit about Russia and their involvement in Cyprus. One point of interest I noted was the part about the British deposits not falling under the new rules.

http://news.sky.com/story/1066004/cyprus-bailout-savings-shift-amid-russia-offer


Cyprus Bailout: Savings Shift Amid Russia Offer
Banks in Cyprus are to remain closed until Thursday as Russia offers alternative loans terms amid an emergency EU bailout deal.
7:16pm UK, Monday 18 March 2013
Video: Growing Anger Over Cyprus Bank Tax

Cyprus has ordered its banks to stay shut until Thursday as the government seeks to alter the terms of a controversial EU bailout that taxes savings.

The uncertainty comes as Russia's finance minister said his country would consider restructuring its loans to Cyprus.

Russian energy giant Gazprom has also reportedly offered financial assistance to Cyprus in exchange for access to the island's gas reserves.

Eurozone countries across the region have seen markets shudder as a result of the weekend bailout offer, which includes a one-off tax on bank deposits, with many losing more than 2% and the FTSE dropping 1.6%.

Officials in southern Cyprus, which does not include the Turkish north of the island, have now delayed the parliamentary vote until Tuesday in order to soften the impact of a levy on smaller savers.
The Budget, Economy Road Lowestoft Sky News will have Budget coverage throughout Wednesday, starting from 9am

Banks stayed closed on Monday due to a long weekend and will remain closed on Tuesday to prevent a run on the banks.

Yiannakis Omirou, the speaker of parliament, said the delay is needed to give the government time to amend the deal agreed late last week.

Authorities had planned a 6.7% tax on deposits under 100,000 euros (£85,000), triggering queues at cash machines as people in Cyprus rushed to withdraw their money on a bank holiday weekend.

But the country's government is thought to now want a 20,000-euro (£17,000) minimum to the levy, with the tax set at 6.7% on the next 80,000 euros (£68,000) and 9.9% above that figure.

In exchange for the levy which would raise 5.8bn euros (£5bn), Cyprus would receive another 4.2bn euros (£3.6bn) in aid to help recapitalise its banks.

Meanwhile, eurozone ministers planned a conference call to discuss the issue, as Germany insisted it was not behind the extraordinary weekend bailout proposal.

But Russian President Vladimir Putin slammed the proposed tax in Cyprus, where some 30,000 of his compatriots live.

"(Mr) Putin said that this decision, in case of its adoption, will be unfair, unprofessional and dangerous," Russian news agencies quoted Kremlin spokesman Dmitry Peskov as saying.
Cypriot President Nicos Anastasiades and his cabinet sit at a meeting at the presidental palace in Nicosia The Cypriot government discussed the bailout deal offer from the EU

Cypriot President Nicos Anastasiades, who was elected just three weeks ago, had earlier said the island must accept a painful compromise or face bankruptcy.

International Monetary Fund (IMF) boss Christine Lagarde added: "The IMF has always said that we would support a solution that is sustainable, that is fully financed, and that appropriately allocates the burden sharing."

Depositors in the eurozone's weaker economies have been unnerved by the levy, with investors fearing it will set a precedent that could reignite market turmoil.

But the European Central Bank (ECB) moved to soothe investor nerves, saying Cyprus is a special case and other countries should not fear contagion from its bailout deal.

ECB governing council member Ewald Nowotnytold Austria's ORF radio: "For other countries, there is absolutely no reason to fear contagion."

He said Cyprus' banking system accounted for an above-average proportion of national output, and that the island nation had a particularly high share of foreign depositors.
Tho logo of the Bank of Cyprus is seen at one of its branches in Athens Savers have queued to withdraw their money from cash machines across Cyprus

The British Government said staff and military personnel in Cyprus will be protected from any levy on their bank deposits.

Foreign Secretary William Hague told Sky News that Britain had been "separated" from contributing towards the bailout, adding that 3,000 Britons in the country would not suffer in the proposed raid on bank savings.

The tax on deposits in Cyprus, which accounts for only 0.2% of the eurozone's economy, is expected to raise up to 6bn euros (£5bn) and affect rich Russians with deposits in Cyprus and domiciled European retirees, as well as Cypriots themselves.

The levy will apply to all deposits held in banks within Cyprus, including an estimated 2bn euros (£1.75bn) of British money, according to the ECB.

It will not affect deposits held in the UK branches of Cypriot banks, such as Bank of Cyprus, whose UK subsidiary is regulated by the Financial Services Authority.

However, Laiki Bank UK said on its website: "Your eligible deposits with Laiki Bank UK are protected up to a total of 100,000 euro by the Cyprus Deposit Protection Scheme and are not protected by the UK Financial Services Compensation Scheme.

"Any deposits you hold above the 100,000-euro limit are not covered."

Cypriot banks lost 4.5bn euros (£3.8bn) - equal to a quarter of the island's gross domestic product - when eurozone leaders decided to write off Greek debt last year.

As part of its bailout deal, corporate tax will rise from 10% to 12.5%, while state assets will be sold off to help balance the public finances. Cuts to government workers' salaries and pensions have already been approved.

[Jimmy24]

Here is another article related to the bailout in Cyprus. There is quite a bit about Russia and their involvement in Cyprus. One point of interest I noted was the part about the British deposits not falling under the new rules.

http://news.sky.com/story/1066004/cyprus-bailout-savings-shift-amid-russia-offer


Cyprus Bailout: Savings Shift Amid Russia Offer
Banks in Cyprus are to remain closed until Thursday as Russia offers alternative loans terms amid an emergency EU bailout deal.
7:16pm UK, Monday 18 March 2013
Video: Growing Anger Over Cyprus Bank Tax

Cyprus has ordered its banks to stay shut until Thursday as the government seeks to alter the terms of a controversial EU bailout that taxes savings.

The uncertainty comes as Russia's finance minister said his country would consider restructuring its loans to Cyprus.

Russian energy giant Gazprom has also reportedly offered financial assistance to Cyprus in exchange for access to the island's gas reserves.Eurozone countries across the region have seen markets shudder as a result of the weekend bailout offer, which includes a one-off tax on bank deposits, with many losing more than 2% and the FTSE dropping 1.6%.

Officials in southern Cyprus, which does not include the Turkish north of the island, have now delayed the parliamentary vote until Tuesday in order to soften the impact of a levy on smaller savers.
The Budget, Economy Road Lowestoft Sky News will have Budget coverage throughout Wednesday, starting from 9am

Banks stayed closed on Monday due to a long weekend and will remain closed on Tuesday to prevent a run on the banks.

Yiannakis Omirou, the speaker of parliament, said the delay is needed to give the government time to amend the deal agreed late last week.

Authorities had planned a 6.7% tax on deposits under 100,000 euros (£85,000), triggering queues at cash machines as people in Cyprus rushed to withdraw their money on a bank holiday weekend.

But the country's government is thought to now want a 20,000-euro (£17,000) minimum to the levy, with the tax set at 6.7% on the next 80,000 euros (£68,000) and 9.9% above that figure.

In exchange for the levy which would raise 5.8bn euros (£5bn), Cyprus would receive another 4.2bn euros (£3.6bn) in aid to help recapitalise its banks.

Meanwhile, eurozone ministers planned a conference call to discuss the issue, as Germany insisted it was not behind the extraordinary weekend bailout proposal.

But Russian President Vladimir Putin slammed the proposed tax in Cyprus, where some 30,000 of his compatriots live.

"(Mr) Putin said that this decision, in case of its adoption, will be unfair, unprofessional and dangerous," Russian news agencies quoted Kremlin spokesman Dmitry Peskov as saying.
Cypriot President Nicos Anastasiades and his cabinet sit at a meeting at the presidental palace in Nicosia The Cypriot government discussed the bailout deal offer from the EU

Cypriot President Nicos Anastasiades, who was elected just three weeks ago, had earlier said the island must accept a painful compromise or face bankruptcy.

International Monetary Fund (IMF) boss Christine Lagarde added: "The IMF has always said that we would support a solution that is sustainable, that is fully financed, and that appropriately allocates the burden sharing."

Depositors in the eurozone's weaker economies have been unnerved by the levy, with investors fearing it will set a precedent that could reignite market turmoil.

But the European Central Bank (ECB) moved to soothe investor nerves, saying Cyprus is a special case and other countries should not fear contagion from its bailout deal.

ECB governing council member Ewald Nowotnytold Austria's ORF radio: "For other countries, there is absolutely no reason to fear contagion."

He said Cyprus' banking system accounted for an above-average proportion of national output, and that the island nation had a particularly high share of foreign depositors.
Tho logo of the Bank of Cyprus is seen at one of its branches in Athens Savers have queued to withdraw their money from cash machines across Cyprus

The British Government said staff and military personnel in Cyprus will be protected from any levy on their bank deposits.

Foreign Secretary William Hague told Sky News that Britain had been "separated" from contributing towards the bailout, adding that 3,000 Britons in the country would not suffer in the proposed raid on bank savings.

The tax on deposits in Cyprus, which accounts for only 0.2% of the eurozone's economy, is expected to raise up to 6bn euros (£5bn) and affect rich Russians with deposits in Cyprus and domiciled European retirees, as well as Cypriots themselves.

The levy will apply to all deposits held in banks within Cyprus, including an estimated 2bn euros (£1.75bn) of British money, according to the ECB.

It will not affect deposits held in the UK branches of Cypriot banks, such as Bank of Cyprus, whose UK subsidiary is regulated by the Financial Services Authority.

However, Laiki Bank UK said on its website: "Your eligible deposits with Laiki Bank UK are protected up to a total of 100,000 euro by the Cyprus Deposit Protection Scheme and are not protected by the UK Financial Services Compensation Scheme.

"Any deposits you hold above the 100,000-euro limit are not covered."

Cypriot banks lost 4.5bn euros (£3.8bn) - equal to a quarter of the island's gross domestic product - when eurozone leaders decided to write off Greek debt last year.

As part of its bailout deal, corporate tax will rise from 10% to 12.5%, while state assets will be sold off to help balance the public finances. Cuts to government workers' salaries and pensions have already been approved.

I understand the gas reserves are in the 60 TRILLION cubic feet range....and considering Russia runs the tables in Europe on gas anyway.......we shall see...

Jimmy

[bacpacker]

I can see that taking place in the not too distant future.

[prepguide]

It has been announced that Cyprus banks will be closed until Thursday while a decision is reached regarding the bailout. Bank holiday anyone?

[NWPilgrim]

The pitiful thing is, no matter how they end up stealing the private funds, the banks will keep on making the bad loans, buying the debt of a govt that will keep overspending. Six months from now they will be back for an even larger confiscation.

Homeowners, hide the livestock and womenfolk before it is too late.

[ladyhk13]

The vote from their Parlimont today decided not to do it.

[izzyscout21]

The vote from their Parlimont today decided not to do it.

that was probably a smart move on their part.

[greg48]

good read bacpacker! wonder how many in the US are moving funds as we speak?

[bacpacker]

Greg, my bet is several million in both Europe and the Americas already have or are making plans to.

Here is a follow up after last nights vote by the Cypriot government voting down the bailout/levy. The part I found very interesting was the German chancellor warning Cyprus not to enter talks with the Russians. I had been under the impression that the two had been working together on various issues over the past few years. Anyway, I guess we will see where all this goes. The banks in Cyprus are suppose to open up tomorrow, I just wonder how bad the rush on them will be? Here is the link to the story.

http://www.ifaonline.co.uk/ifaonline/news/2255939/cyprus-turns-to-russia-after-parliament-rejects-levy-on-bank-savings


Cyprus turns to Russia after parliament rejects levy on bank savings
Author: IFAonline
IFAonline | 20 Mar 2013 | 08:20

Cyprus turned to Russia for help on Tuesday night after the country's parliament overwhelmingly rejected a tax on the deposits of bank savers.

With protesters celebrating in the streets, the rejection of a draconian levy left a planned £8.5bn eurozone bail-out to save the Mediterranean island in chaos, according to the Telegraph.

The country's finance minister defied explicit warnings from Angela Merkel, the German chancellor, and left Cyprus for urgent talks in Russia.

Michael Sarris flew to Moscow to plead for aid, despite Merkel warning Cyprus not to enter into negotiations with Russia, raising the spectre of eurozone disintegration.

"The chancellor once again emphasised that the negotiations are to be conducted only with the troika (the European Union, European Central Bank and the International Monetary Fund)," said her spokesman.

Not a single Cypriot MP voted in favour of a eurozone rescue package that had been made conditional by Germany on the Cypriot government finding £5bn to pay off its debts by raiding bank deposits, including the savings of up to 60,000 Britons.

Under the original eurozone deal at the weekend, Cyprus agreed to impose a levy of 6.75% on bank accounts up to €100,000 (£85,000) and 9.9% for larger deposits.

Despite a compromise proposal not to tax any bank deposit less than €20,000 (£17,000), the country's 36 MPs rejected a deposit tax that has rattled financial markets and threatened the island's future as an offshore banking haven for Russian investors, with 19 MPs abstaining from the vote.

"There can only be one answer: no to blackmail," Yiannakis Omirou, the speaker of the Cypriot parliament said.

"This decision is no more than a raid on bank funds. Our demand must be that this deal must be renegotiated. If we pass this tax there will be no foreign investor who will keep their money here."

Read more: http://www.ifaonline.co.uk/ifaonline/news/2255939/cyprus-turns-to-russia-after-parliament-rejects-levy-on-bank-savings#ixzz2O7F8Zqmy

[ladyhk13]

I can kind of see why they would run to Russia in such a panic considering Russia moves so much money (call it laundering or whatever you want) through their banks. Russia would have to be involved at some level or at least assured that their money won't be taxed I would think.

[bacpacker]

This is coming from my phone so I will only post the link. Apparently Russia has turned down the Cyprus government for any loans. According to this report the Russkies may be trying to bring down the Euro. At the least I feel like it bears keeping an eye on the situation.

http://www.reuters.com/article/2013/03/22/us-cyprus-parliament-idUSBRE92GO3120130322

I hope this link works. If not I will fix it tonight.

[Richarddbeck]

yet I think the damage is done. Who is going to trust the Cyprus banking system now? They just told the entire world they planed to steel their depositors money. lol It is my personal opinion that they have sealed their inevitable fate now. I believe the Cyprus banks will probaly fail anyways. Or they will print Euros which is the exact same thing as steeling the depositors money.... Money printing just steels the value of the asset instead of the physical asset.

[bacpacker]

I don't see anything good coming of it for the folks who live there. I do wonder after all the dust settles, who will end up owning or at least controlling the natural gas reserves??? I really thought the Russians would jump on that. Perhaps just bidding their time.

[bacpacker]

Here is the latest story I've saw today about Cyprus. There is still no telling where this will end up at.

http://www.reuters.com/article/2013/03/23/us-cyprus-parliament-idUSBRE92G03I20130323


(Reuters) - Cyprus conceded on Saturday to a one-off levy on deposits over 100,000 euros in a dramatic U-turn as it raced to satisfy European partners and seal an 11th-hour bailout deal to avert financial collapse.

The island's finance minister, Michael Sarris, reported "significant progress" in talks with international lenders, with the clock running down to and end-Monday deadline for Cyprus to clinch a bailout deal with the EU or lose emergency funding for its stricken banks and risk tumbling out of the euro zone.

His counterparts in Europe's 17-nation currency union scheduled talks in Brussels for Sunday evening to see if the numbers add up, and the EU's Economic Affairs Commissioner Olli Rehn said progress was being made towards a solution.

As Cypriot party leaders met, a senior Cypriot official told Reuters that Nicosia had agreed with EU/IMF lenders on a 20 percent levy over and above 100,000 euros at No. 1 lender Bank of Cyprus, and four percent on deposits over the same level at others.

Troika officials could not immediately be reached for comment.

Cypriot President Nicos Anastasiades tweeted: "We are undertaking great efforts. I hope we have a solution soon."

The conservative leader, barely a month in the job and wrestling with Cyprus's worst crisis since a 1974 invasion by Turkish forces split the island in two, was due to lead a delegation to Brussels, also on Sunday, to meet heads of the EU, the European Central Bank and International Monetary Fund, in a sign a deal might be near.

"Hopefully by tomorrow in Brussels we will have the agreement of our partners," Averof Neophytou, deputy leader of the ruling Democratic Rally party, told reporters.

Government officials held talks through the day at the finance ministry with Cyprus's 'troika' of lenders - the EU, ECB and IMF. Angry demonstrators outside chanted "resign, resign!"

Its outsized banking sector crippled by exposure to crisis-hit Greece, Cyprus needs to raise 5.8 billion euros in exchange for a 10 billion euro EU lifeline to keep the country's economy afloat.

But in a stunning vote on Tuesday, Cyprus's 56-seat parliament rejected a levy on depositors, big and small, as "bank robbery", and Sarris spent three fruitless days in Moscow trying to win help from Russia, whose citizens have billions of euros at stake in Cypriot banks.

Rebuffed by the Kremlin, Sarris said on Saturday talks with the troika were centered on a possibly levy of around 25 percent on savings over and above 100,000 euros at failing Bank of Cyprus.

In a sign of how fluid the situation remains, however, a senior ruling party lawmaker said other options were on the table, including a "voluntary haircut" in exchange for equity that would not require parliamentary approval.

The EU's Rehn said the bloc recognized the progress made by the Cypriot government, and warned of tough times ahead.

"Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available," he said in a statement. "Today, there are only hard choices left."

It was far from certain that a majority of lawmakers would back a revised levy, or whether the government might bypass the assembly.

Ordinary Cypriots were outraged by the original proposal, and have been besieging cash machines ever since bank doors were closed last weekend on the orders of the government to avert a massive flight of capital.

RESISTANCE

Racing to placate its European partners, Cypriot lawmakers voted in late-night session on Friday to nationalize state pensions and split failing lenders into good and bad banks - a measure likely to be applied to No.2 lender Cyprus Popular Bank, also known as Laiki.

They also gave the government powers to impose capital controls, anticipating a run on banks when they reopen on Tuesday.

A plan to nationalize semi-state pension funds has met with resistance, particularly from Germany which made clear that tapping pensions could be even more painful for ordinary Cypriots than a deposit levy.

The senior official who told Reuters of the levy agreement said the pension funds would not be part of the package to seal the bailout.

The bank restructuring has also angered Cypriots. On Saturday, around 1,500 bank workers marched on the presidency, holding banners that read, "No to the bankruptcy of Cyprus" and "Hands of workers' welfare funds".

OFFSHORE HAVEN

The pace of the unfolding drama has stunned Cypriots, who in February elected Anastasiades on a mandate to secure a bailout and save banks whose capital was wiped out by investments in Greece, the epicenter of the euro zone debt crisis.

Then news of the levy on bank deposits broke, an unprecedented step in Europe's handling of a debt crisis that has spread from Greece, to Ireland, Portugal, Spain and Italy.

Cypriots leaders had initially tried to spread the pain between big holdings and smaller depositors, fearing the damage it would inflict on the country as an offshore financial haven for wealthy foreigners, many of them Russians and Britons.

The tottering banks hold 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.

But panicked by the visceral reaction of ordinary Cypriots, support from lawmakers fell away and they rejected the levy as "bank robbery".

Under the latest proposal, Russians are unlikely to be hit hardest by the mooted percent tax, given that just five percent of deposits at Bank of Cyprus come from Russia, according to the bank's latest results statement.

The board of the Central Bank of Cyprus was likely to hold its first meeting in almost a fortnight on Sunday, a source with direct knowledge of the meeting told Reuters, in another sign a deal may be close.

Asked about the new plan for a possible 25 percent levy, Finnish Prime Minister Jyrki Katainen, whose country is allied with Germany in taking a hard line on Europe's debt-laden southern flank, replied in English:

"If it was like this, I think it might be quite suitable because it means that the highest deposits will be taxed."

[Foulball]

Looks like Russian investors are taking the biggest hit:

http://www.voanews.com/content/cyprus-bailout-deal-draws-wide-interpretations/1628102.html
To secure the $13 billion bailout from their European neighbors, the central bank and International Monetary Fund, Cyprus had to raise $7.5 billion. As part of the deal, it agreed to close the island's second largest bank, Laiki, and enforce heavy losses on wealthy bank depositors. The island last week rejected an earlier plan sanctioned by the lenders that also would have taxed the insured accounts of small investors.

Wealthy Russian investors have parked vast sums, some of it ill-gotten, in Cypriot banks. But Russian Prime Minister Dmitry Medvedev said Monday that Cyprus, by agreeing to impose a tax of about 30 percent on big, uninsured accounts with more than $130,000 to help solve its debt crisis, is "continuing, I think, to plunder the loot" of his countrymen.