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Cyprus savers lose 10% of money after shock bailout
- kmfrk 14y agoRelevant clarification: People with less than €100,000 in their Cypriot bank accounts will have to pay a one-time tax of 6.75%, those with more will lose 9.9%. The measure is expected to net €5.8bn in additional revenues, Mr Dijsselbloem said, greatly reducing the country's financing need. Nevertheless, this sounds insane.
- sbarre 14y agoReally? I think it's a valid move. If people in a certain economic zone are using one of the countries as a tax shelter, and that is causing problems with regional stability, then an adjustment is required. The saying "we're all in this together" comes to mind.. Even though the tax shelter is legal, it doesn't change the fact that if the regional governments are going to step in and provide bailout money for the country that was the tax shelter in the first place, then the financial residents (so to speak) of that country should be made to chip in.. If Cyprus didn't have such an imbalanced tax and banking system (that led it to be a shelter in the first place), they wouldn't have needed the bailout..
- iwwr 14y agoIt stems more from EU governments generally abhorring tax competition. Cyprus was in too weak a position to negotiate.
- tomp 14y agoOne has to admit, EU politicians (and their financial advisors), are cunningly smart... First, they force Greece to default, now they force Cypriot banks to default, but they never actually call it default, so the reaction of the financial markets is quite tame.
- StavrosK 14y agoAfter seeing the results in Greece, and after they admitted that austerity failed, how can they do the same with other countries? I fail to understand the thinking that leads to this.
- dnu 14y agoWhat austerity are you talking about? The governments still spend much more money than they have. When you have no money, taking a loan to buy a 60" plasma TV instead of an 80" one does not mean austerity.
- StavrosK 14y agoWhich country are you talking about? Nobody I know buys TVs any more, let alone with loans. Or are you saying the government buys TVs? Sounds like a nice anecdote, it would be good if it corresponded with reality at all.
- gasull 14y agoYes and no. Governments are spending in bank bailouts, but there's austerity for the masses, like tax hikes and cuts in social spending.
- gasull 14y agoWhere's the default? I don't read anywhere that Cyprus is defaulting in part of its debt. EDIT: Why the downvote? Please explain what percentage of the debt is being defaulted, that is, what is the percentage of Cyprus debt that isn't going to be paid at all?
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- jl6 14y agoThere's going to be a major demand in Cyprus over the next few days and weeks for a non-bank store of wealth.
- dgregd 14y agoYou mean new rookie players at banksters poker tables.
- solarexplorer 14y agobad luck: banks are closed over the weekend and monday is a holiday. By tuesday the new tax will already be in place and the respective amount in all accounts frozen.
- iwwr 14y agoThere is still the danger of a continuing bank run come Tuesday. There is not enough cash to satisfy it all (and probably no willingness to let it be transferred electronically), so expect more emergency measures.
- deleted 14y ago[deleted]
- tomjen3 14y agoWell hopefully people will demand the money the only way they can. At the point of a gun, a sad way to go for decent people but only fair.
- jl6 14y agoMore likely they'll take the hit now, then if the crisis passes, launch lawsuits against the government to claim it back. Or a political party will adopt a manifesto pledge to return the stolen money upon election victory.
- LefterisJP 14y agoIt's by no means a matter of luck. This was calculated to happen on a Saturday
- DrJokepu 14y agoI wonder what steps they are taking to avoid a complete, Armageddon-style bank run in Cyprus?
- iwwr 14y agoBanks are closed, money in ATMs is gone. Currency and cash controls are expected to remain in force.
- gasull 14y agoThis Cypriot redditor gives more details: http://www.reddit.com/r/europe/comments/1aeht8/eurozone_and_imf_agree_10bneuro_cyprus_bailout/c8wouo2 http://www.reddit.com/r/europe/comments/1aeht8/eurozone_and_...
- tomp 14y agoWhy would that happen? Unless you expect more "tax", bank runs aren't reasonable... The article states that you wouldn't be able to withdraw more money than you have (today - 10% tax) anyways.
- DrJokepu 14y agoPeople being human beings and often driven by emotions rather than rational decisions, even if only a proportionally small group of depositors lose their confidence in banks and chose to withdraw their savings, such an event could quickly snowball into a complete panic where the one-off 10% levy is the least of people's problems as if people expect that the banking system will collapse (and once again, rational decisions play no part here, much of the banking system is built on trust) they would desperately try to get hold of their savings even after the levy has been imposed.
- coldtea 14y ago>Why would that happen? Unless you expect more "tax" Of course people would expect more tax. As for assurances, they don't mean anything. Just five days ago they were assured by the Finance Minister that "no bank tax would happen". And then boom. So, a bank run DID happen after the news emerged. But the people found the banks were closed and ATMs had restrictions. The banks will be closed for several more days.
- arbuge 14y agoThis seems pretty morally hazardous to me. It penalizes good savers and lets debtors go scot-free. The message it's sending is that taking on an excessive loan or mortgage is fine; on the other hand you could be screwed if you live within your means and save up for a rainy day. I'm not familiar with Cyprus' particular situation but I'm guessing that if they need a bailout, excessive spending and debt are factors contributing to that problem to begin with...
- mrich 14y agoYou have to consider that this has been going on all the time through money-printing and devaluation of the major currencies over the past years. Savers get screwed, debts are devalued. I would say this step is more transparent in that regard.
- tomp 14y agoSavers are not good for the economy. People should either spend the money they earn, or invest it. Economically speaking, of course.
- coldtea 14y agoYou mean "capitalistic economy" speaking. Which is not the only kind of economy known to man. I'm not taking about communism either. Lots of systems have been both proposed and used effectively. Until 15th century (or even 2-3 centuries later) there wasn't even capitalism proper.
- Evbn 14y agoYou are referring to "cash savers under the mattress". Putting money in a bank is investing.
- eru 14y agoWhat's the difference between saving and investing?
- coldtea 14y ago
- barredo 14y ago1. isn't Cyprus considered some sort of Tax Haven? 2. this is a terribly non-progressive levy Edit. From: http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bail-out http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bai... > That idea had been in the air for a while, not least because a lot of those uninsured deposits came from outside Cyprus, and from Russia in particular. The politics of saving wealthy Russians with money loaned by thrifty Germans were always going to be tricky. > What had not been anticipated was a 6.75% loss for savers with deposits in Cypriot banks below the insurance ceiling. Cypriots woke up this morning to find bank branches closed to them. By the time they will be able to get at their money, it will be too late. The offer of equity in banks to replace the value of their savings is meant to be a balm but it’s not a choice they would have made. Why this decision was taken is not yet clear. The most plausible explanation is that the Cypriot government itself preferred to spread the pain rather than wipe out non-resident depositors and jeopardise its long-term prospects as an offshore financial centre for Russian and other money. Interesting.
- dnu 14y ago3. it proves that it's better to spend spend spend, than to be a sucker and save
- Evbn 14y agoIt is true, though. Money is currency, not a store of value. Buy durable goods or invest in growth projects. Working to accumulate pure money is just piling IOUs on people. If you do that, you are going to face inflation in the future, which you deserve , because your non-spending took away other people's opportunity to create things of value. (Or, if they produced in excess of demand, then prices will drop in the future, and conpensatory inflation is no problem to you.)
- RockyMcNuts 14y agoRoundup of news stories at http://www.linkfest.com http://www.linkfest.com (project of mine - sort of crude proto-HN for finance) Tough choice... banks are busted, so do you make depositors whole and bail out Russian mobsters with German taxpayers' money? (Cyprus is a big offshore money laundering center, much of the deposits are from offshore)... or create a precedent where money in EU banks is not safe, raising the specter of bank runs? Bank runs it is... distinct possibility Cyprus could be the Reserve Primary Fund of the EU crisis. (When Lehman failed and that big money market mutual fund broke the buck, everybody started withdrawing money from money markets, and the US had to guarantee all MMMF and bank deposits.) (going to further speculate...Germany and the EZ said we will only pony up X, depositors have to take some of the hit... no one in these banks or the Cyprus government was eager to be the point person advocating the mobsters taking a bigger hit by exempting locals or small depositors...so the small local depositors got sucked in.)
- rescripting 14y agoOff topic and unsolicited request: Can you make the font size of the article titles larger than the surrounding text? I'm getting a 'wall of text' feel from the design that is making it hard for me to delineate where one news item begins and ends.
- RockyMcNuts 14y agoThanks, will add it to the list! definitely looking for feedback, feel free to ping me offline via the contact form, or linkfest (at) linkfest.com ! ( also hackers who might want to work on this sort of thing )
- kokey 14y agoLove the idea and the site. Comments would have been nice but I understand that's not a small task to code and run.
- RockyMcNuts 14y agothanks! wanted to get it out there and see if it worked. On a day like today it's pretty useful. looked at adopting/forking the reddit codebase, seemed a little hard to skin/customize and wanted to see what I could do as an MVP. Thinking about how to do v2.0. Any ideas about ways for investors to share/crowdsource news and analysis, discover great content and creators and get them to rise to the top, disrupt low-quality investing message boards, would love to hear them!
- codesuela 14y agoFor people who like me are not familiar with the debt problem Cyprus is facing and would like a little more info: http://www.nytimes.com/2012/04/12/business/global/in-cyprus-a-national-quest-to-shore-up-teetering-banks.html?pagewanted=all&_r=0 http://www.nytimes.com/2012/04/12/business/global/in-cyprus-...
- waterlesscloud 14y agoOdds that the "connected" types were tipped off and moved their money?
- tomjen3 14y agoAs good as the sun rises tomorrow. This does not increase my confidence in keeping my money in the bank. The usual argument is theft + lack of interest but the banks barely pay any interest anymore and the lack of theft....
- coldtea 14y agoKnowing Cyprus (or any other place for that matter, from the US to Germany to China) 100%
- tomjen3 14y agoAnd this is one of the reasons I look forward to bitcoins - the state can't steal them.
- gasull 14y agoCan someone explain to me what happens with money people have in assets? If someone has an investing account that has money invested in stocks or ETFs, are those assets liquidated partially to pay up to the the 10% of the levy? Does only not invested money count?
- csomar 14y agoThis is baffling to say the least. This is the worst move any country/president can make in my opinion. You are teaching people how not to trust and work with the system. By having money(wealth) stored in banks, you can control the economy. You'll have more control over inflation, taxes, leverage... By having money stored in people mattresses, you'll lose this control. It'll be even hard to estimate the amount of money in the system, and if it's even moving. The EU is handling this crisis all wrong to protect their interest.
- pfraze 14y agoDoesnt their interest include trade? It's aggravating how we got to this point, but I'm not sure yet whether this story is bad behavior or bad PR.
- seivan 14y agoThis is going to get standard in Europe. Already happened in Hungary, has happened in the UK and will happen again. Even Germany is going to suffer for this. As they already do with their fucked up taxes. Sweden has started to screw with pensions which are basically savings. It's fucked up. I can't stand it. High tax countries not being able to handle it and tax even more from savings/pensions. It's unsustainable. And recently there were many articles praising "the nordic model"... fuck it's a joke. As far as I've seen the only countries managing their economy is Singapore. They got a sustainable model. Don't spend peoples money. Low taxes means that whatever they spend it's not coming from the people.