General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWow! If you have money in a bank in Cyprus...
then you are in for a rude suprise next time you check your balance... even if your balance is insured.
The bailout of Cyprus is being financed partialy by a 10% disappearance of deposited money in accounts over the 100K euro insured level. (A lot of that is thought to be sketchy Russian ganster moneyCyprus is like Iceland or the Caymans... an over-sized banking sector of the "haven" variety)
AND a 6.75% loss for savers with deposits in Cypriot banks below the insurance ceiling. That's rather shocking. If you were a working person with 100 euros in the bank on Friday your new balance is 93.25 euros.
Expect fewer Cypriots to keep their money in banks, I guess.
Almost 6 billion of the savings for taxpayers in euro-zone countries came from losses imposed on depositors in Cypruss outsize banks. A one-off 9.9% levy will be imposed on all deposits over the insurance threshold of 100,000 before banks reopen after a bank holiday on Monday. 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 its 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...
http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bail-out
dawg
(10,624 posts)maybe even Spain and Italy.
People are going to be in need of reassurances tomorrow. It could get ugly.
cthulu2016
(10,960 posts)A promise to not do the same elsewhere? Why would anyone believe it?
That is what they would say either way.
I really am surprised they went after insured funds. That seems very destabilizing to me.
dawg
(10,624 posts)was so as not to bail out the Russian mafia 100%. Presumably, those other countries aren't safe-havens for that sort of thing. So if they could make people understand why Cyprus was a special case, they might be able to prevent bank runs elsewhere.
But I still think it was a stupid move.
dipsydoodle
(42,239 posts)It was the haircut on their bonds which caused this mess in Cyprus
reformist2
(9,841 posts)If we're going to bail out banks, or the economy, it makes no sense to attack people with savings, especially going after people with less than $100K. What about people with all their money in stocks? bonds? real estate? They get off scot-free?
oldhippie
(3,249 posts)"We" are not doing this. It was the Eurozone bankers. In fact, it's not decided yet that anyone is going to do this. The Cyprus Parliament still has to vote.
Earth_First
(14,910 posts)to ensure that their assets have been protected and moved out of country.
oldhippie
(3,249 posts)Tha banks are still closed and no transfers are being allowed.
This is not yet a done deal. The Parliment still has to vote on it. We'll see.
cthulu2016
(10,960 posts)MrScorpio
(73,630 posts)Every week is a new adventure over there.
Nye Bevan
(25,406 posts)oldhippie
(3,249 posts)... to insure you against your assets being taxed by your government. It's insurance against the bank failing.
That said, I think a lot of people don't understand their financial lives.
Nye Bevan
(25,406 posts)out of my FDIC insured savings account, I would be royally pissed. Even if they called it a "tax".
oldhippie
(3,249 posts)... about the Obamacare tax (oops, I meant "penalty."
I'd be pissed too, even though many here say we should happily pay our taxes as the cost of a civilized society. I sure paid a bunch last year.
But I don't think it is going to happen. I bet the Cyprus Parliament balks.
oldhippie
(3,249 posts)So now what? Does Putin bail them out for a naval port? Or do they deefault and drop out of the Euro?
cthulu2016
(10,960 posts)The state has a right to tax bank deposits, but not without prior notice of such a policy where people are able to avoid the newly-taxed behavior.
Your effort to justify the unjustifiable is a non-starter.
oldhippie
(3,249 posts)... in the Constitution? Our government has imposed retroactive taxes before and it passes Constitutional muster.
Or in the Cyprus Constitution? If they even have one.
cthulu2016
(10,960 posts)re: And where does it say that in the Constitution?
In US law a rate change to an existing tax can be retroactive, but a wholly new tax cannot, particularly when, as is the case in Cyprus, it imposes a tax on an activity that was undertaken with the expectation of no tax at all (!)
If Cyprus were the 51st state, under the 5th Amendment the Cyprus solution would be struck down.
Blodgett v. Holden and Untermyer v. Anderson struck down the retroactive application of the federal gift tax, establishing the "wholly new" standard.
The most recent judicial description of the standard is that a wholly new tax is a tax that could not reasonably have been anticipated by the taxpayer at the time of the transaction.
oldhippie
(3,249 posts)I didn't know that case law. I guess it makes sense, but it isn't something I had seen before. I guess I see it as an interpretation of something that isn't in the Constitution. Sobeit, I learned something.
I wonder if Cyprus has any such provision in whatever it's founding laws are?
cthulu2016
(10,960 posts)the parliament thinks it can do, so I'd guess it's allowable.
But I don't know.
MineralMan
(146,288 posts)the day before this was announced, of course. Moved all the money to the Caymans, you see. It helps to have Greek friends in high places. Still, it's best to avoid Greeks bearing gifts. Word to the wise.
oldhippie
(3,249 posts).... the Cayman's banks. I'll try to get out with you!
MineralMan
(146,288 posts)I have to protect my billions, you know.
Renew Deal
(81,856 posts)Seems selfish to me
oldhippie
(3,249 posts)This is not yet a done deal. Their Parliament still has to vote on it. It's not clear yet when, or if it will pass.
If you (an American) have money in a Cyprus bank, you are most likely not part of the 99%.
A lot of people in Europe would rather have the Russian oligarchs and mafia that use the Cyprus banks for money laundering pay a chunk of the bill rather than the regular taxpayers in Germany and France.
The small depositors (<100K Euros) may be protected by Euro zone deposit insurance (though not the big Russian accounts.)
I have read in a couple of places that the depositors will receive some bank equity in return for the "tax."
After some initial reaction early this morning, the US markets have seemed to kind of shrug this off.
Stay tuned.
reformist2
(9,841 posts)dipsydoodle
(42,239 posts)Search for latest information.
malaise
(268,952 posts)This is going to get ugly
abelenkpe
(9,933 posts)Response to cthulu2016 (Original post)
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