Cypriots Stunned by Forced Savings Cuts

[BadJuju]

Re: Cypriot parlament rejects "bailout"

I really dislike Alex Jones.

[don]

Re: Cypriot parlament rejects "bailout"

Cool! Sounds like a Bohemian Grove naked dance party!

https://www.youtube.com/watch?featur...&v=FVtEvplXMLs






See what you miss out on by being home in bed at 11:00?

Every trip to the Russian River we passed the Bohemian Grove.

Near but never invited . . .

[wayiwalk]

Re: Cypriot parlament rejects "bailout"

Anecdotal information from a good friend and former coworker who was a refugee from Cyprus who arrived here in the late 1970s. (Spelling errors are all his):

"The situation in Cyprus will not impact me because I never had any money to hide there like the billionaires from Russia or other European Countries. Overall, the situation is very bad and the moral is worst than in 1974 after the Turkish invention. In 1974, people were concerned with the everyday survival and new that once the war was over, they could rebuild. Now, is a total chaos. People are not sure what the future will bring.
As far as the “potential bank-theft”, I would not call it that yet. The biggest deficit is due to trying to help Greece. In 1974, after the Turkish invasion, Greece supported Cyprus, and gave significant amounts to cover the value of new currency that they had to print. The new currency was to replace the one left in banks, business and homes on north part of the Island and the Turks were cashing in Europe. When Greece was in trouble, Cyprus tried to pay back the 1974 support by buying their bonds. Now that their bonds are worth very close to nothing, Cyprus is short over 10-15 billion Euros.

The EU is trying to punish them because for many years (since mid 80s), the Cypriot government allowed the “laundry” of dirty money for primarily Russians and some other Europeans where their counties have high taxes. Cyprus was allowing anyone to came and in a deposit any amount without questions.

The EU original plan (about 2 months ago) was to take away from all accounts any amount over 100,000 Euros to cover the cost of this bail-out plan. They assumed that they will be taking away all the billions from the accounts that belong to non Cypriots. Immediately, all the people with the large accounts took their money somewhere else. Someone that I know and works in a bank, said that their branch had about 0.5 billion Euros moved in one week. Since then, the plan changed and now they will be taxing at different levels all bank accounts. Less than 100,000 Euros is 6.5% and over 100,000 is about 10%. Still lot of money!!!

[c1ue]

Re: Cypriot parlament rejects "bailout"

The subtext of what is happening is not known yet, and won't be for some time.

Cyprus had borrowed $5 billion from Russia in 2011. Besides restructuring this loan (which is in discussion in the Russian government), there is also Putin's public commentary on 're-offshorization'. Note that the restructuring proposals floated thus far include Russia taking a big stake in a large Cypriot bank, a kind of denationalization.

Equally, the Cyprus deposit tax is being pushed by the EU which has wanted an even higher tax rate - with the not-unwanted idea that a significant amount of the tax collected will be from offshore Russian money.

It will be some time before it becomes clear which - or which combination - of these issues are presiding over this episode:

1) ECB flexing its muscles in a move to find yet another way to save the banksters
2) Cyprus government making moves to get better terms for its $5B loan
3) Russia shedding crocodile tears over offshored money getting taxation without representation

[charliebrown]

Re: Cypriot parlament rejects "bailout"

If no bail out, and the banks collapse and normal bankruptcy rules apply,

i.e.
shares holders completly wiped out.
bond holders next,
then depositors.

Is there enough bond holder capital to make the bank solvent if it is whole?
If not how much will the depositors lose if no bail out?
Will they lose more or less than the 6-10% now in the proposal?

However ...

Even if it is decided that the hair cut is better than collapse,
Is this the last hair cut??
Is the banking system now doomed no matter what?
What would you do?

I have most of my money in the U.S. banking system. If the same thing happened here, I would be electronically moving 33% out of the system on Thursday
if that is when the banks reopen. Then I will think ... Then next thing question is, "ok its now out of the system" what is it in FRN's, t-bills?
PM's? ???? The people of Cypress face tough choices, i'm sure they do not have the t-bill option as short debt of cypress could plunge in value.

Other questions I have what about institutional accounts? Think the municipalities that have bank accounts, schools? Will they be spared? Can these
places make payroll with 10% of the their assets gone? What about pension funds, insurance companies and money markets that hold CD's of the banks are these funds busted too?

[GRG55]

Re: Cypriots Stunned ..ngs Cuts

I am not so sure. This will be seen as a small country that had its savings accounts taxed because it was being used as a tax haven for wealthy Russians etc.

No one will believe their governments will do that to them.

Really? How many non-Cypriots will see accounts holding less than 100k as wealthy Russian tax-haven funds?

The Germans screwed this one up. They think that everyone else thinks the way they think. Institutionalized national arrogance.

From Bloomberg:

"...“Cyprus has rebuffed the outstretched hand” of its partners, Hans Michelbach, a German lawmaker from Merkel’s Christian Democratic bloc and its ranking member on parliament’s finance committee, said in an e-mailed statement. The vote is “an act of collective unreason” and “the people of Cyprus must now pay a high price.”..."

[lomaxzoltor]

Re: Cypriots Stunned ..ngs Cuts

This is probably one of largest bank heists I've seen in my lifetime. Sure, you can compare this to MF Global, but at least the people who lost money there were taking some sort of risk (if im not mistaken). These are savers who thought wrongly that they were taking zero risk by placing their cash into a simple bank account

MF Global was nearly as bad, but not quite so given that the general public doesn't deal with futures and options. In the case of MF Global, most of the people who suffered the losses were ranchers who had futures on the cattle they were raising. These weren't like naked shorts or puts, their purpose is to protect the investment in their livestock. Their only risk was on the difference in price between the futures contract and the cattle at the time of sale. Given that a little drought or expensive feed could easily wipe out an entire season, the futures contract reduces risk, not increases it. Most of these people had their entire season's contracts tied up with MF Global!

Anyhow, the fact that the average person doesn't care or even vaguely understand what happened with MF Global, that Jon Corzine doesn't have a cell next to Bernie Madoff, and the fact that it should've completely destroyed trust in brokerages that live behind this asinine concept of a Chinese firewall segregating customer funds from the banks, just helps to illustrate PoZ's point above. There won't be any banks runs in Europe or elsewhere. Sure Cyprus will be hit, but who cares - I don't know a single person (who I talk face to face with) who has registered the importance of a government or institution even proposing the concept of confiscating bank deposits.

[astonas]

Re: Cypriots Stunned ..ngs Cuts

Really? How many non-Cypriots will see accounts holding less than 100k as wealthy Russian tax-haven funds?

The Germans screwed this one up. They think that everyone else thinks the way they think. Institutionalized national arrogance.

From Bloomberg:

"...“Cyprus has rebuffed the outstretched hand” of its partners, Hans Michelbach, a German lawmaker from Merkel’s Christian Democratic bloc and its ranking member on parliament’s finance committee, said in an e-mailed statement. The vote is “an act of collective unreason” and “the people of Cyprus must now pay a high price.”..."

I don't think it was the Germans that screwed this one up, mostly because the idea to tax accounts less than 100k did not come from Germany at all. The German delegation only wanted a tax on accounts greater than 100k. It was the Cypriot delegation that was too cowardly to impose a tax greater than 10% on their Russian masters, and so opted instead to share the pain with their own citizens. The overly simplistic "german=bad" story may be easy to sell within Cyprus, but it is really too poorly thought-out to believed here, given the abundance of documentation that it just didn't happen that way. Don's post gives a decent summary:

A Bank Levy in Cyprus, and Why Not to Worry

It isn't too surprising that this should come to a head, as Cyprus has for years been trying to play this both ways for years: within the EU, with its protections, but friendly to Russia, with its corruption-originated free-flowing wealth. Now it is time to pay the price for its gamble, and they understandably try to find a way out that paints some external force (at the moment, the EU) as the bad guy. The only problem is that unlike Greece, they are very far away from being too big to fail. And there really isn't a compelling pracitcal reason for anyone in the EU to bail out Russian oligarchs at all, be they German, or another nationality. The only reason Cyprus got as good a deal as it did was so that the EU could save face by claiming to back up the EU ideal. By rejecting the deal outright, Cyprus has just freed the EU from that artificial "moral" burden, and set itself up for some serious pain.

My guess is that they'll try to get Russia to pitch in to make up the difference, and then try to play the EU and Russia off against each other, giving each side the option to be the dominant force in Cyprus after it's all over. I would even hazard a guess that the EU won't take the bait in a serious way, but the US might get involved, since that's the entity that cares most about about regional hegemony, and limiting Russia's expansion.

[astonas]

Re: Cypriots Stunned ..ngs Cuts

My guess is that they'll try to get Russia to pitch in to make up the difference, and then try to play the EU and Russia off against each other, giving each side the option to be the dominant force in Cyprus after it's all over. I would even hazard a guess that the EU won't take the bait in a serious way, but the US might get involved, since that's the entity that cares most about about regional hegemony, and limiting Russia's expansion.

Wow, that didn't take long!

Cyprus officials made clear that they wanted the lines of communication with Moscow open. Soon after the vote in Parliament, Mr. Anastasiades called President Vladimir V. Putin of Russia to inform him of the results.

Mr. Putin’s spokesman, Dmitri S. Peskov, said that the Russian president had expressed concern about the possibility of any measures being adopted that could harm the interests of Russian citizens or businesses, according to the Interfax news agency. The two leaders agreed to stay in contact, and Mr. Putin invited Mr. Anastasiades to visit Moscow at any time.

Russian officials were preparing for talks in Moscow on Wednesday with the Cypriot finance minister, Michalis Sarris, who was expected to request that Russia postpone the maturity date on a 2.5 billion euro loan that it extended to Cyprus in 2011.

[GRG55]

Re: Cypriots Stunned ..ngs Cuts

I don't think it was the Germans that screwed this one up, mostly because the idea to tax accounts less than 100k did not come from Germany at all. The German delegation only wanted a tax on accounts greater than 100k. It was the Cypriot delegation that was too cowardly to impose a tax greater than 10% on their Russian masters, and so opted instead to share the pain with their own citizens. The overly simplistic "german=bad" story may be easy to sell within Cyprus, but it is really too poorly thought-out to believed here, given the abundance of documentation that it just didn't happen that way. Don's post gives a decent summary:



It isn't too surprising that this should come to a head, as Cyprus has for years been trying to play this both ways for years: within the EU, with its protections, but friendly to Russia, with its corruption-originated free-flowing wealth. Now it is time to pay the price for its gamble, and they understandably try to find a way out that paints some external force (at the moment, the EU) as the bad guy. The only problem is that unlike Greece, they are very far away from being too big to fail. And there really isn't a compelling pracitcal reason for anyone in the EU to bail out Russian oligarchs at all, be they German, or another nationality. The only reason Cyprus got as good a deal as it did was so that the EU could save face by claiming to back up the EU ideal. By rejecting the deal outright, Cyprus has just freed the EU from that artificial "moral" burden, and set itself up for some serious pain.

My guess is that they'll try to get Russia to pitch in to make up the difference, and then try to play the EU and Russia off against each other, giving each side the option to be the dominant force in Cyprus after it's all over. I would even hazard a guess that the EU won't take the bait in a serious way, but the US might get involved, since that's the entity that cares most about about regional hegemony, and limiting Russia's expansion.

Don't be too quick to give the Germans a free pass. They are in an election year and this whole thing is wrapped up tight in individual national politics on all sides. The "they said, I said" accounts should all be discounted...

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

http://greece.greekreporter.com/2013...id-eu-bailout/

I've been hearing rumblings that one of the banks in Cyprus has been sold to a Russian entity now. I cannot confirm it, though.

Not quite a done deal, but close.

[astonas]

Re: Cypriots Stunned ..ngs Cuts

Don't be too quick to give the Germans a free pass. They are in an election year and this whole thing is wrapped up tight in individual national politics on all sides. The "they said, I said" accounts should all be discounted...

You're certainly right that there are plenty of reasons to be cynical on all sides, not just in this case, but generally. And I'm also pretty inclined to chalk things up to internal German politics, given the choice.

In this case, however, the breakdown is being played pretty strongly in the German media, enough so that if it were later shown to be factually incorrect, there would be certain backlash. It doesn't seem to be worth the trouble to state outright lies in the German media, particularly in light of recent ousters of government officials on ethics charges. Germany is far more unforgiving about that sort of thing than either the Anglo-Saxons, or the Mediterraneans.

It isn't getting the same "it's not clear what happened" that some of the Anglo-Saxon press is giving it. And even in England, it's not exactly left entirely vague. This was posted earlier in this thread, (Thanks Chomsky!):

But once you get into whacking depositors with a tax, the question is who pays that tax. The IMF had advocated simply drawing funds from deposits over the 100,000 euro deposit guarantee threshold. Moscow has said their chief aim is to get information on tax dodgers (link in Spanish). And the Germans have never specifically said – from anything I have heard – that private participation had to include savers, let alone deposits under the 100,000 euro threshold. Clearly then, the levy on small deposits was driven by the Cyprus government, ostensibly to maintain Cyprus’ status as a tax haven. [Update 1715 EDT: Reuters has a post out now in which Wolfgang Schaeuble says that Germany would have protected insured deposits. The decision to levy small deposits was driven by the Cypriot government. UPDATE: 1845 EDT: The FT also confirms this. "The Cypriot president did not want to agree to a levy higher than 10 per cent, and if you do the numbers you get the 6.75 and 9.9 [per cent].” Update: 2215 EDT: Peter Spiegel of the FT writes that the Germans did insist on a saver levy, though they did not insist the levy extend to insured deposits. ]

So the same story is coming from Reuters, the Financial Times, and the German press, in a way that would cause Schaeuble to be dismissed in disgrace if it weren't true, and frankly doesn't really buy him much at all if it is true, since it was largely assumed in Germany in any event. It's not just that it's coming from different places, that can easily be group-think. It's more that I don't see much incentive to make this quote up, given Germany's current environment.

[astonas]

Re: Cypriots Stunned ..ngs Cuts

It's more that I don't see much incentive to make this quote up, given Germany's current environment.

I should also add that this interpretation also makes sense based on Germany's MO regarding the financial crisis so far:

A. Identify which group cheated to bring about the current state of affairs in any given country. (Implicit is the assumption that if no one was cheating, the country wouldn't be in trouble in the first place.)

B. Try hard to enact the toughest measures they can on that group.

C. Try use the fact that the pain of these changes is inevitably passed on to innocent people to highlight among those innocent people that internal structural change is needed, and that those responsible in the domestic government should be thrown out to allow that structural change to occur.

So in England, they try to force a Tobin Tax to punish the City and its bankers, in Spain they force bank consolidation and reform, in Greece it's tax evasion, with concomitant number-fudging to hide the fact, in Italy it's government corruption, in Cyprus it's Russian-dominated offshore banking and tax evasion, etc.

I'm not saying that the plan is working particularly well, since wherever they go, they seem to convince fewer and fewer people that the problem is domestic, rather than their own selves. But it isn't exactly surprising for them to take this tack.

And to be frank, it is somewhat refreshing to see a group actually trying to address the structural problems that pretty obviously do exist, even if they aren't exactly the smoothest implementers of change that one might imagine. To be honest, I'm not certain they need to be all that smooth for it to work. All they need to say at any point, should they be resisted, is "ok, you can go ahead and do what you like".

"But don't expect us (the Germanic nations) to pay for it."

And while that does come across as petulant, it is hard to find reasonable logic that justifies why any country should pay for another country to sustain massive structural deficits indefinitely, while the recipient remains corrupt, beholden to banks, tax-evading, number-fudging etc. So far the only arguments the opponents to reform have been able to muster are emotional ones, rather than logical ones.

That's both why the Germanics are convinced they will eventually be seen by history as the reasonable adults at the table, and why their actual success is uncertain. The central question revolves around whether the political theater is one that is grounded, ultimately, in reason, or in emotion. In the north, the answer is clear. But I'm far less certain that this is what holds political sway anywhere else, in either the short term, or even the long term.

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

And some lucid thoughts by Edward Harrison:

http://www.creditwritedowns.com/2013...in-cyprus.html

Thanks for posting this! I hadn't encountered Harrison before, and am glad you've pointed him out here.

This is important reading for anyone interested in seeing another perspective on this crisis. It is certainly unusual to find this level of balance among the usual Anglo-Saxon media outlets. To the extent that Germanic nations are in the driving seat, these are the views that will be determining the direction that the Euro travels.

[Thailandnotes]

Re: Cypriots Stunned by Forced Savings Cuts

This line that leaps out of Harrison’s article:

“The levy on small deposits was driven by the Cyprus government, ostensibly to maintain Cyprus’ status as a tax haven.” It’s why the average Joe belongs in the streets.

Northern Europe won’t/can’t bail Cyprus out. There are no bond holders to speak of. The really big deposits left a year ago.

The silly RAF cash airlift makes clear how poorly planned this was.