Cypriot Austerity Measures

[Freakbro]

So the deal is to wind up the laiki bank, merging the good part with the bank of Cyprus.

The amount of savers money to be taken is yet to be agreed upon, but 40% is being touted at the minute, and that is from deposits over 100,000 euro in both the laiki bank and bank of Cyprus only, not the entire sector.

One crucial part of the deal from the IMF is that the deal does not require a Parliamentary vote...of course, we don't want pesky democracy getting in the way

Also, there is a current capital restriction on the amount of Cypriot Euros you can take out of the country to spend in the wider euro area, effectively downgrading the Cypriot euro.

I think with the protection of savers under 100,000 euro will mean most people won't care anymore about the issue of the levy now and will allow this to go through. And not having to vote on it helps too

 

[godinman]

Wow, so they can't get it through democratically so decided to...put it through anyway? Outside organisations have stupid amounts of power of supposedly free nations.

 

[Dolph]

Wow, so they can't get it through democratically so decided to...put it through anyway? Outside organisations have stupid amounts of power of supposedly free nations.

Well, only when the free nation needs to borrow their money.

 

[Freakbro]

Well, only when the free nation needs to borrow their money.

Borrow implies they will be giving it back

But I suppose the banks are only in this mess because they 'borrowed' other peoples money and can't give it back either.

I suppose it asks the wider question, banks are private companies, so shouldn't a depositor take risk when putting their money into it?

In reality this deal is not much different to what we have over here with the FSCS - where £85,000 is protected by the state, but if a bank went down everyone with more than that in one bank would lose it.

 

[Ilikeitblackplease]

they are better off closing the current banks and re opening new ones. It is all about saving the Germany economy and banks by imposing harsh term on other nations.

 

[Super-Spy]

It looks like Cypruse has now come to a deal.

I blame this whole mess on two factors:

- Cyprus should never have entered the Euro. Prior to the Euro, they had one of the strongest currencies in the world. 1 British Pound would only get you about 80 cyprus cents, They wanted to get into the Euro because they wanted to be part of something bigger.....looks like they got their wish, they are now part of a bigger mess

- The idiotici Cypriot bankers. The country's finances were in good shape but the banks went over the top. With large deposits from Russian et al, they were much larger than the GDP of the country and in their stupidity, invested most of it in Greece's banks, even after they went under because they bought into the attractive loan rates and not recognising that they may never pay back those loans. An interest rate of 20% is useless if you will never see your money back, it may as well be 200% !

 

[aardvark]

by classing savers as 'lenders' to the bank and therefore liable to its debts a major precedent has been set. I don't think the seriousness of what has happened here can be understated.

 

[Judgeneo]

Rumours abounding that the Kremlin will respond by freezing the assets of German companies in Russia.

 

[scorza]

Rumours abounding that the Kremlin will respond by freezing the assets of German companies in Russia.

Absolute tosh lol.

 

[Castiel]

Well, only when the free nation needs to borrow their money.

Based on too broadly applied economic policies that only suit the largest economies and power brokers in the Eurozone to the detriment of smaller economies in the first place.

 

[Nate--IRL--]

Based on too broadly applied economic policies that only suit the largest economies and power brokers in the Eurozone to the detriment of smaller economies in the first place.

This caused the Cypriot banks to invest heavily in Greek Bonds?

Nate

 

[Judgeneo]

Absolute tosh lol.

Probably, but I would be surprised if they didn't react in some way.
I was speaking to a Russian man on Saturday and asked his opinion, he said simply "I'm going to loose a lot of money"
He has told all of his customers to stop paying him and just mark it as money owed in an effort to minimise the loss.

Alternative viewpoint:
http://blogs.ft.com/beyond-brics/20...ut-but-should-back-a-strong-eu/#axzz2OXtY91Kn

 

[Castiel]

This caused the Cypriot banks to invest heavily in Greek Bonds?

Nate

It encouraged expansion of banking systems, and Greece was even more affected by disparate economies following a singe economic policy thus their collapse and the collapse of Greek bonds.

Between poorly thought out economic policy that only suited the wealthier nations in the Eurozone and the banking sectors incompetences, the depositors in Cyprus (and no doubt in other nations as soon as the precedent is set) are being asked to foot the bill.

If this was Germany or France, do you think this would be a requirement of a bailout? I don't. The Euro was supposed to be a shared single currency, a shared single currency implies a shared responsibility, it seems that the responsibility only goes one way however.

 

[Freakbro]

The Euro was supposed to be a shared single currency, a shared single currency implies a shared responsibility, it seems that the responsibility only goes one way however.

And if the Capital Controls go ahead then it could relegate the Cypriot Euro into the equivalent of a domestic currency

Once full capital controls are imposed, a Euro in Cyprus will no longer be the same as a Euro anywhere else in the Euro area. It cannot leave the island. The Cyprus Euro will in effect be a new domestic currency. The imposition of capital controls in Cyprus is therefore the end of the single currency in its present form.

Yes, the Eurogroup will claim that it is "business as usual" in the Euro area. Draghi will continue to claim that the Euro is "irreversible". Eurostat will continue to produce statistics for E17 and E27 including Cyprus. But the reality will be that the Euro will be broken in two. There will be the Cyprus Euro, and the "mainland" Euro (if we can call it that).

And for general info, the concession to only levy on savers in excess of 100,000 is due to European Law, the same as our £85,000 FSCS protection, so it would have been illegal to levy on savers lower than that.

 

[Nate--IRL--]

And for general info, the concession to only levy on savers in excess of 100,000 is due to European Law, the same as our £85,000 FSCS protection, so it would have been illegal to levy on savers lower than that.

Note this was done per member state of the Euro, it was European agreement that each member implemented in their national law, not a European law IIRC. The Cypriots could vote in parliament to change this to make it perfectly legal.

Nate

 

[Spit]

What happens if someone has 99,000 Euros in the bank and another has 101,000 Euros?

 

[Nate--IRL--]

What happens if someone has 99,000 Euros in the bank and another has 101,000 Euros?

Supposedly the guy with 101,000 will lose a portion of the 1,000 over the 100,000

Nate

 

[Spit]

Amazing all this. Someone with a million euros will have 730,000 after this event.

 

[grumpysculler]

And for general info, the concession to only levy on savers in excess of 100,000 is due to European Law, the same as our £85,000 FSCS protection, so it would have been illegal to levy on savers lower than that.

It's the same level being used, but it would not have been illegal to tax savers below the 100k.

The protection exists against bank defaults. The bank isn't defaulting - a new tax is being levied by the govt - so the protection does not kick in. The fact that the low level savers would receive 100% of their money back if the bank went bust instead of the initially proposed 93% they would get by 'saving' the bank is neither here nor there in the eyes of the politicians.

 

[aardvark]

And for general info, the concession to only levy on savers in excess of 100,000 is due to European Law, the same as our £85,000 FSCS protection, so it would have been illegal to levy on savers lower than that.

the two are not connected.