Holy-e-smokes! EuroZone saves Cyprus.

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**whembly**

Saw this on my twittah feed...

This seems really dangerous:

Europe Announces Stunning Bailout For Cyprus — Bank Depositors To Get Instant 10% Tax Before Banks Reopen This Week
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.

Essentially, everybody with money in a bank gets loses an immediate 10% over the weekend, except those with less than 100,000 euros...those folks get jacked for 6.75% of their savings. Here's the sore point, the public sector workers are shielded from any cuts to salaries or pensions!

There.Will.Be.Riots.

I wonder if they did this on the weekend (banks are closed??) to prevent a run.
EDIT: Oh damn... just saw that the funds to pay for the levy were immediately frozen, before this was announced. o.O

**d-usa**

If they don't like loosing 6.75% of their savings, just let them lose all of it.

Fair is fair.

**whembly**

d-usa wrote:
If they don't like loosing 6.75% of their savings, just let them lose all of it.

Fair is fair.

So... they need to work for the government then? You missed this:
the public sector workers are shielded from any cuts to salaries or pensions

But that's fair... right?

So, I stole this from some dude on twittah and that's what I was thinking:

We're to the point where 'the people exist' simply to support the chosen few who selflessly devote themselves to public service."

[edit: I wonder of Legos can make dakka accept twitter posting, similar to what we see on the other sites.]

Automatically Appended Next Post:

Check out the comments in here: http://market-ticker.org/akcs-www?post=218812#discuss

**d-usa**

I see nothing in the article you linked that says that public sector workers are exempt form the tax.

Here is what I am seeing:

By not allowing the government to default, public sector workers are not out of jobs.

Just as by not allowing the banks and businesses to default private sector workers are not out of jobs.

And just as by not allowing the banks to go bankrupt everybody that has money deposited is not out of all their money.

So yes, I think it is fair that a system that keeps EVERYBODY from getting screwed in Cyprus is being secured with payments from EVERYBODY that has money in Cyprus.

Automatically Appended Next Post:
But for all I know you are just mad because you read that you should be mad.

**Mr. Burning**

All savers are hit with a one of levy.

A saver with 100,000 is worse of by 6,500.
A saver with one euro is worse off 6.75 cents.

Better than a continued Levy per month.

Or, say, loosing all your savings as the country goes bankrupt.

**whembly**

d-usa wrote:
I see nothing in the article you linked that says that public sector workers are exempt form the tax.

Here is what I am seeing:

By not allowing the government to default, public sector workers are not out of jobs.

Just as by not allowing the banks and businesses to default private sector workers are not out of jobs.

And just as by not allowing the banks to go bankrupt everybody that has money deposited is not out of all their money.

So yes, I think it is fair that a system that keeps EVERYBODY from getting screwed in Cyprus is being secured with payments from EVERYBODY that has money in Cyprus.

Automatically Appended Next Post:
But for all I know you are just mad because you read that you should be mad.

If I'm wrong... what does this mean?

"It's something that compared to other possible outcomes, is the least onerous," Finance Minister Michalis Sarris said, adding the arrangement meant his government "avoided salary and pension cuts" for the public sector.

The scary part really is that, this is claimed to be a "one time tax/levy" on depositors... do you trust that? In fact, what this shows is that this can happen elsewhere (looking at Spain/Italy) If they can do this... why have a savings account?

**Mr. Burning**

@Whembly.

Public sector avoid salary and pension cuts - They still pay the levy on deposits and or savings at the advised levels.

No cuts in public sector wages and pensions means less chance of strikes.

**Albatross**

Hmm. Kind of sinister if you ask me.

**Orlanth**

Having lived in Cyprus in ther 80's I can attest that it was badly managed them. However once their fellows in Greece taught them to max out the national credit card this was an obvious outcome.

We were cursed with one Gordon Brown, and will be paying for his idiocy for decades to come. In Greek politics figures like him are the norm. The expanding of the data threshold has opened up new ways for politicians to squander. Most politicians are fairly short sighted, Greek and Greek Cypriot politicians can drain a budget faster than a spoiled brat drinks cola.

No suprises here.

**Lord of Deeds**

So who thinks there will not be a run on banks in Cyprus, Greece, Spain, Italy, Ireland, Portugal, etc as soon as banks reopen. Because the lesson here is if you have money in a bank in a euro zone country that is being bailed out or may need a bailout, the EU will confiscate your money, err...levy a special one time tax.

As another poster mentioned, how many trust that this is truly "one time".

Also, just curious, who elected these folks who can at will levy special one time taxes? Also, who are the bond holders that are being protected from losing any money in this bailout?

Of course, we have a similar situation here in the US where the President can apparently set aside bankruptcy laws at will to benefit groups for political gain (i.e. organizations that donate and promise votes) at the expense of the groups who have better and superior legal claims to be repaid, and truly deserve to be repaid ahead of groups that contributed to the bankruptcy in the first place.

Of course ultimately who cares, we are all just playing with the China's money. They are the ones sitting on a ton of bonds that might turn out to be worthless. They certainly are worth less now with everyone trying to devalue their currency through such things as QE.

**djones520**

Lord of Deeds wrote:

Also, just curious, who elected these folks who can at will levy special one time taxes?

That's a very good question.

**Grey Templar**

Maybe on Monday we'll see the total collapse of the european banking system as everyone rushes to empty their accounts. The anticipation is killing me!

**Kovnik Obama**

djones520 wrote:
Lord of Deeds wrote:

Also, just curious, who elected these folks who can at will levy special one time taxes?

That's a very good question.

It's also a very easy question to answer, if you bother two minutes to search for the information.

The IMF managing director and upper staff is voted in by governors representing 186 countries, each having a voting power equivalent to a complex calculation based on currency strenght. For exemple, the US have 16.75% of the voting shares.

The Eurozone's political makeup is usually that of the finance ministers of the 17 countries part of the European Union. Since 2008, it's more often the leaders of those countries which make it up.

So, to answer your question shortly, those folks were elected by your representatives, and by the european nations part of the EU.

**djones520**

Kovnik Obama wrote:
djones520 wrote:
Lord of Deeds wrote:

Also, just curious, who elected these folks who can at will levy special one time taxes?

That's a very good question.

It's also a very easy question to answer, if you bother two minutes to search for the information.

The IMF managing director and upper staff is voted in by governors representing 186 countries, each having a voting power equivalent to a complex calculation based on currency strenght. For exemple, the US have 16.75% of the voting shares.

The Eurozone's political makeup is usually that of the finance ministers of the 17 countries part of the European Union. Since 2008, it's more often the leaders of those countries which make it up.

So, to answer your question shortly, those folks were elected by your representatives, and by the european nations part of the EU.

Why bother looking when I can get my answer served to me with a side of condencending attitude?

**dogma**

Lord of Deeds wrote:

Of course ultimately who cares, we are all just playing with the China's money. They are the ones sitting on a ton of bonds that might turn out to be worthless. They certainly are worth less now with everyone trying to devalue their currency through such things as QE.

If we're going to play with China's money, we may as well follow similar practices.

**Kovnik Obama**

djones520 wrote:

Why bother looking when I can get my answer served to me with a side of condencending attitude?

That statement accomplish the rare feat of both complaining about my condescending tone and justifying it, all in one sentence.

**djones520**

Kovnik Obama wrote:
djones520 wrote:

Why bother looking when I can get my answer served to me with a side of condencending attitude?

That statement accomplish the rare feat of both complaining about my condescending tone and justifying it, all in one sentence.

Glad I could oblige.

**Kilkrazy**

Perhaps the plan is to provoke a run on the banks, then let them fail. It might be cheaper than bailing them out.

Some respected economists argued that is that the UK government should have done in 2008-9, when several of our banks were collapsing.

**whembly**

Mr. Burning wrote:
@Whembly.

Public sector avoid salary and pension cuts - They still pay the levy on deposits and or savings at the advised levels.

No cuts in public sector wages and pensions means less chance of strikes.

@Mr. Burning... that was my initial reaction. But, what got them there in the first place?

Also, I think the biggest issue is what's going to happen on Monday/Tuesday at the other countries looking for a bailout? It doesn't take much to start a run at the bank.

Automatically Appended Next Post:

Albatross wrote:
Hmm. Kind of sinister if you ask me.

Yup... at least they should've put it up for referendum... but, then again, that'll definately start the bank run. "Damned if you do, damned if you don't"?

Automatically Appended Next Post:

Kovnik Obama wrote:
djones520 wrote:
Lord of Deeds wrote:

Also, just curious, who elected these folks who can at will levy special one time taxes?

That's a very good question.

It's also a very easy question to answer, if you bother two minutes to search for the information.

The IMF managing director and upper staff is voted in by governors representing 186 countries, each having a voting power equivalent to a complex calculation based on currency strenght. For exemple, the US have 16.75% of the voting shares.

The Eurozone's political makeup is usually that of the finance ministers of the 17 countries part of the European Union. Since 2008, it's more often the leaders of those countries which make it up.

So, to answer your question shortly, those folks were elected by your representatives, and by the european nations part of the EU.

Kovnik, I think the distinction is that they're elected officials to do a job. They don't represent the collective WILL of the people... because, let's face it, these politicians are people too with their own agenda.

So, saying that they were "duly elected" be the people voted for them seems dubious at best.

**Relapse**

Get your food storage together, gents. Hard times a comin' in the next couple years or so.

**KalashnikovMarine**

This only justifies my decision to keep all my money in a coffee can.

**Flashman**

Makes me glad I have no savings. Savers are going to get screwed for years to come, though I had imagined it would be through low interest rates, not surprise tax raids.

**azazel the cat**

whembly wrote:Also, I think the biggest issue is what's going to happen on Monday/Tuesday at the other countries looking for a bailout? It doesn't take much to start a run at the bank.

Yes it does. A couple years ago there was a warning from a few economists that a handful of unnamed US banks were on the verge of collapse, and yet still there was no run on the banks.

**Grey Templar**

Well, I think there is a difference in perception between an economist saying certain banks may collapse and the threat of a government literally taking money right out of your account. Especially when said government has already done it once.

**djones520**

azazel the cat wrote:
whembly wrote:Also, I think the biggest issue is what's going to happen on Monday/Tuesday at the other countries looking for a bailout? It doesn't take much to start a run at the bank.

Yes it does. A couple years ago there was a warning from a few economists that a handful of unnamed US banks were on the verge of collapse, and yet still there was no run on the banks.

Ummm... no one was forcibly taking peoples money then though. That's what the potential bank run could be for. If they can do it to Cyprus, why not Greece, or Spain, or Ireland?

**Kilkrazy**

Flashman wrote:
Makes me glad I have no savings. Savers are going to get screwed for years to come, though I had imagined it would be through low interest rates, not surprise tax raids.

If you've got a pension plan you've got savings, though it is probably embodied mainly in equities rather than cash.

The BoE is talking about setting a negative interest rate.

**Grey Templar**

The BoE is talking about setting a negative interest rate.

O'sure, Now there's a good idea

**Flashman**

Kilkrazy wrote:
Flashman wrote:
Makes me glad I have no savings. Savers are going to get screwed for years to come, though I had imagined it would be through low interest rates, not surprise tax raids.

If you've got a pension plan you've got savings, though it is probably embodied mainly in equities rather than cash.

The BoE is talking about setting a negative interest rate.

Bother, I forgot about the pension.

A negative interest rate you say? Does this mean the bank pays me interest on my mortgage repayments?

**Steve steveson**

Grey Templar wrote:
The BoE is talking about setting a negative interest rate.

O'sure, Now there's a good idea

Nothing wrong with it. They are doing it in other country's. the idea is that banks are not lending enough and it is causing the economy to slow. Make it cost them to keep money and they will have to start lending.

**Kilkrazy**

Flashman wrote:
Kilkrazy wrote:
Flashman wrote:
Makes me glad I have no savings. Savers are going to get screwed for years to come, though I had imagined it would be through low interest rates, not surprise tax raids.

If you've got a pension plan you've got savings, though it is probably embodied mainly in equities rather than cash.

The BoE is talking about setting a negative interest rate.

Bother, I forgot about the pension.

A negative interest rate you say? Does this mean the bank pays me interest on my mortgage repayments?

A -0.25% would mean that clearing banks would have to pay interest to the BoE on their deposits with the BoE. This would encourage them to lend out the cash rather than sit on it, which a big problem at the moment.

Various countries have set negative interest rates at times including Sweden, Denmark and Switzerland. It isn't a kind of banana republic accounting system.

It would probably affect mortgages and savings rates as well, of course.