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Cypriot Parliament Rejects EU Deal; Negotiations Continue
enlightenedbum
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Basically, the EU is giving Cyprus a massive bailout because (surprise!) their banking sector has totally fucked them. But instead of taking the money from the people who fucked everything up, they've decided to take 7% from all bank accounts and 10% from bank accounts with 100k euros or more in them. Naturally, this has Cypriots racing to try to withdraw their money before the tax is confiscated on Tuesday. Fortunately for the bankers and the EU thieves, Monday is a banking holiday and they got the Cypriot government to close the banks today.
And given this precedent, shouldn't Portuguese, Spaniards, Italians, and Greeks be racing to withdraw their own money? Which would, you know, create a vast international banking crisis?
Who the fuck thought this was a good idea?
Basically, the EU is giving Cyprus a massive bailout because (surprise!) their banking sector has totally fucked them. But instead of taking the money from the people who fucked everything up, they've decided to take 7% from all bank accounts and 10% from bank accounts with 100k euros or more in them. Naturally, this has Cypriots racing to try to withdraw their money before the tax is confiscated on Tuesday. Fortunately for the bankers and the EU thieves, Monday is a banking holiday and they got the Cypriot government to close the banks today.
And given this precedent, shouldn't Portuguese, Spaniards, Italians, and Greeks be racing to withdraw their own money? Which would, you know, create a vast international banking crisis?
Who the fuck thought this was a good idea?
Self-righteousness is incompatible with coalition building.
enlightenedbum on
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I get that it feels a bit galling to bail out small countries who intentionally put themselves into a dependance on the financial industry. I get that when non-trivial portions of the money being protected by the bailout in those banks aren't even from EU nationals, you're not super excited to be bailing them out.
But neither of those two complaints warrants setting the stage for large scale bank runs. What the fuck are they thinking?
Slightly less stupid than just taking the cash, but still amazingly stupid.
If the EU did nothing, 100% of the money would've been gone within the week. That's what happened in the Netherlands, when the DSB bank died in the first months of the crisis. Savings under 100k were guaranteed by the state, but certain kinds of depositos and anything above 100k was completely wiped.
I will say, I don't think there could be a more foolproof way to instantly undermine all confidence in the safety of a person in said country putting money into a banking institution.
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Supposedly half or more of deposits are held by Russians, yea. Though I'm not sure of the political ramifications of the EU essentially telling Russia, "Hey, fuck off" while at the same time saying effectively the same thing to the average person in Cyrus.
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ebum, you should know better than most that those lice gotta pay-up for all those years of not-austerity. Everyone knows the residents of Cypress have just been sitting at home playing video games while they were supposed to be building a better tomorrow for themselves with the buck fifty we tossed their way. We can't let those Goddamn welfare queens get away with this!
It certainly makes things a lot more complicated. I guess I have a lot less sympathy for a country that has a business out of running dodgy banks for non EU deposits
@ronya your thoughts?
http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bail-out
http://www.spiegel.de/international/europe/savers-will-be-hit-as-part-of-deal-to-bail-out-cyprus-a-889252.html
"Sounds good to me! What could possibly go wrong?"
I'd never bank in the Caymans, and those are island(s). As in plural.
But I wonder if it is somehow connected to Iceland borrowing hundreds of millions and then having a general vote deciding to nah let's not pay it back?
Stock in a bank with across the board depositor haircuts, to be frank, ain't going to be worth shit. The bank runs that this will trigger will make equity in those banks effectively worthless, and they'll be entirely dependent on someone on the outside the propping them up in a completely zombified state, if they aren't going to just be killed outright.
In normal operations of the bank, the shareholders are expected to be the first ones thrown overboard in the event the bank goes under, and depositors towards the last ones thrown overboard and protected normally by deposit insurance. Bondholders are typically in between and take a haircut (a loss on the principal of the debt to be paid back) depending upon how how bad things get. The reason why we have the FDIC insuring deposits in the US is because without the government stepping to protect depositors, there was a nasty tendency for bank runs to kill banks in panics. Banks didn't and don't have to be insolvent to get taken out when the depositors panic and all rush to withdraw their money en masse. That is the sort of thing happening in a widespread manner was one of the main things that kicked off the Great Depression. But to have the government go from being the one who normally provides deposit protection to the one looting deposits...that sure doesn't look good.
I don't know how big of a player Cyprus is in the scope of the EU, but the panic has already hit there the moment news of this got out. It may not necessarily trigger widespread panic across the EU, but the folks who have deposits in places like Greek or Spanish or Portuguese banks right now are probably eying the exits. And those banks were already under pressure for bank runs before this.
The Euro is looking like an even dumber idea than ever. I'm amused by them explaining this move as one taken in an attempt to restore confidence in the Eurozone. What the fuck sort of confidence does one inspire in the sort place that will confiscate deposits without warning or recourse?
Except that the country wanted to run centralized / nationalized banks, but NATO decided in the 70s that Cyprus was going to go socialist, and we can't have that, so they were attack, occupied and then restructured so that good 'ol fashioned private interests could control things like the finance sector.
Oh no! It turns out said private interests were corrupt, just as the old government said they would be before before they were forced out of parliament at gunpoint by the Turks, and stealing money! Well, obviously the solution is just to steal money back from the people of Cyprus and pretend that this whole thing is just an unavoidable consequence in the cycle of moochers taking things from the ubermensch.
Also, but pure coincidence, I'm sure, this language appears to cover any MPs with deposits in the dodgy Cypriot banking sector. Imagine that.
The old government of course being the military junta that had forced themselves into office at gunpoint by the Greeks?
Dropping depositors on the uninsured portion is bad news for a financial system considering it, but would be somewhat understandable if the insolvency is so bad that you really don't have the money to cover it. Even if the higher end depositors convinced themselves that would never happen, it was a risk that was made apparent ahead of time.
But actively confiscating deposits below the insurance line to protect senior bondholders and make sure the portion above the line isn't hit harder, who does that? Why in the world would anyone think that that would be the sort of thing that would instill confidence in the banking system, either on the local level or for the wider eurozone? Do they really think that the Russian depositors will be cool with arbitrarily losing only about 10% of their deposits by fiat? If I was using Cyprus for offshore banking, I'd be heading for the exits either way.
And really, the EU's inability to do anything besides provide bridge loan after bridge loan in exchange for punitive measures is one of the prime examples why the entire monetary system of the Euro as it is now is completely fucking idiotic. When the FDIC covers deposits on failing banks when putting them in receivership, quite often it takes a loss on the process. Because it is worth it to take a loss here and there and make the money back elsewhere in order to actually instill confidence to the depositors that the banking system won't collapse in a panic. Not to mention that when there are asymmetric shocks within the US (or many other countries with their own currencies) it is actually politically palatable to let the weaker portions of the country get by with paying less than their fair share for what they get out of the government, effectively funneling money to them.
How well do you think it would work out in the US if the Northeastern states told the Southern states to go screw themselves and make do with bridge loans because the Southern states paid less in taxes than they got back from federal government funding? As fun as some people may think that sounds, that wouldn't be the sort of thing that would speak well for the stability of the US dollar.
No, the old government being Makarios's socialist government, which was overthrown by Sampson as a precursor to the later Turkish invasion.
Then why say they were forced out at gunpoint by the Turks when they were by the greek junta coup?
Early Modern History? Look up Northern Rock.
This kinda puts shit into perspective huh?
You just triggered an awful radio style commercial based around "Eurozone" being the name of something.
Y-Y-Y-Y-YOU'RE IN THE EUROZOOOOOOONE (the eurozone!)
wubwubwub
How is this even a 'tax'? Or were you just joking?
Because it is a tax.
Do you not know what a tax is?
It is when the government takes your money to pay for services and/or goods.
This is, by definition, a tax.
Okay, I might be misunderstanding this:
Cyprus is being given a loan by the EU & IMF, correct? And the depositor monies are being extracted in order to pay the foreign interests back the money for the loan?
If the money is going to foreign states, how is it a tax? Like, if the Canadian government took your money out of your bank, you would consider that a 'tax' even though a foreign state took it?
Welcome to the Eurozone.
Every government that has debt outstanding is taking its citizens' money to give (in part) to foreign interests.
It's a little bit disingenuous to compare the standard 'over a long period of time' repayment of foreign debt (on a timetable mostly at the discretion of the indebted state) to a bridge loan, which must be paid NOW, whose terms are being dictated by foreign powers and a fucking private multinational corporation, the IMF. Will they provide aid money to the country they ruined in the 70s? Haha, no. But they sure will rob the public that they imposed the robber barons on!
Euro. Zone.
I'm guessing, the world sucking and all, that somehow those people are going to be the only ones who don't pay.
If they had, say, seized everything above the bank guarantee, they'd have pissed off a ton of russians, but the man on the streets of Lissabon wouldn't have had a reason to go "hrm... Maybe my mattress is a better place for it". Instead, some idiots figured that if we show the russians that we're totally having this haircut as well, they'll be more likely to accept it and continue doing business with us.
But, the cost of not pissing of the russians, is increasing the default risk of every other bank in the PIGS countries, and that point you could easily make the case that simply paying for portion of the tax affecting guaranteed deposits would be cheaper for the Eurozone in the long run.
It makes no sense.
If a government is unilaterally taking things from people (not by percentage or a usage fee or something) it's a nationalization or eminent domain if you are feeling generous, not a tax.
I just get tired of everyone saying something is a tax all the time because it demonizes legitimate government action. As in high gas prices are like a tax.