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.
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.
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.
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.
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.
They where saying the banks are not going to open until they know they will not collapse. who knows when that will happen.
Makes ya wonder why granny kept her cash in a mason jar huh?
Common sense is so rare these days, it should be re-classified as a super power.
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/2013-0...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/cypru...ut-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/...ancial-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.
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.
WARNING: This post may contain material offensive to those who lack wit, humor, common sense and/or supporting factual or anecdotal evidence. All statements and assertions contained herein may be subject to but not limited to: irony, metaphor, allusion and dripping sarcasm.
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/cy...d-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...Originally Posted by bacpacker
Jimmy
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