Europe Announces Stunning Bailout For Cyprus. 7 to 10% Tax on Depositers

[AoE]

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.

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.

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.

http://www.businessinsider.com/cypru...ut-deal-2013-3

Thought this was interesting and wanted to see some BG opinions on what possible precedent this could start.

[Ragnus]

Europe just needs to bite the bullet and end the Euro already.

[Correction]

€10 billion bailout, 1.1 million population. ~€9000 in new debt on every man, woman and child, many of whom have just lost 7% or more of their net worth.

Have fun with that.

From CNN

The tax has compromised a fundamental principle that professional investors -- shareholders and bondholders -- not depositors should feel the pain of a bank failure.

I'd love to live in the world this writer lives in where this is a fundamental principle.

[BadKarma]

Obama would be proud.

[archibaldcrane]

And yet the US markets are barely touched lol, we don't give a fuck.

[AoE]

Nah I never thought we'd care unless it personally affected us. If anything, it'd probably affect any rich who invested into the banks but more than likely, they've either taken their money out, or are in the processes of doing so I suppose a bit moot.

I kinda wonder what would happen if one of the big banks over here ever try to pull something off like this, though.

[Moogleboss]

This still needs to be voted on by the Cypriot parliament and the vast majority are opposed to it in its current form. The government is a newly elected weak minority with I think around 20 seats out of 56 in Parliament.

I'd be very suprised if this passed as it has currently been proposed. However I'm not sure whether the EU/Cypriot government has the power to force it through anyway?

Will be interesting to see it develop.

If the Cypriots keep taking all their cash out of affected banks (Applies only to cypriot banks iirc) They won't raise any cash at all to secure a bailout anyway!

[Drex]

If the Cypriots keep taking all their cash out of affected banks (Applies only to cypriot banks iirc) They won't raise any cash at all to secure a bailout anyway!

Almost half of Cyprus bank deposits are from foreigners that can't withdraw the money, hence why the Russians especially are mad as hell. Also, the banks were ordered to set aside the 10% of everyone's account amounts this weekend before allowing withdrawals, so the money is already gone. It's just a matter of whether they'll get any credited back, and how much.

[quannum]

run, dont walk, to your nearest bank

[AoE]

Gonna start a bank stroll.

[Chamaan]

The tax was averted, so now the bailout won't happen as planned. Now Cyprus is just kind of staring at the rest of Europe like "What's up?" like the shittiest little brother that's going to take down the whole family. Washington Post says that Cyprus makes up like .2% of the area's economy.

[Moogleboss]

36 against and 19 (The goverment itself) abstained. Not one vote for it.

0.2% is correct. The EU only really has two options:

- Renegotiate bailout terms
- Kick Cyprus out of the euro zone

Second option is unthinkable to the EU because of the precedent it would set. It could be argued that Cyprus actually have a slight upper hand at the moment in negotiations.. if they're clever they'll get themselves better terms and get it passed through parliament.

Otherwise the Russians are just sitting, waiting to exploit Cyprus' natural gas in exchange for Russian money to prop their economy up.