Saturday, March 16, 2013
Beware your bank account is at risk!
Eurozone and IMF agree 10bn-euro Cyprus bailout deal
"The deal also involves a levy on bank deposits intended to ensure investors contribute to the bailout", the BBC's Andrew Walker in Brussels reports. "The Cypriot economy accounts for barely 0.2% of the eurozone's overall output". (However, Mme Lagarde has set a precedent for Euroland with a cash raid on deposits - it's like a tax, isn't it?).
Posted by alan @ 09:05 AM (3474 views)
21 thoughts on “Beware your bank account is at risk!”
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dill says:
“A European Central Bank (ECB) official said the Cypriot authorities had already started to take action to ensure that the levy can be collected.”
Which presumably means capital controls to prevent an inevitable surge in outflows.
The oligarchs won’t like that. Could get tense.
enuii says:
The ‘one off’ 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. 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.
This is quite a big one to ponder on, a bit like sticking your hand in someone else’s till, it sets an uncomfortable precedent that may well end up spreading outside ‘bank accounts’ to other savings and investments and will possibly put the proverbial cat among the pidgeons.
libertas says:
From higher taxes, in today’s conditions, the economy will shrink, resulting in less overall tax receipts.
Taxing deposits, will result in less deposits, meaning less money to lend to business.
The economy will shrink, resulting in less overall tax receipts, leading to another bailout, causing more austerity, causing more bailouts, doing what the IMF have done to the third world, which was developing well during the 1970’s before they DESTROYED the lives of billions.
alan says:
It was all carefully rigged, wasn’t it? Monday is a bank holiday in Cyprus, so nobody can get to their branch. Call me cynical if you like…
If you take this a few steps forward, I can forsee a UK government raiding our ISAs because that’s what the EU rules dictate – a sort of “not my fault, guv, just doing my job” comment from the PM of the day.
I think we need to get out of the EU trap as soon as we can practically do so – lets get back to the free trade agreement we wanted in the first place. Anyone seriously think this sort of rigging won’t affect our cash?
…Oh dear… I’m starting to sound like one of those dreadful anarchist people…..!
will says:
This is really quite rightening, who says they can’t do it to us without warning ? Perhaps now is the time to put it under the mattress.
This is the ‘negative interest rates’ that the Bank of England were musing recently.
nod2glod says:
If they go ahead with this they will cause multiple unintended consequences.
Any investment in paper, fiat money, shares, will not be safe. I’m surprised, I guess they have already raided pensions in southern Europe so maybe I shouldn’t be
enuii says:
Hungary has already nationalised pension scheme assets which is why I hinted at ‘other savings and investments earlier’, looks like many of us are thinking subconsciously along the same lines.
This is the sign that the bottom of the barrel is being scraped.
grumpybob says:
This is amazing. I think the only reason we are not properly shocked by this is that we have become acclimatised to similar but lower grade theft tactics by other governments – including our own. The Cypriots are now being mugged, in broad daylight, by their own government. Unbelievable!
alan says:
Christine Lagarde, managing director of the International Monetary Fund (IMF), attended the meeting: “I welcome the agreement reached today to address Cyprus’ economic challenges. 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.†she said.
“Burden sharing” means screwing savers to help the banks.
Guys, also note that public sector officials who don’t need savings because of their lavish pension schemes suffer no such confiscation.
iguana says:
One glimmer of light relief, a lot of very funny money went into northern Cyprus to keep it safe from the other European tax authorities, unless they got the wink and shifted their wedges a number of ‘colourful’ individuals will need to adjust to paying for their past activities. Not much but its a start
happy mondays says:
This will test the Cypriot people & their belief in the failing EU authorities.. The Slow Gravy train, train crash is approaching..
Grey Tornado says:
This is plain theft. No other way of putting it.
Striebs says:
nod2glod said… If they go ahead with this they will cause multiple unintended consequences.
Quite , if they can expropriate private citizens money who will invest in a business there ?
I can see France making it’s way back to banana republic status too with nationalisations .
alan said… Guys, also note that public sector officials who don’t need savings because of their lavish pension schemes suffer no such confiscation.
It’s all about the state vs the individual as the moves to clamp down on the freedom of the press show .
When we were told there was going to be austerity we were also told that 80% of it would be done by Govt spending cuts and only 20% by tax rises . Well they transposed the emphasis on those two measures so that the austerity only applies to us , not them with their defined benefits pensions .
In the UK there is no inflation indexation on capital gains tax and tax on interest on savings .
This almost tempted me to save more in my SIPP for my old age , you know , try to do the right thing . Fortunately I came to my senses .
Are they only applying a haircut to deposits in failing banks or all banks ?
enuii says:
Problem is they are not just helping themselves to a few ‘colourful individuals’ savings they are dipping into everyone’s savings no matter how rich or poor. Plus it should not be called a tax which is generally on income, capital gains or a financial transaction. I don’t know what you would call it but its more akin to legalised theft.
quiet guy says:
There is a particluar aspect of this story that doesn’t seem to be getting much attention here or in MSM. The Cypriot banking system has a reputation for taking Russian oligarchy money of dubious origin. Apparently, it’s quite easy for Russians to obtain Cypriot citizenship and park ill gotten gains from Russia in Cypriot banks.
The point is that an ECB bailout similar to the ones in other eurozone contries would involve European taxpayers bailing out rich Russians – not something that would play well with the German electorate many of whom are already fed up the the Euro project.
The horror is that ordinary depositors are being clobbered. Forbes makes an interesting point:
There’s nothing particularly bad about making depositors carry some of the load of a bank failure. Indeed, it has something to recommend it: if it happens occasionally then people will take more care over where they put their money and what the banks do with it. However, there’s a very great difference between allowing depositors without government insurance to take losses and actually reneging on the previously promised government insurance. And it’s that second that they’re actually doing here.
http://www.forbes.com/sites/timworstall/2013/03/16/the-cyprus-bank-bailout-could-be-a-disastrous-precedent-theyre-reneging-on-government-deposit-insurance/
Maybe this will be a special case due to the huge amount of Russian cash in the Cypriot banking system?
vinrouge says:
It would be better to put a 10 or 20% levy on all property related profits, all over Europe, including primary residences. You could just tax the retained profit, or allow the profit to be carried in the event of purchase of another property.
nod2glod says:
@14, how do you distingish between ‘profit’ and an increase in price due to inflation?
i truely believe there are not painless solutions. the best to do would be a return to moral finacial behaviour.
stillthinking says:
The real not nominal reduction is about the same as inflationary losses in the UK over a three year period. Personally I would prefer the, there you are we is having it sonny, approach to just cowardly underhand inflationary skanking.
mark wadsworth says:
+16
miken says:
We’ve all already been mugged by the UK government through sterling devaluation. A loss of 10% is small compared to the UK’s devaluation which was caused by QE.
Olga says:
Does anyone hold a bank account in Cyprus and would be willing to give a short interview for TV? Thanks!