Skip to comments.Cyprus on the brink of euro exit after ECB ultimatum
Posted on 03/23/2013 11:46:28 PM PDT by Olog-hai
Cyprus is on the brink of bankruptcy and of becoming the first-ever country to leave the euro after the European Central Bank (ECB) issued an ultimatum on Thursday (21 March).
In its statement, the ECB warned that it would turn off the tap of emergency funding to Cyprus banks on Monday if a rescue package is not agreed.
Removing Cyprus emergency support could see the country's two largest banks, Bank of Cyprus and Laiki, collapse within days.
Carston Brezki, senior economist at ING, described the ECBs move as a gun at the head of Cyprus.
(Excerpt) Read more at euobserver.com ...
This article is old news. Need info for 24 Mar 2013 onward. Sunday EST is Monday in EU. We will have an inkling what will happen in EU by Sunday night which will impact stock opening in New York on Monday EST.
Cyprus has reportedly agreed to a new scheme to tax deposits in order to raise the money to bail out its banks.
According to Reuters, a 20 percent tax on deposits over 100,000 euros at the Bank of Cyprus would be levied. That would be coupled with a 4 percent tax across the board elsewhere.
EU purportedly guarantees deposits of 100,000 Euro or less against default. How does this “tax” square with such a guarantee? It doesn’t.
How does the EU hope to ever retain large foreign depositors when they’ve hung them out to dry in an EU member state? They won’t.
This has been a tremendous game of chicken and the EU just blinked. They’ll quietly find some face-saving means of a full bailout. The consequences across the EU are too great to allow this.
What really s*cks is, it’ll probably be the Federal Reserve that ultimately bankrolls the whole thing. They’ve been recapitalizing the EU all along since 2008.
Zero Hedge has some good articles & links (language warning on comments).
#Cyprus has good updates. This is really, really, really not good- worse than TARP (direct theft), if that’s possible.
And when everyone pulls their money out of the banks to avoid the tax, then what?
Capital controls, no withdrawals, banks are still closed.
Agreed may mean nothing or it may be everything if their agreed means their parliament already voted on it.
The tax would be collected before the banks reopen. They wouldn't have a chance to pull their deposits in order to avoid the tax.
The Turks will take over the rest of the island on the other side of the ceasefire line and/or the Russians buy the banks and the undeveloped offshore gas fields?
Now they are talking 20% - 25% instead of 100%.
That will not happen.
Depositors will likely lose closer to 100%.
Tuesday, banks will ‘open’.
When Cyprus banks open, there will be a run on the banks by all depositors who are not brain dead, to remove every cent.
Deposits will be limited, capital controls... in an attempt to stop a bank run. So what if you have a piece of paper that says you have $1million in the bank if you cannot withdraw it at all.
When will they remove the capital controls?
That is the day the banks fail completely - they are insolvent.
If you cannot withdraw your money, you don’t have it.
Now they are talking 20% - 25% instead of 100%.
The way it will play out - the government will steal 20%-25%, the subsequent run on the banks will bankrupt them and depositors will lose every penny of the rest.
Not only did they kill the banks but they killed Cyprus’ biggest industry outside tourism.
Cyprus as a tax haven is dead.
Cyprus as a company location is dead.
There are thousands of lawyers who made a living setting up companies, investment funds, trusts, etc. in Cyprus.
They are all finished.
From what I’ve read, the 20% confiscation will be made to those who have over 100,000 in their account at the Bank of Cyprus. The second largest bank (Popular Bank) will be split into 2 (good assets and bad assets). What I’m not clear about is what happens to the accounts in Popular bank that were over 100,000 ? Is it all gone?
Now they are talking about confiscating (stealing) 25% with some demanding 40-50%.
Pretty much every penny in Cyprus banks is gone, what remains to be seen is if their deposit insurance works and if the little people lose everything too.
The Soviet mob bosses will help them recover....right?
The euro was a dumb idea. Wailing over the consequences of a dumb idea is stupid.
Milton Friedman said that from the very beginning.
Look at his documentaries Free To Choose.
Well worth watching!
Better than a Ph.D. in economics from watching online videos!
They are well produced and very interesting - it's surprising to think that PBS was involved.
Economist Fiona Mullen said she doubted there would be much leeway from the Eurogroup.SOURCE: http://www.france24.com/en/20130323-pain-mounts-big-depositors-two-main-cyprus-banks
"Estimates on how much you would need to haircut changes from minute to minute but, if we go with (German Finance Minister Wolfgang) Schaueble's number last week, it was 40%. That probably just increased to 50% because of the recent events," she said.
The smart money...would let Cyprus collapse within the EU. The EU is neither stable or sustainable. Every member state of the Euro is a socialist mess with debt up to their ears.
You don’t try to save a drowning person of they will not follow your instructions lest they take you down with them.
The EU and all od the countries who signed on to the Euro did so with the thought that they could set up utopia and if it crashed then someone else would be on the hook to clean it up.
The EU is doomed, and they simply will not be able to save themselves from their own greed.
Socialists are the most greedest.
I suspect that the Europhiles will blink on this one, and cough up the bailout, because they would rather destroy their own countries than see other nations leave the EU, as that would “destroy the dream” of a unified European nation, that they are obsessed with.
Actually they will probably get more foreign depositors in solvent states now that they know they won’T be required to carry as much of the load for those who are insolvent. I don’T really understand the pity for Cyprus who is being required to give something back in return for a bailout. This will cut back on cries for bailouts in future. I don’T see this as a bad thing.
Cyprus is “giving back” other peoples’ money. Cyprus is a European Union member state. Cyprus is being forced to confiscate deposits by the EuroGroup, which are all the various heads of the central banks in EU member states. If no one can see how this will destroy trust in the financial system of the EU as a whole, there’s a really big train wreck coming. I don’t think they’re quite that stupid. Arrogant, yes. Stupid, no. Not on the whole.
From what I understand over 50 percent of the depositors are Russian. If so, it’S likely that a large number of the rest are in sympathy with Russia and what the Russians are doing there. AGain, if they want a bailout I don’T see problem with them giving something in return.
Scapegoating depositors does not sway me in the least. Depositors didn’t drive Cypriot banks into insolvency, regardless of their nationality.
They do run banks into insolvency if they, for example, establish a presence in the country only for political reasons in order to speculate in real estate bubbles and then expect to be bailed out by western European taxpayers.
They wouldn’t have deposits to levy if that were the case, now would they?
Sure they would if they’Re funneling in money from other ventures around the world to take advantage of a bailout they thought was coming with no strings attached.
If that were to be the case, I'd suspect that there would be multiple, multiple sketchy accounts for the purpose of money laundering set up to fall within the limits of the EU guarantee up to 100,000 EU.
But, those aren't being touched.
Maybe they should just take it all, might be dirty money.
Up to this point it hasn’T been “might” get bailed out. It’s been “WILL” get bailed out. The EU has pre empted the Russians by suddenly changing the MO. The Russians did not expect the 100,000 threshold so did not go the multiple small account route. I find it funny so many conservatives defending the Russians in their stealth takeover. I for one am happy to see them blocked.
The 100,000 deposit guarantee threshold came into being several years ago and was no secret so to say anyone is surprised by the existence of it is nonsensical.
If there is proof of illicit funds being laundered there are legal means to pursue the matter without seizing funds on a vague pretext and violating the trust upon which the banking system depends and functions.
This is the thing that so many fail to grasp in rushing to scapegoat depositors.
Deposits do not make banks insolvent. The lack of them does.
No a Levy on accounts over 100,000 was not clear until a few days ago. It had not been done before so the russians did not know it was coming. And large depositors most definitely do have say in the direction a bank goes. Big customers and bank management walk hand in hand.
You believe not just that Russian mobsters comprise the entirety of large depositors above the ECB guarantee cutoff, having funneled more money there in the hopes of possibly being bailed out, but that they directed the haircut they're now up in arms about. Right.
You're making this up as you go along, aren't you, lol?
Who said anything about the Russians directing the haircut. I said they were blindsided by that. They may now have to go along with it now but earlier I’M sure they thought an infusion of cash was coming at no cost to them.