Bank runs, bank holiday & 10pct bailout tax on deposits in Cyprus

swissaustrian

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The EU finance ministers decided yesterday that all depositors at Cyprian banks will have to pay for the bailout of the government, regardless of whether their bank is in trouble or not. Collectivism at it's best. It's also gonna hit local and smaller depositors more heavily, because smart money (Russian money launderers and hedge funds) has left the country long ago anyway. This is a primary example of the immorality of bailouts. There are bank runs happening all over Cyprus today, but the bailout tax has already been substracted from the account balances. I also haven't read a word about the participation of government and/or bank bondholders in the bailouts. It seems they haven't been asked to give something which makes perfect sense, because the bondholders are mainly foreign banks and not domestic depositors...

I'm predicting that this is gonna cause capital flights from other weak Eurozone countries' banks to "safe" countries like Germany, the Netherlands or Finnland, thereby increasing the Target2 ( http://en.wikipedia.org/wiki/TARGET2#Relation_to_European_sovereign_debt_crisis_and_criticism ) imbalances between the Eurozone countries.


Here's the news by AFP:
Cyprus depositors hammered in radical EU-IMF bailout

By Roderick Thomson (AFP) – 6 hours ago

BRUSSELS — 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.google.com/hostednews/af...docId=CNG.4339e45bc5c512fa24c45ef2921cd51a.21
 
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Unobtanium

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This gives even more credence to the discussions that not only could this happen in other countries including the US, but that one day, sooner or later, there may also come a mandatory 401k retirement fund "tax" to help bail out the US Govy's debts.
 

pmbug

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When money is electronic ones and zeros stored in a bank's computers, it's very easy to steal.
 

ancona

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So this is how it begins. Wait and see what the peripheral effects will be. Do you think Greek and Spanish banks were in trouble before this iddotic plan? Just wait until this news flash sinks in to depositors heads. When they start making folks who had absolutely nothing to do with a banks troubles pay through the nose for bailouts, don't cry a river when they flee those countries perceived as weak.

What a monumentally stupid thing to do. I sincerely believe this will be the straw that broke the camels back. The Technocrats just signed their own death warrants.
 
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swissaustrian

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Financial commentators can't believe it:
Authored by Lars Seier Christensen, CEO Saxo Bank; originally posted at his blog at www.TradingFloor.com ,

It is difficult to describe the weekend bailout package to Cyprus in any other way. The confiscation of 6.75 percent of small depositors' money and 9.9 percent of big depositors' funds is without precedence that I can think of in a supposedly civilised and democratic society. But maybe the European Union (EU) is no longer a civilised democracy?

I heard rumours about this when I visited Limassol last week, but dismissed them as completely outlandish. And yet, here we are. The consequences are unpredictable, but we are clearly looking at a significant paradigm shift.

This is a breach of fundamental property rights, dictated to a small country by foreign powers and it must make every bank depositor in Europe shiver.
Although the representatives at the bailout press conference tried to present this as a one-off, they were not willing to rule out similar measures elsewhere - not that it would have mattered much as the trust is gone anyway. It is now difficult to expect any kind of limitation to what measures the Troika and EU might take when the crisis really starts to bite.

If you can do this once, you can do it again. if you can confiscate 10 percent of a bank customer's money, you can confiscate 25, 50 or even 100 percent. I now believe we will see worse as the panic increases, with politicians desperately trying to keep the EUR alive.

Depositors in other prospective bailout countries must be running scared
- is it safe to keep money in an Italian, Spanish or Greek bank any more? I dont know, must be the answer. Is it prudent to take the risk? You decide. I fear this will lead to massive capital outflows from weak Eurozone countries, just about the last thing they need right now. Even from the EU as a whole, I suspect, as the banking union is in place in most countries already.

Another open question is what will happen to the huge number of brokerages based in Cyprus? There is about 100 or more FX and other brokers currently operating under the relatively light Cypriot regulation. How will this impact the trustworthiness of these many small institutions? What IS the exact impact on the client deposits they might be holding in Cyprus? Will anyone dare to do business with them going forward?

This is a major, MAJOR game changer and the fallout will be with us for a long time to come. I believe it could be the beginning of the end for the Eurozone as this is an unbelievable blow to the already challenged trust that might be left among investors. Talk about a possible own goal.

Market reaction? it must be very good for gold - and for safe-haven countries
like Switzerland, Singapore and economically more healthy non-Euro countries in, for example, Scandinavia. I would think the EUR and associated markets will be undermined by increasing lack of confidence when the full implications become clear for investors.

This is full-blown socialism and I still cannot believe this really happened.


Be careful out there...
 

mmerlinn

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This is just one more step that Warlord Dragon (Mario Draghi) is taking to consolidate the power of the ECB worldwide. Sacrifice Cyprus to force other countries to toe the ECBs line. Once the Warlord has Europe toeing the line, watch for him to extend his reach across the Atlantic. Unfortunately, our spend-fake-money policies are playing right into his hands.

It may signal the end of the Euro, but if the Euro goes, the ONLY thing I see that could replace it would be the return of the German Mark (probably backed by gold), as no other country can possibly fill the gap.
 

pmbug

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... A few hours ago, this meeting was delayed until 4 pm local on Monday "after signs lawmakers could block the surprise move.... If [parliament fails to ratify the bail-in], President Nicos Anastasiades has warned, Cyprus's two largest banks will collapse." ...
Yeah, we heard that same story here in the USA when legislators were pressured to pass TARP.

In a capitalist market, bad actors get punished for risks gone bad and new actors fill the void when they implode.

Of course, this isn't about the bad actors - the "two banks" - this is about the foreign banks and contagion from the debt dominoes.

Global finance is a house of cards.

 

pmbug

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Jim Sinclair said:
... The wire reports on the Cyprus situation are working overtime to try to make the case that 80% of the deposits belong to the people of Cyprus, and only 20% of the deposits belong to the Russians. That’s absolutely false. After 1985, when the ‘Robber Barrons’ of Russia took over the general economics of Russia, that was the transformation from the KGB to private business. The primary place for exported Russian funds was Cyprus.

Now, there is one leader in the world that would be very dangerous to challenge and that is Putin of Russia....

“What’s just happened is the IMF has backed up, lauded, supported, and publicized, as if it were a victory, the taking of 10% of what really turns out to be 80% of Russian ‘black money.’ Russian ‘black money’ is KGB money, now in business. The leader of Russia (Putin) was a former KGB official. Whose money do you think they have taken? This is the biggest mistake the IMF could possibly have ever made.
...
More: http://kingworldnews.com/kingworldn..._Most_Important_Events_In_History_&_Gold.html

Are they going to accelerate their transition into gold?
 

ancona

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I find the discussion on the web very very telling today. People around the world are furious and demanding that Cuprus tell Brussels to take a flying fuck at a rolling donut. While a bailout is still the stealing of the "peoples" money, this is simple thuggery and outright theft. It is not even veiled or disguised; it's pure unadulterated theft. These arrogant fucktards actually think thy can get away with stealing the honestly earned money of Joe Six-Pack to pay the banksters their blood money. If this thing goes through as advertised, Europe will come down in a giant smoking ball of fuck, and could ultimately take out the entire financial system. Tonights open in Asia will be most telling indeed.

The arrogance here is absolutely breathtaking.
 

pmbug

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Yeah, but I think we all know Strauss-Kahn was set up with that "sex scandal". Anyone think Lagarde is gonna rock the boat when the puppet masters tell her to jump after that "in your face" exercise?
 

ancona

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This weak excuse to blame all this on the Russians is beyond stupid. When the people of Europe realize that the Euro experiment had nothing to do with unity, and everything to do with enslavement to the banks, the revolt will be unstoppable.
 

mmerlinn

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When the people of Europe realize that the Euro experiment had nothing to do with unity, and everything to do with enslavement to the banks, the revolt will be unstoppable.
The people of Europe basically have no say-so in the matter. Any revolt will be quashed by those in power.

This is a power play amongst those in power to force economic, and eventually political, integration of Europe. Cyprus is just the "example" to show the others what will happen to them if they don't surrender their economies and taxing authority to the beast called the ECB.

Cyprus was chosen because it is so small that no matter what the Cypriots do, it will not economically affect Europe as a whole. Basically the same as your school yard bully going after the weakest to show others what they could be subject to. And, of course, the rest are so cowardly that they fall for the scam.
 

swissaustrian

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Now they're discussing adjustments to the current plans, ie even higher tax rates than 10% for the larger deposits and lower rates for small ones in the name of "justice". This is just going to increase the panic amoung foreign depositors in other peripheral countries, thereby causing even more capital flight.

Politicians are such giant idiots.

---

Pms are probably going to open lower in 5 minutes due to a massive 1+% surge in the DXY. Don't worry about that too much :wave:
 
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swissaustrian

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I was wrong gold is up even challenging 1600, so is silver

EDIT: 1603 and counting. Markets are finally making sense here. Let's see if we hold these gains.
 
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