Raid on bank accounts in Cyprus

(358 Posts)
MrsJREwing Sun 17-Mar-13 03:46:09

Nearly 10% of savings will be taxed from private individuals savings, to save the banks.

CogitoErgoSometimes Sun 17-Mar-13 08:04:35

It's the extreme conclusion of 'wealth tax'. Anyone with a 'mansion' take note.

mablemurple Sun 17-Mar-13 08:52:32

We are not Greece/Cyprus, you're being comically alarmist.

Bowlersarm Sun 17-Mar-13 09:00:28

How is it alarmist, when it is about to happen? No one is making the story up

LtEveDallas Sun 17-Mar-13 09:12:18

Crikey, is there a link to this?

Who will it effect, just the Greek Cypriots or everyone with a Cypriot bank account?

When you go over there with the military you have to open a local bank account for your wages to be paid into - and trying to transfer the remains back to your UK bank account when you leave costs too (hence I came home with £3k cash in Euros rather than transfer the money to Barclays).

Is there an earning/saving limit?

I find it alarming that this could be legal, although I understand it is still to be ratified by the coalition government? It's for all bank accounts not only large balances and I feel very sorry for all savers. angry sad sad

Bowlersarm Sun 17-Mar-13 09:14:51

lteve it's a leading story in the national newspapers. Affects all with accounts in Cyprus

Lt Eve, I think it for everyone regardless of nationality and the rate for accounts with less than 10,000 Euros is 6.75%.

LtEveDallas Sun 17-Mar-13 09:16:52

Bloody Hell DM Link

(Sorry for the DM link, I'm not a FT subscriber and it was the first one I found)

It seems its everybody being affected. That's awful

CoteDAzur Sun 17-Mar-13 09:20:18

Accounts held in the British subsidiaries of Cypriot banks would not be affected as they are covered by the FSA (Sky News). Would the servicemen or expats normally have these sort of accounts?

ErikNorseman Sun 17-Mar-13 09:27:39

I'm impressed that the DM actually used the word 'decimated' in its correct context.

Rosa Sun 17-Mar-13 09:30:59

If Cyprus can get away with doing this then which country will be next ?

Sorry, that should have been bank accounts under 100,000 Euros will be taxed at 6.75%

niceguy2 Sun 17-Mar-13 09:37:40

For me this is a very good illustration of why we need to tackle our debts/deficit now rather than stick our heads in the sand and carry on spending.

It's very interesting though that the BBC is reporting that the reason for this tax is partly because it is suspected that a lot of money held in Cyprus is laundered money. And as such the German's were baulking at the idea of throwing taxpayers money to save laundered cash. So the levy is the only way any rescue package was going to get through. The fact innocent savers end up suffering is simply a price worth paying. source

DolomitesDonkey Sun 17-Mar-13 09:42:20

It will be very interesting to see how the markets react tomorrow morning. Shades of Argentina?

For anyone thinking "it couldn't happen to me", I guess the Cypriots didn't think so either until a law was passed under their noses on a bank hol weekend.

Very unfair that this affects the savers and not the bond holders.

Privatise the profits, socialise the losses. Again.

I'm in the euro zone and wondering if I should empty my account today simply fro a bank run perspective.

claig Sun 17-Mar-13 09:45:53

A spokesman for the Cypriot government said yesterday the agreement with Brussels was ‘serious but not tragic’ and said that the EU had wanted a much higher levy but the government had fought hard against it.

That is what the elites think of the people

Tory MP Douglas Carswell added: ‘We should all be extremely worried about this. It shows that ordinary Europeans are being fleeced by the Continent’s elite in order to rescue foolish banks

Roshbegosh Sun 17-Mar-13 09:47:34

That really will empty the banks. Unbelievable!

LtEveDallas Sun 17-Mar-13 09:47:46

Offline, when we are posted to Cyprus we get 6 weeks to open a Cypriot Bank Account, usually either with Hellenic or Laiki. It's a current account for your daily wages etc. you can still keep an allotment to a British Bank for savings - but of course if you use them you get charged.

On further reading it seems that it is 'savings' accounts rather than current accounts, so most soldiers I know keep their savings in UK and won't be affected.

It's the expats I feel sorry for. Lots of them have substantial savings and live off the interest. They sell up in UK and buy a smaller property in Cyp, so live off their savings. They will lose thousands it seems.

The Russians will be going spare. There are a huge number of Russian Multi Millionaires in Cyprus - and a lot of their money comes from more nefarious means. Maybe this is why the government are doing this - but penalising the 'normal' savers at the same time.

meditrina Sun 17-Mar-13 09:52:14

The Cypriot parliament vote has been postponed until tomorrow, according to SKY.

It seems to be affecting all deposits in all sorts of bank accounts. So even if there maybe recourse via FSA eventually, it could be a cash-flow wrecking event.

There was something on the news yesterday about accounts being inaccessible, so if you haven't already moved money off the island, it may already be too late.

CoteDAzur Sun 17-Mar-13 09:56:10

Of course, it will not be possible to transfer these accounts outside Cyprus without first paying the 10% tax. If they don't close that door, there will be no money left in any Cyprus account by tomorrow afternoon.

claig Sun 17-Mar-13 09:57:34

'Banks have already acted to seal off the amount of the levy - a 6.75 per cent tax on deposits under 100,000 euro and 9.9 per cent on those above - so depositors can't access it.'

www.dailymail.co.uk/news/article-2294388/ATMs-emptied-Cyprus-savers-learn-10billion-euro-bailout-agreement-includes-levy-bank-accounts.html

claig Sun 17-Mar-13 10:00:47

Restrictions have been imposed to stop people emptying their accounts or moving their money out of the country following the
deal with other eurozone finance ministers, under which ordinary citizens’ deposits will be directly raided for the first time.

claig Sun 17-Mar-13 10:02:37

Clearly the elite knew the fear that this would create, but it seems they wanted to send a message.

claig Sun 17-Mar-13 10:06:11

'the EU had wanted a much higher levy'

and they wanted the message to be even louder

MrsJREwing Sun 17-Mar-13 10:07:17

Military seem to be ok then.

meditrina Sun 17-Mar-13 10:09:16

SKY reporting that Osbourne has said the UK government will pay back anything taken by the levy to all those posted to Cyprus by the Government (military, FCO, OGD).

LtEveDallas Sun 17-Mar-13 10:13:49

So in a stealthy way, the Britsh Government helps to bail out another country? Although I cannot see it being very much money, it is still wrong.

I am really shocked by this. I just did not know that something like this was possible. I have Cypriot friends who were pretty much living hand to mouth in any case - it's a very expensive country to be a part of. This is going to hit them hard.

Everything is expensive these days, from food to water to fuel. This just adds insult to injury doesn't it?

claig Sun 17-Mar-13 10:16:22

Yes, Osborne has to do that and rightly so.

But does that mean that in effect the British taxpayer is helping to bail the banks out?

claig Sun 17-Mar-13 10:19:19

None of the elite and political class who were in power when the banks were allowed to operate with ineffective regulation have been arrested or jailed, but ordinary people stand to lose thousands of pounds of their savings to rescue the banking system.

flatbread Sun 17-Mar-13 10:28:00

We just took a huge chunk of money out of a supposedly 'safe' Euro country and moved it to UK. Just in case.

I can see a possible run on all Euro banks. Who on earth will trust any of them?

It is fucking unbelievable!

Getting on this thread

flatbread Sun 17-Mar-13 10:41:31

In NYT earlier they had a quote from some EU official who declined to rule out depositor haircut in other bailouts.

Designed to instil confidence...not.

meditrina Sun 17-Mar-13 10:47:52

I think it means simply that the Government will make good financial loss to those it posts for anything that happens as a direct result of that posting. After all, those service personnel and other crown/civil servants wouldn't be facing this had the government not sent them there.

BrianB Sun 17-Mar-13 10:50:50

MY CONSCIENCE IS CLEAR. IS YOURS? In the early 70's I voted in the UK against joining any form of Europe. Today I still will vote against it. Europe and the Euro is a mess DO PEOPLE EVER LEARN. The Cypriots need to get a grip before its too late. It was once a financial stable island. It joined Europe and worst of all the EURO. Now its BANKRUPT. If the main cause of joining Europe was to get the occupying Turks out then that failed as well. Incidentally, Northern Cyprus, European Union land, is the only part of the EU illegally occupied by a vicious and murderous foreign regime - TURKEY (and to think the war monger Tony Blair wanted them as a member). Message to the sensible, DUMP EUROPE, DUMP YOUR GOVERNMENT IF IT FAVORS BEING A MEMBER, VOTE SMALLER PARTIES TO GIVE THE BIGGER PARTIES A BLOODY NOSE, THOSE WHO DON'T OR NEVER VOTE GET OUT AND VOTE SMALLER PARTY AS THE BALLOT BOX WHEN USED PROPERLY IS THE BEST METHOD. Oh and guess who is the main benefactor of all the turmoil in the EU - GERMANY, raking it in and I'm sure the Cypriots will be pleased to know that their hard earned and scarce money will finish up in the GERMAN Economy. Well Done!

I can't read shouty messages, they give me sore eyes and a headache.

DH's family is Cypriot and we have an awful lot of relatives out there who are furious at this. The banks were very sneaky. The few that usually open on a Saturday, didn't and apparently quite a few ATMs mysteriously stopped working too hmm I understand why it's been done (50% of Cypriot accounts are alleged to belong to non-resident Russians and they suspect money laundering - Germany doesn't want to bail out illegal funds) but it's going to screw a lot of ordinary people up.

I dread to think what's going to happen on Tuesday. The levy may be ringfenced but from what I understand people are going to withdraw the funds they can as a 'fuck you' to the banks. I'm pretty sure the banks aren't going to be able to cope with that...

CoteDAzur Sun 17-Mar-13 11:05:01

Brian - Fine if you were against joining the EU. You were arguably even correct. However, the rest of your post makes you look like an ignorant idiot.

"If the main cause of joining Europe was to get the occupying Turks out then that failed as well."

That couldn't have been the cause, because Greek part of Cyprus was the only part of the island that was invited to join the EU.

"Incidentally, Northern Cyprus, European Union land..."

Not EU land, obviously, since it was never invited to join the EU and has therefore never joined the EU. Not because Turks didn't want to, by the way.

Northern Cyprus voted "Yes" to join Greek Cyprus before ascension to EU. Greek Cyprus voted "No" to join with Northern Cyprus. It was the Greeks of Cyprus who didn't want the island to join EU as a whole.

"Oh and guess who is the main benefactor of all the turmoil in the EU - GERMANY, raking it in"

You really don't know a thing, do you? Germany has been financing the bailout of failing EU economies, against the wishes of the majority of its citizens. 'Raking it in' is the opposite of what they have been doing.

BrianB Sun 17-Mar-13 11:15:00

If it is true that the Cyprus Parliament vote on the raiding of bank accounts is postponed until 18 March, then it is the duty of every Cypriot to get out on the streets and ensure that the vote goes against the raids.

It wasn't quite as simple as that Cote, but this probably isn't the place to debate it.

CoteDAzur Sun 17-Mar-13 11:22:01

Nothing is simple but it is patently wrong to claim that Northern Cyprus is EU land, especially since its residents actually voted to join the EU alongside the rest of the island.

Oh yes, I'd agree the occupied north isn't part of the EU. I'm just saying the vote wasn't as simple as the south just saying no to reunification. Reunification would be fantastic, just not with the conditions attached to that particular vote smile

BrianB Sun 17-Mar-13 11:34:20

Message deleted by Mumsnet for breaking our Talk Guidelines. Replies may also be deleted.

edam Sun 17-Mar-13 11:37:39

Blimey, so the EU can just suddenly decide to steal whatever amount they like from anyone who has a bank account i.e. almost everyone? Good grief.

CoteDAzur Sun 17-Mar-13 11:37:57

It is not EU land.

It never was EU land.

It wanted to join EU but wasn't let in.

Any questions?

edam Sun 17-Mar-13 11:39:07

Bet the Turkish Cypriots are feeling jolly glad Turkey wasn't allowed to join the EU now...

claig Sun 17-Mar-13 11:39:32

'Due to the Cyprus dispute, Northern Cyprus is only recognised by the EU candidate state Turkey. All other countries recognise the Republic of Cyprus, an EU member state, as the only legitimate government for the whole island. However the Republic of Cyprus de facto only controls the south of the island while the Northern government, seen as a Turkish military occupation, controls the north.

Due to this dispute, northern Cyprus is de jure part of the EU by virtue of de jure being part of the Republic of Cyprus. Aside from complicating the accession of Turkey to the European Union, it has placed the north in international isolation

en.wikipedia.org/wiki/Northern_Cyprus_and_the_European_Union

CoteDAzur Sun 17-Mar-13 11:41:41

I think it was the decision of Cyprus to do it. EU seems to have told them "If you want us to spend loads of money to bail you out, you need to put some in, too".

Cyprus needs 17 billion Euros to save itself. They will raise about 6-7 billion euros with this tax and EU will fund the remaining 10 billion, from what I read.

claig Sun 17-Mar-13 11:43:51

'You really don't know a thing, do you? Germany has been financing the bailout of failing EU economies, against the wishes of the majority of its citizens. 'Raking it in' is the opposite of what they have been doing.'

It has been against the wishes of the German people but according to the wishes of the German political class and elite.

CoteDAzur Sun 17-Mar-13 11:43:51

edam - Greek exodus into Northern Cyprus? It is not as ridiculous a scenario as it would be a few days ago.

CoteDAzur Sun 17-Mar-13 11:47:11

claig - Northern Cyprus isn't part of the EU just because someone wrote so on Wikipedia hmm Neither are the two sovereign base areas in South Cyprus that are part of British overseas territory.

edam Sun 17-Mar-13 11:47:26

Yeah, so the EU tells Cyprus to do it and Cyprus does it. Still the EU's responsibility. Still the EU approving the theft deal. Don't know why I'm surprised tbh, given the EU overthrew democratically elected governments in Italy and, irony of ironies, Greece, clearly the leaders feel able to do what the hell they like and sod the ordinary man and woman in the street.

Honestly, I'm aware that sounds like a UKIP rant but good grief, the EU's behaviour is extreme. I hold no candle for Berlusconi who was clearly an incompetent shit, and Italian politics is extremely murky, but he was actually elected. Overthrowing democratically elected governments was an astonishing low for the EU.

Xenia Sun 17-Mar-13 11:48:07

I think they have supposedly a guarantee protection for savers which in effect is being ignored for the 6.75%. I suppose they must have changed the law to remove the guarantee which of course means the UK could do so too.

Perhaps people should keep their money under the bed or in gold.

edam Sun 17-Mar-13 11:48:44

And I loved the EU's description of the new puppet governments they installed in Greece and Italy as 'technocrats'. Yeah, right, because the accurate term 'dictatorship' is soooo embarrassing.

claig Sun 17-Mar-13 11:50:38

edam, it is the elites versus the people, that's how the system works. The people in Cyprus have had this imposed on them without a vote.

flatbread Sun 17-Mar-13 11:52:05

Xenia, pretty right. From Zerohedge today:

"More importantly, as of this morning Europe has finally grasped that there is a 6.75% to 9.9% premium to holding physical cash in your mattress rather than having it stored with your local friendly insolvent bank"

I do think US and UK will be ok, as any other country that can print money. They have the option to devalue our savings and erode through inflation, rather than direct theft.

claig Sun 17-Mar-13 11:52:06

'Perhaps people should keep their money under the bed or in gold.'

Don't forget that Franklin Roosevelt confiscated people's gold.

Chandon Sun 17-Mar-13 11:54:05

Oh fatbread, that is sadly true...

claig Sun 17-Mar-13 11:55:00

Isn't eroding through inflation indirect theft od saves' money?

CoteDAzur Sun 17-Mar-13 12:00:04

What else were they going to do? Annual GDP of Cyprus is about 17 billion euros. They want someone to give them what their entire economy is worth in a year. It is a lot of money for such a tiny country.

Imagine if UK were to beg for almost 2 TRILLION euros. I bet whoever offered to help would ask the UK to come up with some of that amount by taxing someone.

At least Cyprus is raising most of the money they need from non-citizens who are probably not even residents. Would you rather they fund this 6 billion euro amount by taxing Greek Cypriots?

BrianB Sun 17-Mar-13 12:02:01

It appears that CoteDAzur is pro Europe (a vote for disaster), anti Greek Cypriot and Pro Turkish. If you took away the politics, who voted what on what you were allowed to vote on and a host of other none moralistic values and you are simply left with a Europe in collapse, bankrupt and a divided island of Cyprus which morally should be a part of the EU. you are either for the European disaster or against as you are with the Greek Cypriots or against. I know where I am. Its not Europe and its not the Turks.

MrsJREwing Sun 17-Mar-13 12:06:17

ESM Fiscal pact is why this will happen elsewhere, David Cam didn't sign.

claig Sun 17-Mar-13 12:08:08

No I'd rather they nationalise the banks, jail the polticians who allowed this state of affairs to exist, lend the tiny amount of money something like 0.2% of European GDP, increase taxes on earnings and not touch savings on which tax has already been paid, and set a low interest rate over a very long period to pay back the debt.

Instead of the people taking a haircut, the banks should take haircuts.

CoteDAzur Sun 17-Mar-13 12:11:50

Not sure what you mean by "pro-Europe", Brian. I don't live in the EU and have never been asked to vote to join the EU.

But don't let facts stop you from ranting.

CoteDAzur Sun 17-Mar-13 12:14:21

"a divided island of Cyprus which morally should be a part of the EU"

"Morally", no less grin

Well, as edam said, I bet today they are celebrating the day when they wanted to be part of EU and were snubbed by Greek Cypriots who joined the EU on their own.

claig Sun 17-Mar-13 12:21:23

On the Sunday Politics, one of teh commentators just said that the Dutch finance minister has refused to rule out that these typoe of measures may be used in other Eurozone countries.

The elite often test their policies in small countries before launching them on a larger scale. The elite will want to watch the reaction of the people before they attempt it anywhere else.

BrianB Sun 17-Mar-13 12:30:39

Apart from the CoteDAzur none EU (but pro EU disaster), is there any 'Legal Beagles' that can give legal comment on a Cypriot Government that interferes with a banking system BEFORE it has taken a parliamentary vote?

MrsJREwing Sun 17-Mar-13 12:32:20

Yes Clag, as the Dutch as with all EU members signed last years ratification allowing this. David Cameron and one other country didn't sign.

BrianB Sun 17-Mar-13 12:56:55

Lambs to the slaughter?

C - Cypriots
L - Largely
A - Angry &
G - Gutted

edam Sun 17-Mar-13 13:29:29

I never thought I'd have cause to say 'well done David Cameron' but it seems appropriate.

MrsJREwing Sun 17-Mar-13 13:40:54

Edam, it seems savers in Europe will feel their money is more secure over here.

edam Sun 17-Mar-13 13:45:34

It seems they would be right!

Gales Mon 18-Mar-13 12:56:52

I wonder if some enterprising journalist could get details if all the large transfers made out if the country in the week before the announcement....or even if the total was higher than usual

Does this make anyone else feel differently about holding money in banks (anywhere) I would have thought it could have a knock on effect on banks worldwide as people start to wonder if that really is the best place for their cash. If it can be done legally in Cyprus surely it can happen anywhere.

Xenia Mon 18-Mar-13 13:01:57

It is a creeping hidden communism, confiscation of wealth also to be seen in the proposed mansion tax. Better to spend your money on wine, women and song or even your children's education than risk saving or buying a house as assets that can be stolen from you can be by the state. No one can steal your education from you.

Yes, it is having a knock on effect. Value of UK shares down today etc. which affects people's pension funds.

edam Mon 18-Mar-13 13:57:16

I would imagine the knock-on effect will be even bigger in the Eurozone, since if they can do this to Cyprus, they can do it elsewhere... yet another reason to be thankful we didn't join the Euro. But haven't checked the financial news today.

flatbread Mon 18-Mar-13 14:06:58

I am ok with a mansion tax. The taxes on higher-end UK property are very low. In the US you pay twice or thrice the amount in annual property tax as compared to UK.

There seem to be all sorts of discussions in Cyprus on what percentage of deposits to take, between lower and higher groups. It beggars belief how badly managed this whole affair is.

I thought we are a nation of muddlers, but the Eurozone leaders seem to take a combination of arrogance and incompetence to a new level.

flatbread Mon 18-Mar-13 14:09:58

Edam, surpringly the Euro is still strong, $1.29 to a euro. Can't understand why, given that the US economy and dollars are a better hedge than the eurozone.

drivinmecrazy Mon 18-Mar-13 14:21:35

Anyone doubting it will spread through the Euro zone should take note. My Mum's accountant in Spain has had to make a full declaration of Mums global asssets, including property held in UK and Spain, and all her overseas accounts and investments (only bonds are exempt). It's not clear at the moment if Spain is going to levy an immediate tax but the reasons given have been the huge amounts of money wealthy spaniards have been moving out of Spain in the last 12 months leading to a huge drop in tax revenue.
Unfortunately many non spanish speaking ex-pats are currently oblivious to this and only have until 1st April to file their assets over 50,000 euros, upon which time fines will be levied.
Any attempt to move assets is now futile because its based on accounts and assets held before 31st December 2012.
Watch this space, am sure they will be following on the coat tails of Cyprus very soon

drivinmecrazy Mon 18-Mar-13 14:33:52

Frighteningly legislation to approve this was passed by the European parliment quietly in November. Spanish government has also enacted, though not yet enforced, legislation to deny any non fiscal resident non emergency medical care. many Britsh ex pats believe because they hold resedencia this doesn't apply to them. many ex-pats aren't aware and most have no private medical care so will be forced back to the UK

flatbread Mon 18-Mar-13 14:44:43

Crazy, but they can only grab what is within the eurozone. Even if you declare your worldwide assets, thy have no jurisdiction over funds/property outside the zone. Atleast as far as I am aware...

Agree that the Cyprus move is a trial run. Probably Italy is next.

DolomitesDonkey Mon 18-Mar-13 14:45:08

edam Your currency has been devalued and is suffering the effects of inflation - the robbery has simply been disguised.

Same as it ever was - spend your money on booze & fast living - the rest you should waste. It is becoming more and more apparent that those with visible assets - i.e., the eejits who saved their money will suffer further grabs - as if the raid on the private pension pots wasn't enough.

flatbread Mon 18-Mar-13 14:48:24

Yes, but erosion of savings through inflation is an acceptable form of theft, as there is no legal contract to prevent this.

Taking secured/guaranteed bank deposits is not. It takes us into unchartered territory.

drivinmecrazy Mon 18-Mar-13 15:00:44

Would hope that's true flatbread but she's still had to declare parts of her investment portfolio in the States.

CoteDAzur Mon 18-Mar-13 15:09:31

The Cypriot government was scrambling to ease the terms of the bailout on Monday to push the deal through parliament. The Wall Street Journal reported that it proposed spreading the pain of the one-off tax more evenly. Under the new proposal, smaller depositors with up to €100,000 would be taxed at 3%; savers with €100,000 to €500,000 would be taxed at 10%; and those with more than €500,000 at 15%. The original deal was for Cyprus to tax every depositor with less than €100,000 at 6.75% and those over that amount at 9.9%.

... says The Guardian

flatbread Mon 18-Mar-13 15:22:38

It makes no sense to take 3% from under €100k. It is a small amount with huge confidence and legal repercussions.

Deposits over €100k are not guaranteed, so you not solely focus on these?

Really bizarre.

CoteDAzur Mon 18-Mar-13 15:26:51

Confidence is already shot. It doesn't even matter if they don't impose any tax on bank accounts anymore. Anyone who can possibly move his money elsewhere will do so on the banks' first business day.

flatbread Mon 18-Mar-13 15:28:19

In fact, even if they completely back-pedal and leave the under €100k depositors intact, the euro-leaders have shown their hand that no deposit is sacred and legal contracts mean diddly-squat.

Who will trust their bank deposits are safe from a government grab in any euro country?

flatbread Mon 18-Mar-13 15:28:45

X-posted. So true

noddyholder Mon 18-Mar-13 15:29:04

The banks are closed until Thursday shock

flatbread Mon 18-Mar-13 15:47:42

And the question is Which Thursday? shock grin

<Ok, not funny. Slaps self>

CoteDAzur Mon 18-Mar-13 15:48:07

Another question is whether Cyprus will have a banking system left on Friday.

ttosca Mon 18-Mar-13 15:55:02

...and the madness of Capitalism continues.

Xenia Mon 18-Mar-13 16:06:19

I was looking at some dodgy deal from a Cyprus person last week. I think the country is heaving with dubious and laundered money.

As for UK depositors as long as we stick with tougher cuts, much much tougher I suspect the UK will be safe from confiscation of bank deposits and I hope they do not impose taxes on houses as those thinking they do not have a "mansion" may well find like all taxes it starts with a house worth £1m and comes down to those costing £300k. Taxes on savings which were made out of taxed income just stop people saving.. although I suppose at present although on a personal level for most people paying off debt is very wise, for the nation they would rather we were all spend spend spend at present to get the economy going.

Just as well money has no effect on personal happiness.

CoteDAzur Mon 18-Mar-13 16:16:28

Re houses worth £1m - There aren't many flats worth less than £1m in Central London.

How would they judge what a house is worth, anyway? There would be many properties in places like Central London that are bought 20 years ago for a fraction of that amount but are now worth millions. Their owners would easily not be wealthy or possibly even be low-income.

CoteDAzur Mon 18-Mar-13 16:17:08

Talk in Monaco today is that there will now be an invasion of ex-Cypriots, following on the heels of Russians and Greeks.

MrsJREwing Mon 18-Mar-13 16:17:53

Look at article 136, European stability mechanism, Cyprus have no choice, like the others, all for the good of the Euro.

flatbread Mon 18-Mar-13 16:32:43

By most accounts, Cyprus exercised fiscal prudence. So Osbourne's statement that it s an example of why we need more cuts is silly. Remarkably ignorant, even by his standards.

The problem in Cyprus is that the banking sector is too big, 900 times GDP. And loans/investment predominantly in Greece have soured. Hence the need to recapitalize the banks

flatbread Mon 18-Mar-13 16:39:35

The mansion tax is altogether another matter.

Taxation has been getting retrogressive, in the last twenty years or so.

There is no reason why a property worth, say, half a million, pays the same property tax as one worth five million. The council tax bands, as they currently stand, are inadequately spaced and not progressive.

I suspect all properties, except the ones in he lowest band, will and should be taxed higher.

At he same time, though, we need to keep a closer eye on council finances and hire a higher caliber of council managers than the current lot.

CoteDAzur Mon 18-Mar-13 16:45:02

What does that mean "Banking sector is too big"? Like, in Switzerland, you mean. That doesn't seem to bother the Swiss.

The problem in Cyprus is that its banks were heavily exposed to Greek debt whose worth was reduced practically to zero.

CoteDAzur Mon 18-Mar-13 16:46:49

"There is no reason why a property worth, say, half a million, pays the same property tax as one worth five million."

It won't, even if taxes are the same in % terms.

Half a million property will pay x.

Quarter of a million property will pay 1/2 x.

People with high-worth property aren't necessarily rich, you know, especially if the property was bought a long time ago.

edam Mon 18-Mar-13 17:26:42

Cote - are you talking about a completely different tax? Council tax is horribly regressive as the top band is based on 1991 values. So a house that is now worth £2m pays the same as a house that is now worth £750k. Obviously if you have a house worth £750k you are unlikely to be desperately poor - otherwise you'd have sold the house. But still, it's unfair that someone more than twice as wealthy as you only has to pay the same amount.

CoteDAzur Mon 18-Mar-13 17:34:44

Sorry if I have misunderstood but the point I was trying to make was that you may very well be living on a small salary or a pension in Central London, in a small flat, which is now worth over 750K (but was bought a long time ago for a fraction of that).

I did ask the question how the values of these houses were to be assessed about two hours ago and I don't think anyone answered.

claig Mon 18-Mar-13 18:47:27

Cote you are right about the difficulty in valuing the properties. It will require a complete reassessment of all properties and that will mean that millions of ordinary people will end up being taxed more. That is why Osborne is against it.

Andrew Neil questioned a LibDem who supports it, and she was all over teh place and didn't have a clue about the valuations. Then Labour jumped in and said they wanted a mansion tax, but when Andrew Neil questioned Balls he was all over the place about valuation too.

None of them want to get into the nitty-gritty of valuations, because then they would have to fess up and tell us that they intend to tax all of us more.

flatbread Mon 18-Mar-13 18:54:43

Yes, the Cyprus banks were very exposed to Greek debt. But fiscal prudence has nothing to do with it. Osborne is wrong to say that fiscal prudence (e.g., cuts in government spending) would have 'saved' Cyprus. It is nonsense, as the issue is too-big-to-fail banks

In fact, the problem with UK is exactly the same. Our banking sector is dangerously large as compared to our economy. But we can devalue and print money, if we need to. And so can the Swiss. And in fact, that s what Iceland did in part when it had a meltdown like Cyprus. Again, nothing to do with irresponsible public spending but everything to do with reckless risks by private banks that had to be bailed out.

lainiekazan Mon 18-Mar-13 19:02:05

It's funny, a few weeks ago I received an e-mail from a money advice site suggesting this very thing might happen in the UK. Ha ha, I thought, and deleted. But...

I know that Italians are in their droves taking money out of Italy and purchasing property in the UK.

Mansion tax? On the face of it it doesn't sound unreasonable - as long as it was set high enough. I get sick of pensioners complaining that they are on a small income in a large house that has gone up in value. Surely unearned income should be more fair game than that which has actually been grafted for?

flatbread Mon 18-Mar-13 19:06:50

Valuations on property are not that difficult, given that we have land registry prices.

In Scotland, every house that is on the market requires an independent home report with a valuation. Something similar could be done for all properties, with the cost of the report deducted from your first year property tax liabilities. In addition, the home report gives energy-ratings, and properties that are green could get a discount on property tax.

It is perfectly possible that some people are asset-rich are cash-poor because they brought their property eons ago. Nonetheless, incomes have gone up in the last two decades and the council tax bands are way too low and inadequately spaced. For pensioners, the government could have a deferred tax that when the property changes hands, they recoup the property tax lability.

flatbread Mon 18-Mar-13 19:10:14

Laine, that is interesting. Is this after the Cyprus fiasco or before?

I talked with a friend in France, and she was quite complacent that nothing woud happen there.

claig Mon 18-Mar-13 19:30:03

flatbread, it would be political suicide to tax us further. Channel 4 has an item on "Zombie Britain" where the economy is in a zombie state with people struggling to pay their bills. Payday loan companies are on many high streets.

Any tax rises on ordinary people will be a disaster for teh political party implementing them. That's why Eric Pickles has capped council tax increases and why Osborne will not revalue homes. Labour have tried to embarrass the LibDems by calling their bluff on the mansion tax, knowing that if they did it, then it would spell the end of the Coalition's chances.

flatbread Mon 18-Mar-13 20:03:00

Claig, it may well be the case that they freeze it at the moment, but at some point they will need to address the issue. The bands don't make sense and are regressive.

edam Mon 18-Mar-13 20:10:21

Claig, I know it would be difficult to re-value without ruddy politicians sneaking in a tax rise but in theory you could re-value while making sure Bands A-G, say, didn't have to pay more than they are now. But you add a new range of higher bands so those at the top end are paying their fair share; that the burden of council tax is shared more fairly among the different centiles, rather than the top 25% or whatever it is paying the same rate as the next 25% down.

claig Mon 18-Mar-13 20:11:48

Yes, we all know who will probably do it. The socialist progressives. It is true that the Tories might trick us and do it after they get in next time, if they do.

There is now a propaganda programme on Channel 4 showing us rich pensioners and how they should have their benefits cut.

They want to divide and rule us and cut more benefits for people.

Cameron has promised not to touch pensioner benefits, but how long can he resist the prpaganda of the progressives who are itching for their mansion tax and benefit cuts on pensioners?

claig Mon 18-Mar-13 20:17:16

Agree edam that would be good. But why didn't Balls say they would do that? Because that is not what they intend to do.

claig Mon 18-Mar-13 20:22:30

Sickening propaganda. There are pensioners living in one room in order to be able to heat their homes and these progressives are showing youths recording rap videos and arguing that they need more money that the frail pensioners.

All the progressive elite discussing how they will cut the benefits of poor pensioners because they are lording it up.

claig Mon 18-Mar-13 20:25:18

It is the same elite and their think tanks that want to steal the money from ordinary people's bank accounts in Cyprus, because they say they too have lorded it up.

CoteDAzur Mon 18-Mar-13 20:39:22

I wish you would stop ranting about the elite in multiple consecutive posts.

This is how you kill every thread on economy & financial crisis.

claig Mon 18-Mar-13 20:44:27

Tory MP Douglas Carswell added: ‘We should all be extremely worried about this. It shows that ordinary Europeans are being fleeced by the Continent’s elite in order to rescue foolish banks

Just because you are not aware of what is going on with the elites and Northern Cyprius, doesn't mean I won't correct you.

CoteDAzur Mon 18-Mar-13 20:51:13

"Valuations on property are not that difficult, given that we have land registry prices"

Those can give average prices in your city or your neighbourhood, but how to value the flat with sea view or one that hasn't been renovated since the '50s? Average prices mean very little when valuing individual properties.

I bought a house 10 years ago for x. It appreciated a bit in value, plus I renovated it up to a great standard, so I sold it for 2x. What does that mean for the house next to me that was bought 30 years ago for 0.2x and has never been renovated? Very little.

claig Mon 18-Mar-13 20:52:29

Even the Guardian knows that the elite is behind it, unlike you.

There are winners, of course. They number the hedge funds of Mayfair that bought Cyprus government debt betting that the euro elite would implement just such a stupid scheme

'What's different this time is the nakedness of the Cyprus heist. The right can jump up and down at a massive infringement of property rights. The left can fulminate at the obvious social unjustness of such a tax, levied even while the banks are shut. However the Brussels elite might thus seek to defend their plan, they have managed to offend all sides – and so blown a huge hole in the credibility of the eurozone.'

www.guardian.co.uk/commentisfree/2013/mar/18/cyprus-savings-raid-bank-robbery

CoteDAzur Mon 18-Mar-13 20:59:52

craig - Surely someone must have mentioned this to you before, but your posts on these economy threads make you look like a loon.

I'm more familiar with Northern Cyprus than you can hope to be by reading Wikipedia and Daily Mail. And you haven't corrected me at any point. It is not now and has never been part of the EU.

And your obsession with "the elite" is a bit embarrassing and makes you look like a conspiracy theorist with a tin foil hat.

Hope that helps smile

CoteDAzur Mon 18-Mar-13 21:04:06

They are using the term "Brussels elite" to mean "EU technocrats based in Brussels". Not some secret organization of the rich and famous who rule the world in secret.

claig Mon 18-Mar-13 21:06:26

Cote, I am a conspiracy theorist, but that is why I understand who is behind it.

And you're so familiar with Northern Cyprus that you weren't aware that it was de jure part of the EU. I trust wikipedia more than your views, particularly as you don't even realise what is being done and who is behind it.

Hope that helps grin

claig Mon 18-Mar-13 21:12:20

Osborne does not want everyone's council tax to increase, and doesn't want inspectors valuing everyone's house

' It means you have to send inspectors round the country valuing all the homes, not just the homes worth over £2 million but those worth less."

www.telegraph.co.uk/news/politics/9879284/George-Osborne-Mansion-tax-a-con-that-threatens-all-home-owners.html

Prescott had the following plans

www.independent.co.uk/news/uk/politics/prescott-satellite-to-spy-on-your-home-521295.html

claig Mon 18-Mar-13 21:17:14

Cote, the Brussels elite is unaccountable and undemocratic. The Cyprus government are elected by the people but are mere puppets of an unaccountable elite - they are powerless against them and have to do as they are told.

The people in Brussels in the parliament aren't the real elite, they are only functionaries - the real elite are the hedge funds and financiers who are really in control of policy and who are really imposing a haircut on the people of Cyprus in order to rescue the banks.

The Guardian is nearly there with its understanding.

claig Mon 18-Mar-13 21:24:46

And it is the real elites - not the politicians, for they are here today, gone tomoorow functionaries - who have milked the world population with their financial crash and who are imposing austerity on the people, and they are doing it to cut the rights and benefits of people (with pensioners being the next target, hence their TV programmes to soften people up) and to control the finances of the Eurozone as they have shown by the message that they deliberately sent to the world with the Cyprus bank deposit levy.

claig Mon 18-Mar-13 21:27:23

What they have done in Cyprus is almost unprecedented and they picked a small country in which to try it. The news said today that never in a Western European country has a bank holiday lasted so long.

The amount of money involved is peanuts compared with the overall rescues that they have been carrying out, but they did it to send a message.

flatbread Mon 18-Mar-13 21:28:06

Land registry prices is one part of the story. One can look at the actual prices of properties sold in the last five years for valuation.

Councils also have to approve any extensions, and these can be used to refine land registry prices.

But the main thrust should come from a one time, or once every ten years home report which evaluates the property. The land registry prices along with planning permission can be used to adjust or validate any large discrepancies in home report evaluations.

The home reports in Scotland, while not perfect, are fairly consistent and fair in their property evaluation.

claig Mon 18-Mar-13 21:34:02

And as someone above said, the money that they have given is a loan
They will get it back with interest, but they still want to rob ordinary people who had nothing to do with it, as they take full control of Eurozone countries' finance through the emergency loans needed to bail these countries out.

It is a win-win for the elite and a lose-lose for the people.

CoteDAzur Mon 18-Mar-13 21:37:09

Do you have this sort of property tax (based on current valuations) in the UK?

There is something similar to this in France but depends on individuals' "honest" declarations of what they think their properties are worth. Needless to say, these are rather understated.

So now they have cooked up another plan - On secondary properties, you pay tax on an imaginary income of several times an imaginary rent, as if you were renting it out. They are going after English property holders in particular, I hear.

edam Mon 18-Mar-13 21:46:39

The European Union is a completely different system to the way we practise democracy as a nation in the UK. New legislation is largely proposed by the bureaucrats - the European Commission - not by politicians, although the Council of Ministers (representatives of national governments) can tell the bureaucrats what areas to investigate. So the bureaucrats have a lot more power than in the UK, where the convention is civil servants merely carry out the will of elected ministers.

At every level there's a lot of horsetrading that goes on that is quite remote from ordinary citizens - which makes the EU quite undemocratic and enables bureaucrats and national governments to get away with stuff (like throwing out the then governments of Italy and Greece) without bothering to ask the voters.

The European Parliament can in some limited circumstances throw out certain legislation, or amend it. But it works in blocs of parties that share interests but can be very different - that's why Cameron took the Tories out of the bloc they had been in until he became PM. But he was thought to have behaved stupidly as it meant the Tories were not part of a particularly powerful alliance any more.

With the Council of Ministers, to some extent representatives from each national government fight their own corner - but they can also get away with stuff that their own electorate would not necessarily back, particularly in Britain where scrutiny of European politics is quite limited.

European bureaucrats will tell you quite proudly that it's all very democratic because they consult 'stakeholders'. I'm uncomfortable with this - of course governments should consult relevant organisations when considering legislation that affects their areas of operation, but it can all get far too cosy. They are supposed to serve the people, not special interest groups.

And it's the bureaucrats who decide how much weight to give to the different interest groups - I know the General Medical Council protested quite loudly about proposals to extend the right to work anywhere in the EU to doctors, because medical education and health services vary so much - most countries don't have GPs in the way we do (apart from Denmark) for instance. The EU went ahead anyway, so we ended up with a German doctor who had mostly done cosmetic surgery coming over here to do out of hours GP shifts and killing a British patient within his first few hours on our soil. Given that German doctors of his type don't usually deal with morphine. It was the EU that stopped the UK testing the language skills of EU doctors - so potentially Australian GPs who speak English as a first language have to sit a language test, but Spanish doctors don't. Although I think there's been some negotiation there and the GMC is now looking at (or has decided they might have the power to) introduce a language test.

We also have a problem with medical devices and the EU. A device can be approved in one EU country that has a remarkably lax approach, and then it is automatically available in Britain - and tbh our arrangements for licensing and tracking the safety of medical devices are nothing to write home about, but it doesn't help when manufacturers can shop around for an original licence from a country that isn't going to look too carefully.

flatbread Mon 18-Mar-13 21:47:48

I am not sure hat you mean, but the only annual property tax in UK is council tax.

It was set in 1991 and has 8 bands or so, from A to H.

H, the highest band, is for properties over £350,000 or so and the property tax on all properties valued higher than that isroughly £2,500 . And you get a 25% discount as a single person.

So if you have a £500k or a £5M home, you pay the same annual property tax of approx £2500.

claig Mon 18-Mar-13 21:59:41

People say the Euro will collapse, but I don't think it will. I think it will eventually become the next reserve currency.

The European Union is all about centralization of power and that is what the powerful want, so that laws and regulations will be the same across 350 million people. That is why it will succeed and why UKIP are sometimes called nutters etc. because national sovereignty is not what the power elite want.
It is much easier to control 350 million people centrally with a common law than to let every country do as they please.

The bankruptciies of Eurozone countries enable the elite to gain control of the financial policy of these countries and install their own technocrats. I think these are short-term troubles. Once full centralized control of finances has been achieved, then the Eurozone will grow stronger again.

What we have to worry about is, what will happen to us? Because there are people who want us to join against the will of the people.

CoteDAzur Mon 18-Mar-13 22:00:41

I was referring to the proposed "mansion tax".

flatbread Mon 18-Mar-13 22:03:03

And it is also regressive in that the bands are too tightly grouped, with not enough increase in tax between these.

The lowest band A (properties under £40k) people pay £850 a year.

So someone in a grotty 450 sq foot one bed in a crap part of town pays £850 a year, while another person in a 3000 sq foot £3M home pays £2500 a year.

The difference in home size and value could be 60 times, but property tax is only three times as much.

While if we had a flat .5% property tax, the person in the one bed (now worth £100k) would pay a £500 a year, while a person in the £3M home should pay £15,000 a year.

MoreBeta Mon 18-Mar-13 22:11:21

There are discussions going on tonight in the EU to stop the confisctaion of any money on acocunts under Euro 100,000.

The confiscation will fall more heavily on people with accounts over Euro 100,000 and bond holders .... BUT there is a big problem

Many wealthy Russians have money in Cyprus and Russia itself has loaned money directly to the Cyprus Govt. Russia has said it will write off the loan if it is granted access to a large gas reserve off the Cyprus coast. There is geopolitics mixed up in this.

Russia via Gazprom dominates the supply of gas to Europe and may relatliate by cutting off gas if the EU allows Cyprus to just default on its Russian loan and confisctaes the deposits of wealthy Russians.

flatbread Mon 18-Mar-13 22:12:49

Ah , a mansion tax in its original form is a 1% annual tax on properties over £2M

The idea being that in the lowest band A, people are paying roughly 1% of their property value in council tax

But in highest band H, a person with a home worth £2M is only paying 0.1% of their property value in council tax.

So effectively it is a higher rate of property taxation on lower value homes and is thus regressive.

claig Mon 18-Mar-13 22:14:12

'Russia via Gazprom dominates the supply of gas to Europe and may relatliate by cutting off gas if the EU allows Cyprus to just default on its Russian loan and confisctaes the deposits of wealthy Russians.'

Wow.

What is also interesting is that apparently Russia had stumped up a few billion for the Cypriot bailout alongside the EU, and this is unprecedented that Russia should participate in an EU bailout.

flatbread Mon 18-Mar-13 22:32:26

And to add, in the US the average property tax is approximately 1% of the home's value.

So it is not unreasonable to use a similar metric in UK. No actually think it should be applied across the board, not just to properties over £2M. (why should properties worth £1M not pay £10,000?)

As a percentage of income, it would probably be no more than 8%, assuming that someone who can afford a £1M home must be making at least £120,000 a year.

Again, in line with what homeowners pay in US. (but in US , homeowners get tax relief in the form of interest payments being tax deductible, but that is a different issue)

flatbread Mon 18-Mar-13 22:33:52

Sorry, some random iPad autocorrect, but you can get the gist wink

HillBilly76 Tue 19-Mar-13 01:03:57

Message deleted by Mumsnet for breaking our Talk Guidelines. Replies may also be deleted.

claig Tue 19-Mar-13 07:08:54

But do the people have any real say? Only if they vote for parties like UKIP who want to leave the EU, will it be the end of the EU. They won't vote for UKIP in large enough numbers because the media often paints them as nutters and even racists in order to put the people off them.

I thought this might happen. Apparently there are suggestions that Russia might want use of a naval base in exchange for bailing Cyprus out. The unprecedented step of Russia participating in an EU bailout at all was very significant.

I doubt the EU will want Russia to use a base there.

'It is also rumoured that the Kremlin is privately offering to help bail out Cyprus in exchange for the right to use a naval base in the Greek part of the island.
Moscow has already handed over £2billion to prop up the economy of Cyprus and is now in talks to restructure the assistance programme.'

www.dailymail.co.uk/news/article-2295507/Will-Russia-try-seize-foothold-Med-Energy-giant-offers-restructure-banks-exchange-gas-exploration-rights.html

claig Tue 19-Mar-13 07:15:53

In fact this is starting to look as if it may have been a deliberate move against Russia. Tensions between Russia and the Eu may rise as a result


President Vladimir Putin called the decision to seize money from savers’ bank accounts as ‘unfair, unprofessional and dangerous’.

Russian Prime Minister Dmitry Medvedev said the eurozone decision seemed to be aimed at confiscating someone else’s property.

‘This practice, unfortunately, was well-known and familiar in the Soviet period,’ he said.

Cyprus ranks as the largest source of foreign direct investment into Russia – money that is largely Russian in origin and passes through Cypriot banks before being sent back to Russia.

Russia’s Finance Minister Anton Siluanov also condemned the move and said the eurozone’s decision that Cyprus should introduce a levy on bank deposits was taken without consultations with Moscow.

www.dailymail.co.uk/news/article-2295507/Will-Russia-try-seize-foothold-Med-Energy-giant-offers-restructure-banks-exchange-gas-exploration-rights.html

claig Tue 19-Mar-13 07:29:42

Interesting that Cyprus has recently been found to be sitting on natural gas fields off its shore worth billions. Ties up with the Gazprom link.

However, the Turks could possibly be used to throw a spanner in the works as so often where Cyprus is concerned.

'Turkey, which has occupied northern Cyprus since 1974, will not hesitate to use its naval forces to thwart Cyprus's hunt for hydrocarbons, according to recent Turkish media reports.

But analysts do not expect the Turkish warnings to escalate beyond rhetoric. James Ker-Lindsay, an expert on the region at the London School of Economics, said: "Turkey talks tough with Cyprus on this energy issue, but they've been told clearly by Brussels and Washington not to stir it up."

www.thenational.ae/news/world/europe/mediterranean-gas-finds-have-cypriots-dreaming-of-riches

claig Tue 19-Mar-13 07:53:53

It looks like there may be a battle for control of the gas between the EU and Russia, and it looks like Turkey may not figure in it due to shifting alliances and EU aims.

'The deterioration of Turkish-Israeli relations and the resumption of aggressive rhetoric and measures by Turkish officials towards Greek Cypriots have brought Israel and Cyprus (and beyond it, Greece) closer, making the Cyprus-Greece corridor the most likely route for Israeli energy exports in the future. The changing alliances were further confirmed by two significant visits paid by Israeli Prime Minister Benyamin Netanyahu to Greece (August 2010) and Cyprus (February 2012), two countries which, for long, enjoyed close relations with Arab middle-eastern countries while maintaining minimal relations with Israel. During a recent visit by Greek Defense Minister Panos Panagiotopoulos to Israel, the idea of an involvement of the Greek navy in the protection of energy installations was discussed. The implication of an EU country in securing these installations would not be surprising given that the development of the fields is expected to be a priority for Europe whose domestic gas demands will continue to rise, making the discovery of reserves in the waters of an EU-member state (Cyprus) highly important in its quest to lessen its dependence on Russian gas. Europe would seem like the most obvious partner, but economic hardships may force these countries to look for alternative partners. Enter Russia, which maintains very good relations with Cyprus and Greece, and even Israel. Moscow has made it clear it is interested in the gas potential in the eastern Mediterranean.'

Cyprus, heavily exposed to the Greek crisis and in need of cash, particularly since it has been excluded from international capital markets, initially sought the EU’s help but, once rebutted, turned to Russia, with which it enjoys solid ties, for a €2.5 billion loan. The country currently presiding the EU is eyeing a further €5 billion in loans. Russia is particularly interested in the island’s resources and several of its companies are competing for licenses, leading many in the EU to voice concerns over the likely strong influence Russia is expected to have on the Cypriot gas sector

www.mestrategicperspectives.com/2012/10/22/eastern-mediterranean-will-gazprom-advance-russias-influence-in-the-region/

claig Tue 19-Mar-13 07:59:05

So for such a relatively small amount of money and given that Cyprus stands to earn billions from gas in the future, to take the unprecedented step of taking money from bank deposits, which are mainly Russian, does look as if it may have been aimed at Russia.

PigletJohn Tue 19-Mar-13 09:00:09

Well, that's an interesting way of looking at it "taking money from bank deposits"

If I have a deposit in a bankrupt bank, which is unable to repay its depositors, I am at risk of losing some or all of my money.

If some external group is willing to generously shovel in millions to prop up the bank, with the result that I get over 93% of my money back, have they "taken" my money?

flatbread Tue 19-Mar-13 09:11:39

Well, Piglet, there is bank deposit guarantee scheme of upto €100,000, underwritten by the government, even in Cyprus.

Typically, if a bank fails, then bondholders get zilch, assets are sold and the depositors under €100,000 compensated in full by a combination of government funds and bank assets.

In this case, the depositors are being put first on the line to take bank losses. This is unheard of. The whole reason you put money in the bank is because you think the principal is safe, with interest rates close to zero, there is no earning on that money anyway. If it isn't safe, you might as well hide your money under the mattress.

Also, there are some stable banks and building societies who are not in the same precarious position, but nonetheless, people who have deposits there will lose portion of that as well, to fund the bail-out of he two biggest banks.

claig Tue 19-Mar-13 09:20:46

No you're right PigletJohn, if they renege on deposit insurance, that's perfectly OK, they haven't taken your money, they're just borrowing it.

The UK government had to bail out Northern Rock, Lloyds and RBS. Would it be OK if they did that by taking 7% or 10% of your life savings? You're obviously richer than most of us or more generous.

The Daily Mail reported on a man who had sold his property in London for about £350,000 and was moving to Cyprus. He put that money in a Cypriot bank as he looked for a property in Cyprus. He stands to lose £35,000.

I think they are "taking" his money and I ddon't think they have a right to it.

flatbread Tue 19-Mar-13 09:26:23

Yes, Claig, and to save Northern Rock or RBS, they took upto 10% of all deposits across all banks, including your deposit in, say, Nationwide or HSBC.

Is that fair? Is that even legal???

flatbread Tue 19-Mar-13 09:28:00

I totally agree with you Claig, on this one. Just surprised there isn't more Eurozone anger and bank runs as a consequence of this dangerous precedent.

claig Tue 19-Mar-13 09:42:33

Exactly, flatbread. As the Greek economist said on Newsnight last night. They bailed out Dexia bank for 100 billion euros and no one lost deposits. Here they want a mere 6 billion euros and they have broken trsut in the banking system by breaking the deposit guarantee scheme. They told the people that deposits under the scheme were guarantedd and then overnight on a bank holiday and over a weekend they reneged on their word and ATMs have run out of money and the bank holiday has been extended until Thursday.

The fact that they did this for such a relatively small amount of money indicates that it is about something more than the 6 billion. I think it is about Russia.

Littlejohn has this to say in today's Mail

It’s a brave man who decides arbitrarily to confiscate a Russian wise-guy’s bank deposits. Most of the hyper-rich former Soviets swanning around the Mediterranean have close links to Putin and whatever the privatised KGB calls itself these days.
We could be talking poison umbrellas here, as a basis for negotiation. Does the name Alexander Litvinenko not ring any bells in Nicosia? I bet the Cypriot President hasn’t been daft enough to entrust his own pension to the Banko Kleftiko.
And never mind the Russians. In the old days, foreign politicians wouldn’t have dared to steal from the British Army.
Just imagine if a band of brigands had descended from the hills and tried to hijack a wages van bound for a British base on Cyprus.

They’d soon find themselves staring down the barrel of a Browning.
So what makes the Cypriot government think they can get away with robbing British soldiers’ bank accounts? And why isn’t there more outrage from our own Government?
Those of us who warned against joining the euro were rubbished as neanderthal Little Englanders intent on standing in the way of progress.
But this is how it ends, with politicians stealing your life savings.

www.dailymail.co.uk/debate/article-2295454/Kebabbed-Banko-Kleftiko.html

MrsJREwing Tue 19-Mar-13 09:44:38

Voting UKIP won't change anything regarding the EU ability to raid private bank accounts, they treaty was signed early last year, it's done, no law in each country can overturn it as each country changed their local law to accept the ratifucation and EU law is above each individual member states law.

flatbread Tue 19-Mar-13 09:48:33

What is this treaty that allows governments to raid personal bank accounts protected by the deposit guarantee scheme?

claig Tue 19-Mar-13 09:49:18

I think there will now be a renogotiation and the amount taken from under 100,000 Euro accounts will be decreased and teh amount on above 100,000 Euros will be increased. The majority of those accounts (but not all) seem to belong to Russians.

They have tried a tactic to show that they are "fair" and would take money from everyone, but they will probably try and increase the amount they take from Russians and reduce the amount on everyone else.

That is not fair either, and we will have to see what Putin has to say about it.

flatbread Tue 19-Mar-13 10:00:40

I don't there is any such treaty, because of there were, why would the Cyprus government need the cash-grab to be ratified by parliament?

MrsJREwing Tue 19-Mar-13 10:27:27

Flat bread I referred to it in my.posts, even mentioned the article. Do you remember the EU meeting where French PM blanked Cameron? Cameron didn't retify for UK, it was us abd CR only, the rest signed and now like Cyprus are under thumb screws.

PigletJohn Tue 19-Mar-13 10:40:47

When times got tough, the Icelanders dumped their Deposit Protection scheme (except for themselves) and the UK government compensated UK private depositors. Eventually, the UK government will probably be paid back a small proportion of what it paid out (but no interest) from the ruins of the Icelandic banks.

A knotty problem: when a bank becomes insolvent, whose job is it to compensate depositors for their losses? If it's the government of the place where the banks are based, what happens when that government is unable or unwilling to compensate in full, as is the case in Cyprus (and was in Iceland)?

It's very difficult to argue that the UK taxpayer is responsible for bailing out Cyprus banks and their Russian depositors; and it's equally difficult to argue that the German taxpayer is responsible.

MoreBeta Tue 19-Mar-13 10:45:18

There is a good economic reason why you gurantee small depositors.

The reason is that it is impossibly costly for small/medium sized ordinary depositors to examine the accounts and make a proper credit risk assessment of a bank like a large professional investor would. Therefore for the sake of economic efficiency small/medium sized depositors are guaranteed by Govt.

If no one trusts banks to do ordinary banking transactions then the economy would grind to a halt and everyone woudl remove their money form bansk - as indeed is likely to happen now in Cyprus. The massive loss of trust that this seizure will cause in the basic functioning of the banking system for ordinary depositors doing ordinary transactions will have huge ramifications.

The shareholders and sophisticated investors with large deposits and bond holdings in these banks should take the capital hit.

The shareholdings should be wiped out as should the lower tiers of bondholders. A bank bail in such as this is a good idea but only if you preserve the normal seniority and security of ordinary depositors and senior (ie safest) bond holders.

This Cypriot arrangment partly tips the capital structure on its head and undermines trust in banks.

ElenorRigby Tue 19-Mar-13 10:50:50

@ drivinmecrazy Mon 18-Mar-13 14:21:35

Just found this on the HM Treasuries website

" This Model Agreement establishes a framework for reporting by financial institutions of certain financial account information to their respective tax authorities, followed by automatic exchange of such information under existing bilateral tax treaties or tax information exchange agreements. It addresses the legal issues that had been raised in connection with the Foreign Account Tax Compliance Act, simplifies its implementation for financial institutions and provides for reciprocal information exchange.

We now look forward to a speedy conclusion of bilateral agreements based on this Model, including by other jurisdictions.

Co-operation will continue with a view to pursuing equivalent levels of reciprocal information exchange and to achieving maximum consistency and standardisation in the technical implementation of the agreed information exchange. More detailed guidance will be forthcoming.

This is an important step forward in establishing a common approach to combat tax evasion based on automatic exchange of information.*France, Germany, Italy, Spain, the United Kingdom and the United States will, in close cooperation with other partner countries, the OECD and where appropriate the EU*, work towards common reporting and due diligence standards to support a move to a more global system to most effectively combat tax evasion while minimising compliance burdens."
shock

Blimey this all getting really Orwellian now!
Of course the above only applies to little people hmm
Is there no where to hide from these thieves??

Wishiwasanheiress Tue 19-Mar-13 10:52:20

Dunno about others but puts u off saving a bit doesn't it?

flatbread Tue 19-Mar-13 11:05:06

MrsJRE,

I still don't see any legal agreement between EU countries, or even within an EU country that negates and nullifies band deposit guarantees.

Indeed, that s why Cyprus is unable to grab deposits without ratification from their parliament, making it legal to do so

Piglet, MoreBeta has it right. There is a hierarchy and order of legal rights in case of a bank collapse, with shareholders, followed by junior bond-holder taking cuts. Then Sr.. Bond-holders and depositors over the €100,000 guarantee limit take a haircut. Smaller deposits under the bank grantee limit are left intact. Always.

There have. Even a number of retail bank failures in the US over the decades and it has been handled legally and appropriately with the small depositors protected.

What should happen, in Cyprus, is that the sovereign bond holders should take a haircut. Because if the country goes bankrupt, they will suffer huge losses. These guys are savvy investors who knowingly took a risk for higher returns. Who are the holders of Cyprus sovereign bonds? Hedge funds in Mayfair and German and other banks.

claig Tue 19-Mar-13 11:07:32

'It's very difficult to argue that the UK taxpayer is responsible for bailing out Cyprus banks and their Russian depositors; and it's equally difficult to argue that the German taxpayer is responsible.'

The treaty that MrsJREwing referred to is the European Stability Mechanism and article 136

en.wikipedia.org/wiki/European_Stability_Mechanism#Ratification_of_TFEU_Article_136_amendment

It seems to be an agreed common fund that all signatories have contributed or will contribute to and its aim is to bail Eurozone countries out if they are in difficulty. So it is not really individual countries taxpayers per se, all governments have agreed and signed up to this way of dealing with bailouts.

I can't find anything aloowing bank accounts under deposit guarantees to be raided, but a BBC article on the European Stability Mechanism says

"Will there be conditions attached to financial assistance?

Yes. The economic policies will be negotiated on a case-by-case basis but they are likely to include steps to reduce the borrowing needs of the country concerned - some combination of spending cuts and tax increases.

They are also likely to include reforms intended to stimulate economic growth, such as introducing more competition into the labour market and other areas of the economy."

www.bbc.co.uk/news/business-19870747

Maybe teh case-by-case basis covers it.

PigletJohn Tue 19-Mar-13 11:08:10

Smaller deposits under the bank grantee limit are left intact. Always.

Except when the government that issues the guarantee is unable or unwilling to honour it, for example in Iceland and Cyprus.

So whose responsibility is it then?

CoteDAzur Tue 19-Mar-13 11:16:10

Responsibility for the failing banks? In the case of Cyprus, it would be whoever made the decision to invest heavily in Greek bonds.

Knowing a bit about how investment decisions are made, I feel that this was a political decision.

claig Tue 19-Mar-13 11:22:01

'So whose responsibility is it then?'

The EU has suggested a 100,000 Euro deposit insurance scheme.

It is interesting that it doesn't yet appear to have been passed.
This may be a pressure trick to force its passing in countries that are wobbling for fear thatthis may happen to them if they are bailed out

'June Timetable
European leaders are working toward a June timetable to set minimum standards for individual deposit guarantee plans at the 27 member states, a key part of the proposals for a banking union that places regulatory authority in the hands of the European Central Bank

“It is very clear in the commission text that savers who are covered by deposit guarantee schemes, because they have deposited less that 100,000 euros, should be excluded from the scope of any bail-in,” said Vicky Ford, a U.K. Conservative member of the European Parliament who is working on the law.

www.businessweek.com/news/2013-03-18/cyprus-bank-levy-threatens-european-plan-for-deposit-guarantees

MoreBeta Tue 19-Mar-13 11:25:43

flatbread - now you hit teh nail on th head there.

"....German and other banks"

Lets be clear here. Making sure that German and other bansk dont take a hit on their capital is very important to Angela Merkel and is always the driving force behind every bailout negotiation in the EU. The EU banks are so fragile with the huge losses accumulating in the system the Euro technocrats are desperate to prevent banks taking losses on their bond holdings. Hence cistizens are being loaded with the burden.

My bet has always been the Euro technocrats will do anything to keep the European project and the Euro together - including raiding banks accounts and private pension funds in the end if the citizens don't do something to stop them.

This Cyprus event is just the first of many. If they do it once they will do it again. Cyprus should do what Iceland did. Refuse to bail out banks, look after its citizens and if necessary leave the Euro.

claig Tue 19-Mar-13 11:34:19

Cyprus’s depositors aren’t covered by deposit guarantee rules because the state is insolvent, German Finance Minister Wolfgang Schaeuble said today on Deutschland Radio.

“The media falsely created the impression that deposits are not safe in other countries,” Schaeuble said. “They are safe, though only on the proviso that the states are solvent.”

www.businessweek.com/news/2013-03-18/cyprus-bank-levy-threatens-european-plan-for-deposit-guarantees

That doesn't sound very reassuring for other countries. The ESM is supposed to bail them out, but it may be that in that case they are not solvent and may possibly not be protected.

flatbread Tue 19-Mar-13 11:37:57

This Cyprus event is just the first of many. If they do it once they will do it again. Cyprus should do what Iceland did. Refuse to bail out banks, look after its citizens and if necessary leave the Euro.

This

Xenia Tue 19-Mar-13 11:42:01

Russia has just made a loan to Cyprus. It is now saying if 10% of all that Russian money in Cyprus is confiscated it will renegotiate the loan terms.

This all seems a PR disaster at the moment as much as anything else - banks still shut, not clear who will lose money and who will not, countries changing their positions, no one clear and a precedent set which damages confidence in banking.

MoreBeta Tue 19-Mar-13 11:46:43

claig - wow!

Mr Schauble might just have let a very large cat out of the bag there.

Once depositors in Euro Area banks realise their money is not safe there will be capital flight, bank runs and an unstoppable collapse unless Germany is prepared to effectively back stop the whole continent by allowing the ECB to recapitalise the entire banking system of Europe.

Printing unlimited quantities of Euros, lending them on easy terms against extremely poor quality collateral including defaulted mortages and then Germany funneling unlimited capital into the ECB to absorb the losses it will incurr on those loans is where we are heading.

The problem is the German people will not want to do that, Anglea Merkel can't admit that is what it will take and the citizens of other Euro countries will not accept the onerous terms that Germany will impose.

Mr Grillo in a speech last week told Italian people they are effectively out of the Euro already as they will be dumped just as soon as the German banks get their money back.

The German flag was torn down off the German embassy in Nicosia yesterday by protestors and everyone knows the Germans hold the whip hand on the terms of the Cypriot bailout.

The Russian dimension is adding a further complication.

PigletJohn Tue 19-Mar-13 11:52:25

so Cyprus will have to decide if it is in the Russian camp, or the European camp.

CogitoErgoSometimes Tue 19-Mar-13 11:53:08

"Surely unearned income should be more fair game than that which has actually been grafted for? "

Unearned income in the form of interest and dividends is already taxed. What's happening in in Cyprus is a wealth tax.... something every Communist will be creaming their pants over....ie. redistributing assets on on an involuntary basis. Aimed at Russian millionaires who hide their money in Cypriot banks but also robbing everyone else in the process. We've already got the Lib Dems suggesting mansion tax on £2m properties. Doesn't affect most people but when the thresholds come down to £1m... £500k... £200k.... we'll have no recourse because the precedent has been set. It's not alarmist. 'Anti-rich' eventually becomes 'anti anyone with a few quid' whether it's been grafted for or not.

MrsJREwing Tue 19-Mar-13 11:58:10

Flatbread, Clag found it. We should be ok as DC didn't sign, what a relief, he doesn't normally do things I am grarefull for, this time he did.

I think the tax sharing info backs up the posters story regarding the Spanish situation.

PigletJohn Tue 19-Mar-13 11:59:14

The German flag was torn down off the German embassy in Nicosia yesterday by protestors

Yes, it's awful of those terrible Germans to stump up the lions share of the money to bail out eveyone else, and to meanly expect the countries with the problem to share the pain.

MoreBeta Tue 19-Mar-13 12:12:20

Pglet - and that is why it would be better for Cyprus and other nations such as Irleand, Portugal, Spain to just default and not accept the German bailout terms.

The problem is the politicians o fthese nations still see it in their own personal interests to stay in the Euo and EU as long as possible.

This is about the established political class doing things against the interest of citizens. No wonder people like Nigel Farage and Beppe Grillo have suddenly received such support. They appear to speak for citizens and not for the established political system.

CoteDAzur Tue 19-Mar-13 12:16:17

Default on what? This isn't about sovereign bonds like the crisis in Greece.

claig Tue 19-Mar-13 12:18:51

A lot of conspiracy sites are reporting a quote by an economist at Commerzbank speaking to Handelsblatt. Can't find teh quote on any UK mainstream newspaper site, but have found it on Handelsblatt

„Insofern wäre es sinnvoll, in Italien eine einmalige Vermögensteuer zu erheben“, schlug der Bankenvolkswirt vor. „Ein Steuersatz von 15 Prozent auf Finanzvermögen würde wohl ausreichen, die italienische Staatsschuld unter die kritische Marke von 100 Prozent des Bruttoinlandsprodukts zu drücken.“

My German has lapsed and I can make out only 3/4 of it, but it is being translated in blogs as

A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product"he told Handelsblatt

I am going to dig out my old German grammar books and be ahead of the curve. I speak French and Italian, but this is a different ballgame!

CoteDAzur Tue 19-Mar-13 12:19:17

"Unearned income in the form of interest and dividends"

In which universe are interest and dividends "unearned income"? hmm

Companies/banks pay you for the privilege of using the money that you invest/deposit in them. That is as "earned" as if you were renting out any other belonging or property.

claig Tue 19-Mar-13 12:21:54
flatbread Tue 19-Mar-13 12:22:55

*Flatbread, Clag found it. We should be ok as DC didn't sign, what a relief, he doesn't normally do things I am grarefull for, this time he did.

I think the tax sharing info backs up the posters story regarding the Spanish situation.*

No, there is nothing that Claig found that says that EZ can step in and take money from depositor accounts. The EZ is simply unwilling to backstop the bank guarantees in case a nation state is insolvent. Fair enough

The sharing of information is something entirely different. It is about money laundering and IMO, a good thing. When you open an off-shore bank account, you are informed that the bank is required under an EU directive to share your banking information with the EU. Otherwise how on earth can they stop money laundering without requiring banks to provide transparent information on depositors?

The Spain bit, is simply that some countries tax you on your worldwide income, while others on your domestic income. Nothing ominous there.

The people who are bringing a mansion tax into this as an equivalent comparision are frankly looney. It has nothing to do with it and is not comparable at all.

MoreBeta Tue 19-Mar-13 12:26:58

This puts me in mind of the famous Martin Niemöller quotation.

First they Came....

It might be rewritten:

First they came for the rich peoples' bank deposits and I didnt speak out because I didnt have many savings.

Then they came for rich peoples private pensions and I didnt speak out because I didnt have a private pension.

Then they came to tax rich peoples houses and I didnt speak out because my house wasn't large.

Then they came for what little I had worked for all my life and no one was left to speak for me.

claig Tue 19-Mar-13 12:29:29

Note that the Commerzbank economist is only speaking hypothetically. He is saying that insofar as it were meaningful for a wealth tax to be raised. So it is hypothetical rather than something that is on the cards.

MrsJREwing Tue 19-Mar-13 12:30:27

MoreBetta, lets add some stages, then they came for those on benefits... then they came for the disabled..

claig Tue 19-Mar-13 12:31:11

Banks have been bailed out and people have paid the price. That is always the way. The elite looks after its own.

claig Tue 19-Mar-13 12:38:23

This is a very sad situation and the rise of hostility towards Germany is very worrying. This has nothing to do with the German people and everything to do with a power elite.

'One of Europe’s most prominent statesmen has warned that resentment of Germany across the continent is so high that war remained a danger.

Jean Claude Juncker, a long-time president of the European Council, painted an ominous portrait of Europe, claiming there ‘chilling’ parallels in 2013 with 100 years ago – the eve of the First World War.'

www.dailymail.co.uk/news/article-2291672/The-demons-sleeping-Luxembourg-PM-paints-chilling-portrait-Europe-draws-parallels-build-WW1.html

claig Tue 19-Mar-13 12:41:59

'He said only a united Europe was a safe and strong Europe. 'A united Europe is our Continent's only chance to avoid falling off the world's radar,' he added.'

However, I do think that some of this is scare tactics to bring people in line and do as the elite want and hand over sovereignty to the Union.

MoreBeta Tue 19-Mar-13 12:42:50

claig - I entirely agree. In fact many German people do NOT agree either with what is happening and opposition inside Germany is growing the the EU an dteh Euro.

As Nigel Farage has said in many of his famous polemic speeches in the European Parliament the road the EU technocrats are heading down is to war in Europe - the very thing the EU was designed to avoid.

The ominous signs of France being unable to reign in or live with the economic power of Germany over the rest of Rurope is there already. The ultimate ireconcilable rupture between Germany and France will in the end be the final death throes of the EU.

flatbread Tue 19-Mar-13 12:46:55

MoreBeta,

It is not all the same. The government can increase income tax, property tax and the like, and have done that frequently. It is legal to do so, you have no contract with the state that your taxes are fixed

But to actually grab a portion of your bank deposit which is guaranteed, is unheard of, and violates the fundamental principle of property rights and sanctity of legal contracts on which capitalism is based.

They can well decide to increase taxes on interest earned on income, but not go after the principal.

If Cyprus were to let some banks go under, and declare insolvency as a state, the bank shareholders and sovereign debt holders would suffer huge losses.

However, none of the pain is being inflicted on these groups. Only on ordinary depositors.

MoreBeta Tue 19-Mar-13 12:47:03

Let us not forget Nigel Farage is married to a German and he has been resolute in his campaign against the power of the EU over peoples lives. He wants a Europe of friendly self determining countries that trade and cooperate on many matters but not a sovereign Europe.

That is my view as well.

claig Tue 19-Mar-13 12:48:22

Even this bank deposit raid is a scare tactic to frighten millions of Europeans. What the future holds and which way it will go no one knows except maybe the string pullers.

CoteDAzur Tue 19-Mar-13 13:02:30

You got it. Cyprus is collecting 6 bn Euros from private bank deposits to scare Europeans. Not because they need it hmm

CogitoErgoSometimes Tue 19-Mar-13 13:10:07

"In which universe are interest and dividends "unearned income"? "

In the very universe I and you inhabit. hmm Unearned income is anything that isn't a wage...

claig Tue 19-Mar-13 13:11:08

No, Cote, not quite, try to keep up.
Cyprus are collecting 6bn because they have been told to, which is why their people are protesting against the EU.

Unlike for every other country or bank that has been bailed out, the comparatively small amount of 6bn has been paid by the bailout but has unprecedently been demanded from the people.

It is "shock therapy" and was intended as a message, but you failed to understand it.

CoteDAzur Tue 19-Mar-13 13:11:34

"If Cyprus were to let some banks go under, and declare insolvency as a state, the bank shareholders and sovereign debt holders would suffer huge losses. However, none of the pain is being inflicted on these groups. Only on ordinary depositors."

I would imagine that the vast majority (if not all) of these bank shareholders and debt holders also have accounts in the banks of Cyprus, so they will be inflicted as much pain as anyone else.

What most people seem to be missing is that Cyprus needs a lot of money, equal to their GDP, in fact. They have happily found idiots willing to put up most of this money (10 bn Euros) with the condition that Cyprus chips in the remainder (6 bn Euros). How would you suggest Cyprus should quickly come up with this money? There isn't much in Cyprus to sell. Anything else I can think of would squeeze Greek Cypriots for this amount, which they would like even less than the current scheme is stealing most of it from Russians.

sherbetpips Tue 19-Mar-13 13:15:04

I am sure someone has already mentioned this but really there are that many people will 10's of 1000's in there accounts? God I am crap with money.

sherbetpips Tue 19-Mar-13 13:15:47

sorry should have read with not will

CoteDAzur Tue 19-Mar-13 13:15:59

Wake up. They need 16 bn. That need didn't just materialise because EU told them to find it.

EU says "We'll give you 10 if you put 6 on the table" and Cyprus is being sneaky by getting most of it from Russians.

Of course Cypriots are not loving it, who would. If they don't want to have banks anymore, they should just let them collapse.

claig Tue 19-Mar-13 13:16:33

A commentator on BBC The World at One just said that much of the Russian elite have their money in Cyprus, but that the real Russian elite have already moved their money out. The real Russians that will be hit are the mid-ranking ones.

claig Tue 19-Mar-13 13:17:49

Cote, please study the situation more and you will understand what is really going on.

MoreBeta Tue 19-Mar-13 13:19:00

Cote - Cyprus doesnt need a lot of money.

If it defaults it owes nothing. The entities that need the money are the investors whole hold the bonds of Cyprus and its banks.

The money being put in by citizens bails out foreign bond holders - especially Russians, EU banks and hedge fund investors who all took a risk on the expectaion of a bailout and they got it wrong.

Citizens had no part in this and they should not pay. Their economy will contract horribly and many ordinary Cypriot people will lose their jobs and homes anyway. The country is now being pressured to give up its gas reserves and to take people's saving as well is beyond the pale and citizens have rightly said no way.

claig Tue 19-Mar-13 13:20:52

No banker would risk a run on banks in the Eurozone and stoke up fear in Spain and Italy which could risk runs that would destroy the Euro for a mere 6bn euros. They probably spend more than 6bn a year on windmills.

They knew what the impact would be and they did it for a reason, not because they couldn't find an extra 6bn.

CoteDAzur Tue 19-Mar-13 13:21:55

Beta - There is nothing for Cyprus to default on. This is not about an inability to meet debt requirements (like in Greece).

This is to recapitalize banks whose investments in Greece (i.e. banks' assets) have been wiped off their balance sheets. I said this before (you ignored it).

CoteDAzur Tue 19-Mar-13 13:23:36

If by "default" you mean "banks collapsing" (not the right term for it, by the way), then depositors will lose all their savings. I doubt if that is what they would prefer.

MoreBeta Tue 19-Mar-13 13:24:14

They should let the banks collapse, take them into Govt conservatorship, liquidate the bad assets the banks hold and impose losses on shareholders and bondholders. Then take bank branches and staff and set up 'Good Banks' with the deposits of existing Cypriot savers in a Cooperative customer owned format like an old fashioned UK building society.

Cyprus will still have a banking system. Just not the old one.

claig Tue 19-Mar-13 13:28:22

sherbertpips, they will recoup 5.8 bn by doing this so presumably there are approximately 58 bn in the accounts

CoteDAzur Tue 19-Mar-13 13:28:30

"Liquidate the bad assets banks hold" grin

Do you know what happened to those bad assets (i.e. Greek government bonds)? Yes, they can be liquidated but for only about 1% of purchase price.

These banks were heavily invested in that Greek debt and now have no more assets of any significance left.

CoteDAzur Tue 19-Mar-13 13:29:39

"Cyprus will still have a banking system. Just not the old one."

Cyprus has no banking system as of yesterday. Anyone who can possibly move their money elsewhere will do so on the banks' first business day, regardless of whether 10% gets cut off or not.

MoreBeta Tue 19-Mar-13 13:30:22

Cote - Cyprus has a bond repayment in June it cannot meet. This bailout was delayed until after the Italian election for EU political reasons to avoid frigthening Italian voters. The EU failed to deal with this Cyprus mess early enough because it was playing politics and it failed. It lost control of the Italian electorate anyway and now it has thrown fuel on the fire with this seizure of bank deposits.

Russia is meanwhile playing its old game of trying to dominate energy markets in Europe and getting access to a Mediterranean port which it has always wanted.

I think you live in France?

Quite frankly if I were you I would get my money out now. She/He who panics first will get the last laugh in this game.

flatbread Tue 19-Mar-13 13:31:55

Cote, why on earth do you think that depositors in Cyprus banks are shareholders and sovereign bond holders?

These tend to be big insitutional investors from all over the world, not Ms. Pension widow with her €40,000 in a bank.

Here is a pretty good solution

blogs.reuters.com/felix-salmon/2013/03/19/a-much-better-alternative-for-cyprus/

CoteDAzur Tue 19-Mar-13 13:32:00

My money is not in France, but thank you for your concern.

MoreBeta Tue 19-Mar-13 13:34:21

Fine. If some assets are worthless then shareholders and bond holders may get nothing.

The Cypriot banks still have some cutomers paying interest and loans back and bank branches and no doubt some other assets plus a customer deposit base. These can be used to form the basis of much smaller and much simpler Cypriot banking system.

MoreBeta Tue 19-Mar-13 13:36:08

"My money is not in France"

That is what I like to call a 'good starting point'. grin

claig Tue 19-Mar-13 13:39:46

I hope it's not in Cyprus

KirstyoffEastenders Tue 19-Mar-13 13:43:50

Am I the only one that thinks that, in principal, it's ok? If it was a choice between cutting services and taking rich people's money, I know which one I'd vote for.

CoteDAzur Tue 19-Mar-13 13:45:21

MoreBeta - Cyprus isn't a normal country with a normal banking system. It is a tax haven with a disproportionate banking sector (8x its economy).

It is practically impossible for the banks of Cyprus to recapitalise themselves with contributions from real economy, simply because the latter is so small compared to the banking sector.

If banks fail, all deposits disappear overnight.

Keeping banks afloat needs 16 bn Euros.

There aren't many solutions to the above, I'm afraid.

flatbread Tue 19-Mar-13 13:50:18

Am I the only one that thinks that, in principal, it's ok? If it was a choice between cutting services and taking rich people's money, I know which one I'd vote for

Are we in a parallel universe? grin

flatpackhamster Tue 19-Mar-13 13:50:58

KirstyoffEastenders

Am I the only one that thinks that, in principal, it's ok? If it was a choice between cutting services and taking rich people's money, I know which one I'd vote for.

Let's imagine then that it goes ahead and the government helps themselves to a slab of money from everyone. What message does that send?

What it says to people is 'Doesn't matter who you are or what you've done with your life, doesn't matter about the law, we will take your money if we deem it necessary'. Suddenly, people will stop trusting the bank system. They'll store the money offshore. They'll store it in their mattress. But they won't trust the government to respect the law with regard to money.

You'll make a few bob now but you've undermined the whole premise of the banking system and worse - you've destroyed trust in it.

Currencies and modern economies work on one thing and one thing only. Trust. I have to trust that, when I take my £5 note in to the shop to buy a sandwich, that the person I'm buying from will accept it as legal tender, that the note itself is genuine and that the product I'm buying for that money is genuine. As soon as that trust is eroded, it shakes the foundation of the economy.

That this has even been considered is frightening. The currency system has worked so well for so long that we no longer recognise it as an arbitrary tool which relies on one person trusting another's word. If the EU wanted to find a single thing which would cause the immolation of the Eurozone they couldn't have picked a better option.

Who will trust the EU now? Will the Spaniards or Italians keep their money in their banks now they can see what can happen to it? Will anyone?

flatbread Tue 19-Mar-13 13:51:26

Yes, there are. See the link I posted above

CoteDAzur Tue 19-Mar-13 13:55:22

That is not a serious proposal. Your link talks about refusing to pay out from any deposits over 100,000 Euros for 10 years, which is not possible.

flatbread Tue 19-Mar-13 13:56:34

Why?

KirstyoffEastenders Tue 19-Mar-13 14:09:26

Governments introduce new taxes all the time, what's the difference?

MoreBeta Tue 19-Mar-13 14:10:58

flatpack - what you say is very fundamental.

Trust is crucial in all 'fiat' paper money systems. A bank note is really just a promise TO PAY a certain value like a cheque. In fact bank notes originated as cheques and in systems where banks stay closed for a long time (eg in natural disasters) people often do start passing endorsed cheques around between trusted parties as promises to pay like bank notes.

Anyone who breaks that promise, be it individual, firm, bank or Govt will be rejected immediately by the system built on trust. That is what the Cypriot people are doing. Rejecting the Govt that broke their trust.

If banks in Cyprus do not open soon I am not sure how long even paper Euro notes will be trusted. I suspect other currencies such as Rouble, Pounds, Dollars are already being circulated and accepted by people. People will barter with cigarettes, bottles of booze and even return to using gold.

flatbread Tue 19-Mar-13 14:20:09

Flatpack and MoreBeta, so true.

I see that the Buchheit and Gulati proposal to convert non-guaranteed deposits into CDs is being considered by Cyprus, atleast according to the latest coverage in the Telegraph. That does seem the best option, imo.

flatpackhamster Tue 19-Mar-13 14:24:33

KirstyoffEastenders

Governments introduce new taxes all the time, what's the difference?

Taxes say "From date X in the future, we will take Y."

This says "We will take Y, and we will apply it to all earnings before date X."

See also MoreBeta's point about currency.

I don't think I can reiterate often enough, or strongly enough, the importance of trust here.

KirstyoffEastenders Tue 19-Mar-13 14:27:50

Some interesting points raised here, for those open to a different point of view:-

http://www.guardian.co.uk/commentisfree/2013/mar/18/cyprus-wealth-tax-good-thing

KirstyoffEastenders Tue 19-Mar-13 14:28:06
flatbread Tue 19-Mar-13 14:37:15

Kirsty,

Maybe I missed it in the article, but where is the justification for grabbing a portion of the bank deposits of people with savings less than €100,000?

The author just glosses over this point....

But it is really the most contentious and alarming issue in the bailout.

claig Tue 19-Mar-13 14:43:16

I think Kirsty's article shows what the Guardian possibly thinks.

'The IMF, our own Institute for Fiscal Studies, and Paris-based thinktank the OECD, have argued that governments need to switch away from taxes on incomes, which act as a disincentive to work, to taxes on wealth.'

This may be the future that the socialists have planned. They will say mansion taxes and wealth taxes and even savings raids are fair and "help people get back to work" by not penalising income.

That article shows no real concern for the people protesting in the street and facing the riot police outside the parliament as they oppose their life savings being stolen.

It seems that the authors of that Guardian article are fully behind the European elite, the IMF and the OECD, and are not on the side of the people.

Xenia Tue 19-Mar-13 14:44:58

However a tax on wealth which you have earned in a double tax on income and in effect says if you save we will penalise you twice. If you spend your money on cocaine instead you will get a pat on the back from the state and you will have nothing to tax.

claig Tue 19-Mar-13 14:48:42

Quite a lot of people are leaving France because of Hollande's taxes on wealth. Depardieu has left. Vive Depardieu!

Xenia Tue 19-Mar-13 14:52:49

Yes, people leave.

We have had confiscatory wealth taxes in the UK in the 1900s of course too. At once point when socialism was a much bigger force than it now is and there were all the revolutions, Russia etc and the UK labour party got in here landed estates were hit with such high wealth taxes on death that the land etc had to be sold. I think it was worse than our current 40% in effect voluntary inheritance tax which you can avoid if you pass on your savings to your children before you die and survive 7 years.

ttosca Tue 19-Mar-13 14:53:01

Xenia

> However a tax on wealth which you have earned in a double tax on income and in effect says if you save we will penalise you twice. If you spend your money on cocaine instead you will get a pat on the back from the state and you will have nothing to tax.

Yeah, because people are never taxed twice, right? That never happens. Doesn't happen with sales tax, capital gains tax, road tax, or any of the other multitude of taxes citizens pay.

flatbread Tue 19-Mar-13 14:56:40

I am perfectly fine with a tax on wealth.

We already have it, through inheritance tax. And hopefully through a better property tax structure.

But how does taking €5000 out of someone's Barclays account of €75,000 to recapitalize Bank of Cyprus, constitute a 'wealth tax'?

It is a violation of a legal contract and is theft, no matter what euphemism you use.

It also has a detrimental effect on the financial sector and economy, by increasing the cost of capital, as every sane person will move away from putting money into the bank. Instead people will diversify into mattresses, Persian rugs and biscuit tins to be buried in the garden.

ttosca Tue 19-Mar-13 14:57:59

You guys do realise that some of the most heavily taxed and 'socialist' countries in europe are also some of the top performing in the world with the highest growth rates, right? They are judged 'The Most Competitive Economies':

(according to the very right-wing World Economic Forum)
--

This year’s report findings show that Switzerland tops the overall rankings in The Global Competitiveness Report for the fourth consecutive year. Singapore remains in second position with Finland, in third position, overtaking Sweden 4th). These and other Northern and Western European countries dominate the top 10 with the Netherlands, Germany and United Kingdom respectively ranked 5th, 6th and 8th. The United States (7th), Hong Kong (9th) and Japan (10th) complete the top 10.

www.weforum.org/issues/global-competitiveness

ttosca Tue 19-Mar-13 14:59:12

Taking money out of people's savings account is just more bank robbery and is likely to precipitate a run on the banks.

claig Tue 19-Mar-13 15:00:14

'But how does taking €5000 out of someone's Barclays account of €75,000 to recapitalize Bank of Cyprus, constitute a 'wealth tax'?'

It is just a grab of liquid assets and is much easier to collect. You use a computer program to deduct 7% off everyone's balance. Easy peasy though it makes the people feel queasy.

flatbread Tue 19-Mar-13 15:01:07

Claig grin

claig Tue 19-Mar-13 15:08:45

There is one good paragraph in Kirsty's Guardian article that I agree with

'There was a route to avoid this debacle. The EU, after the financial crash, should have agreed to forgive much of the debts, not just in Cyprus, but also Ireland et al. The Germans, who are blocking debt forgiveness with the Finns, the Dutch and the Austrians, would have been repaid in full from economic growth over the past three years. Instead they face a prolonged depression and growing resentment from southern Europe towards their hardline policies.'

But if they did that, they would have no leverage and control over the finaces of Eurozone nations. That is what this is really all about - to force centralized control of banking.

Domjolly Tue 19-Mar-13 15:23:14

Its this not what the left want a money grab from the rich ay

Xenia Tue 19-Mar-13 15:32:37

Indeed. It should be warming the cockles of the hearts of the left who want everyone on the same level of poverty with each other.

Yes, arguably all tax is theft anyway but some forms you expect and others which surprise people can lead to lack of trust in the banking system which can back fire. If they just tax larger sums then people will split their savings between banks as they already do in the UK so they ensure all their sums are within the UK supposed guarantee.

flatbread Tue 19-Mar-13 15:57:18

Hmm, latest seems to be Finance Minister submits resignation. President rejects it.

What is going on? Seems like a soap drama or a Dostoyevsky novel. With suspense, anger,anguish, betrayal...and hopefully some redemption!

flatbread Tue 19-Mar-13 16:06:52

And the very latest from Zerohedge:

It appears that Cyprus is now ready to escalate, following news now coming fast and furious, that the Parliament will go ahead and vote after all, but not in a good way as even the Cypriot ruling party, formerly the only party willing to vote Yes on the Bail-In, would abstain according to Dow Jones, which means there is no support at all in the Cypriot parliament for the deposit haircut proposal.

SonOfAradia Tue 19-Mar-13 16:22:13

But aren't the Cypriot Banks about to collapse completely, without the cash injection? There's no money left at all.

So your bank statement might say you have 10,000 Euros, but it's just a series of digits on a piece of paper without the actual money to back it. If the loan doesn't go through, you'll have 0 Euros. If it does, at least you'll still have 10,000 Euros minus whatever the levy they finally decide on.

Pardon me if this has already been said - at work and haven't had time to read through the whole thread.

flatpackhamster Tue 19-Mar-13 16:47:46

KirstyoffEastenders

Some interesting points raised here, for those open to a different point of view:-

http://www.guardian.co.uk/commentisfree/2013/mar/18/cyprus-wealth-tax-good-thing

You'll forgive me if I don't take lectures on finance from a newspaper which is making a loss every year.

You appear to not be understanding the importance of what is taking place. While it might warm the cockles of your socialist hear to see 'the rich' having money taken from them, what is happening here is the destruction of the system of trust which underpins the economies of the world.

flatpackhamster Tue 19-Mar-13 16:49:50

SonOfAradia

But aren't the Cypriot Banks about to collapse completely, without the cash injection? There's no money left at all.

So your bank statement might say you have 10,000 Euros, but it's just a series of digits on a piece of paper without the actual money to back it. If the loan doesn't go through, you'll have 0 Euros. If it does, at least you'll still have 10,000 Euros minus whatever the levy they finally decide on.

Pardon me if this has already been said - at work and haven't had time to read through the whole thread.

The banking laws that Cyprus, as an EU member, has signed up to protect the first 100,000 Euros of every depositor. Average John Smith has nothing to fear from a banking collapse. The losers in a banking collapse are the shareholders and the wealthy.

What is happening here is that the EU is taking money from everyone to save the Cypriot banks. So the losers will be Average John Smith and the winners will be the shareholders and the wealthy.

PigletJohn Tue 19-Mar-13 17:18:01

It is surely incorrect to say that "the EU is taking money from everyone to save the Cypriot banks"

In fact, the Cypriot banks are insolvent, and the Cyprus government is unable to protect the depositors. The EU is in fact contributing, not taking, so that the depositors will recover all but a fraction of their deposits.

flatpackhamster Tue 19-Mar-13 17:26:48

PigletJohn

It is surely incorrect to say that "the EU is taking money from everyone to save the Cypriot banks"

No, it isn't incorrect. The EU is bailing out banks which should be left to fail (as Iceland did to its banks). And it is bailing them out with other people's money.

In fact, the Cypriot banks are insolvent, and the Cyprus government is unable to protect the depositors. The EU is in fact contributing, not taking, so that the depositors will recover all but a fraction of their deposits.

The EU is not contributing. The EU has no funds of its own. The contributors will be the taxpayers. The EU's goal is to maintain the status of the Eurozone. That is why they are robbing taxpayers - to keep the Eurozone healthy and protect the Glorious Project.

It should also be borne in mind that part of the reason Cyprus is in such a mess is that its banks lent money to the Greek government, and then the EU ordered that all banks should write down their debt.

PigletJohn Tue 19-Mar-13 17:30:24

"The EU is not contributing. The EU has no funds of its own. The contributors will be the taxpayers"

not unlike what would happen if a bank went bust in a country where the government was willing and able to compensate depositors - the money comes from the taxpayers.

flatbread Tue 19-Mar-13 17:30:40

It is not as simple as that.

If the banks were to fail and the government declared bankrupt, the biggest financial losers would be (in order of greatest monetary loss to lowest)

A) Sovereign bondholders - German and other banks, hedge funds. All who will get £1.4B when the bonds mature in June, if the government doesn't default
B) Bank Shareholders -largest holdings by wealthy individuls and institutional investors
C) Depositors with funds greater than €100,000 - Russians, others, businesses
D) Depositors with funds less than €100,000 protected under deposit guarantee - normal John Smith

The trouble is that the first two types, with largest exposure and most to lose, emerge unscathed, and benefit from the 'contribution' of John Smith, who should be protected.

The order of haircut should be the exact reverse, with bond-holders and shareholders losing out, before small depositors.

flatbread Tue 19-Mar-13 17:43:33

And this is bad, not only from a fairness perspective. But it creates fundamental trust and moral hazard issues already discussed here

MoreBeta Tue 19-Mar-13 18:28:54

Well given the latest news it looks like the bail-in bail-out plan is dead on arrival so it isnt going to happen.

The normal rational course of action would be for ECB to be asked to provide cash to pay out bank depositors against the remaining good collateral of the banks but bondholders and shareholders will lose most or all of their investments. This is as it should be.

MoreBeta Tue 19-Mar-13 18:32:31

Daniel Hannan MEP an intellectual and extremely well informed EU critic is urging Cyprus to default and devalue.

MoreBeta Tue 19-Mar-13 20:39:18

As I predicted. The Cyprus Govt voted down the proposal and ECB has just announced it will provide cash liquidity within existing rules to pay out depositors.

Let the bank run commence and lets see how much money the ECB will agree to print 'within existing rules'.

MiniTheMinx Tue 19-Mar-13 21:07:38

I think this is what socialists call Capital accumulation by dispossession. I agree with much of what MoreBeta has said. It is wrong than ordinary people have to bail out the banks but to argue that wealthy savers shouldn't whilst at the same time arguing for default and the loses that bond holders and hedge funds would take seems like a contradiction though.

I agree with Morebeta that they should default and nationalise although the longer they string this out without acting then I fear Cote is right......by the end of the week they won't have any banks.

Claig:I think Kirsty's article shows what the Guardian possibly thinks.

"This may be the future that the socialists have planned. It seems that the authors of that Guardian article are fully behind the European elite, the IMF and the OECD, and are not on the side of the people"

Claig this is the time for you to take note, THE GUARDIAN IS NOT a LEFT WING PAPER it is a liberal paper. Liberal ideology is centred on personal freedoms and identity politics, just as neo-liberalism is based on the ideology of capital accumulation to the elites and the strengthening of their class power, divide and conquer through the rhetoric of individual obligation, responsibility and freedom.

"Cypriot Communists slam EU robber barons"

"Interview with Athina Kariati, New Internationalist Left (CWI in Cyprus)
After months of ‘calm’ the capitalist debt crisis has resurfaced over the banking meltdown in Cyprus, sending financial markets into a spin. EU ministers and the newly elected right-wing Greek Cypriot president have demanded that small savers, ie Cypriot workers, pay €billions for a banking bailout.
But angry workers in Cyprus are refusing to accept these capitalist dictats, with Cypriot CWI members helping to organise mass protests outside parliament. Already, the government is making concessions"

www.socialistalternative.org/news/article11.php?id=2076

so rather than being in the business of seizing peoples money, the left are doing a great deal to protect the ordinary savers of Cyprus. Compare that to the liberal elite mouthpiece "the guardian" that says hand over the money.

claig Tue 19-Mar-13 22:11:30

Mini, you are right. The Guardian is not a left wing paper that represents working people. I think it is an establishment paper.

You are right that the entire people (left and right) in Cyprus are united against the elite.

claig Tue 19-Mar-13 22:14:11

Even their politicians are with the people and have defied the elite. It remains to be seen what vengeance is wreaked upon them by the elite in their ivory towers in Brussels.

flatpackhamster Tue 19-Mar-13 22:51:18

No, MinitheMinx, the Guardian IS a left-wing paper. You're trying the same tired old trick that socialists always try, which is to pretend that anything bad done in the name of socialism (such as murdering 100 million people) wasn't REAL socialism.

The Guardian is as much a part of the left as your preferred reading material. It is establishment, yes, but it is left-wing metropolitan establishment, diametrically opposed ideologically to the old Tory landed gentry establishment of the 19th century.

MiniTheMinx Wed 20-Mar-13 07:49:55

landed gentry establishment of the 19th century

Anything opposed to the landed gentry of the C18/19th is capitalist. What came out of feudalism? ahhhh that would be capitalism!! The Guardian is a liberal paper and it is owned by and works in the interests of the capitalist class. They take up a space deemed to be on the left, a left that is not socialist. Clever really.

It seems that not one MP in Cyprus voted for the bank raid, what now?

flatpackhamster Wed 20-Mar-13 08:19:19

ISTM that your definition of 'Left' consists of just you and Ttosca.

flatpackhamster Wed 20-Mar-13 08:19:53

What now? The EU will make them vote again until they vote the right way.

flatbread Wed 20-Mar-13 08:40:32

I doubt it. I think it will be help from Russia

MoreBeta Wed 20-Mar-13 10:10:36

What now?

The deal is being renegotiated. The Cypriot Finance Minister is in Moscow today.

My personal view is that the banking system of Cyprus needs to be taken into conservatorship under ECB/IMF control and split into two. The 'Good Bank' part should be left with the branches and secured loans and credit card receipts that are being fully serviced and thsi should be funded by customer deposits with all the senior bond holders forced to convert to equity.

The Bad Bank part should contain all the bad debt and be funded by Junior Debt holders who will be repaid a very small percentage of their original investment by liquidating those bad assets.

Cyprus should default on all its Governement debt and not bail out its banks. Much tighter regulation of deposits from non residents needs to be implemented.

CoteDAzur Wed 20-Mar-13 17:06:05

There are so many reasons why your plan can't be implemented that I don't know where to start.

First of all, there are people called shareholders who own parts of specific banks. You can't tell some that they are now shareholders of "bad bank" and others that they have shares in the "good bank".

Debt holders also hold debts of specific banks. These names are written on the bonds themselves. You can't tell them that they are now holding bonds of a fictitious new shitty bank, so won't get a thing.

Not to mention the fact that you still don't get that these banks have no money. What do you think happens when most of their liquid assets get written off?

What kind of money do you think they will raise when they "liquidate bad assets"? Most of their investments were in Greek bonds (morons). Those bonds have been converted into various long-term instruments of pathetic returns which nobody will now touch with a barge pole.

"Good bank" & "bad bank" hmm Seriously. Do you really think it's that simple?

flatbread Wed 20-Mar-13 17:39:26

Er, Cote, it is a widely used strategy now.

An intelligent read on in

www.oliverwyman.com/bad-bank-strategy.htm#.UUn0GWtYCSM

MoreBeta Wed 20-Mar-13 17:52:46

Govt can do what it likes when it nationalises a failed bank.

Anyway, it looks like the Cypriot Finance Minister is still in Moscow negotiating over the Russian loan and Cyprus banks will be closed until Friday with ECB meanwhile lending Euro notes fill the cash machines to stop a full blown panic developing across Europe.

There is though the implicit threat now being discussed that the ECB would let the Cyprus banks collapse if a deal is not worked out.

Will they really do that?

EU politicans know if Cyprus banks fail along with a Cyprus Govt default and leaving the Euro area then that could start an unstoppable bank run across the continent, capital flight and the collapse of the Euro within days.

PigletJohn Wed 20-Mar-13 18:01:12

Or, of course, not, if other governments don't turn down the best available offer, which leads to private depositors in an insolvent bank being bailed out and getting over 93% of their money back.

Relying on a good fairy flying in to take away the problem might not be a good move

Xenia Thu 21-Mar-13 10:18:49

I think they are going to nationalise pension funds. In a sense that may be worse. Your pension fund is often the biggest asset you have. If the state takes it over you may well find they raid what is in it now and promise instead to pay pensions when they are due for payment out of then current tax revenues. People cannot then move or withdraw from pensions as they are less moveable than their savings are.

MoreBeta Thu 21-Mar-13 10:35:51

Xenia - very good point on pensions. If they cant take depositors cash they will take pension funds.

Spain is also considering nationalising its pension funds as is the USA to effectively pay for the bank rescue. Did you notice George Osborne also talking about the nationalisation of the Post Office pension fund yesterday in the Budget?

I have thought for the last few years that all of the cost of the Financial Crisis will end up one way or another being paid for by public and private pension funds. They wil seize the assets and give you some sort of bond you cant sell in return and then let inflation soar to eat away the real value of the bond and your ultimate pension.

Its the only way out of this mess and that is whay I never saved for a pension.

A pension promise either public or private is not worth the paper it is written on. There is an article in the FT today tallking about the Japanese plan to allow inflation to increase, under so called 'Abenomics' and that is really just a plan to stealthily tax and inflate away the pension entitlements of the older Japanese generation. Problem is the younger generations are suffering unemployment and falling living standards in Japan and refusing to contribute to their own pensions.

The net result is retirement promises will ultimatley have to be broken. Govt cannot just announce pensions will be seized or cut but they can keep interest rates close to zero for decades and let inflation rise to undermine pension values. It only takes 10 years of zero interest rates and zero capital gains in a pension fund combined with 5% inflation to cut pension fund values in half.

In the UK we have near zero interest rates already and the FTSE 100 is still not back to its July 2007 peak and inflation in basic living costs is already way above what official inflation measures so we are already 5 years down that road hereand nearly 20 years in to that process in Japan.

PigletJohn Thu 21-Mar-13 11:01:21

the previous proposal for Cyprus would have given them a pretty good bail-out, kept them in the Euro, and left most private depositors with 93% of theior savings. It would also have forced the non-Cypriot depositors in Cypriot banks to contribute to propping up their insolvent banks, especially those with very large deposits. Some of them might or might not be gangsters, money launderers and tax evaders.

Compared to that proposal, raiding Cypriot pension funds sounds like a very poor alternative.

Xenia Thu 21-Mar-13 13:59:49

MoreB, may well work out that way. I too have not contributed to mine for years and I think I will just take the tax free lump sum at 55 (which you used to be able to take at 50 until they changed the rules as ever) and annuity for life and forget about it as I have always wanted to and probably work until death anyway. We have had too many changes to UK pension funds (£1.2m life time cap is the latest down from £1.5m, change in ACT years ago by Gordon Brown, private companies taking too many pensions holidays when times were good, state retirement age going up - originally 60 for most of us and now almost up to 70, limits on tax free contributions into it etc etc

MoreBeta Thu 21-Mar-13 14:09:46

Xenia - that is exactly my thinking too. I have a small SIPP and will liquidate that entirely at the very first opportunity before Govt takes it off me.

Xenia Thu 21-Mar-13 14:26:06

Yes, you can do complex things with pensions and I could with my SIPP which I manage and delay drawing it (which usually means long term you get more out of it) etc but my lack of trust in the system means I will take 25% as a lump sum (although they may well have forbidden that by then too) and then just buy an inflation linked annuity for life.

lainiekazan Thu 21-Mar-13 14:45:01

I mentioned up thread that I received a doom-laden e-mail from a money site a few weeks ago, before this Cyprus issue had broken. It foresaw that the only way governments could get money was by swooping on those who had some: the ordinary working people. Pensions are the obvious target and, as MoreBeta says in a more financially-savvy way than I could, there is more than one way to skin a cat as far as raids are concerned.

It all sends me into a state of financial paralysis! Is hiding our money under the mattress the only option?

Xenia Thu 21-Mar-13 14:50:22

I read that too although it does end things by saying subscribe to Money Week and you'll be okay or something like that.

Not putting money in banks does not protect you if the value of your currency drops though, if go back to the inflation we had in the 1970s which was 18%, 22% and 20% three years in a row! So your £1000 in effect became worth £40k over 3 years and it became better to buy goods like a TV now because in a year your savings would not buy you one.

lainiekazan Thu 21-Mar-13 15:04:57

Yes, the "answer to all our problems" would be revealed if I took out a subscription! I wonder what it was...

PigletJohn Thu 21-Mar-13 15:40:50

the way to solve all your money problems is to set up a "tips" website and get people to pay you for it.

MoreBeta Thu 21-Mar-13 17:09:27

CYBC is reporting (following the failure to sell it to the Russians) that the Cyprus Popular bank is to be shut down, split into good-bank-bad-bank, and that deposits under EUR100,000 will be protected.

Rioters seen scuffling with police.

Its kicking off but at least a 'good bank bad bank' resolution looks like a decent start. It is a model for the rest of the Cyprus banks.

ECB has said Cyprus has until Monday to sort this out or they will cut off flows of Euros and ATM machines will be empty.

MiniTheMinx Thu 21-Mar-13 17:22:57

I have just heard that on the news. Apparently they have until Monday. Some German finance minister (didn't catch the name) said that they were not keen on Russian involvement because the debt would be held in euros???

For those thinking of cashing in their pensions early, at 8pm on R4, The Report might be worth listening to. This evening they are covering some research they did on the rip off of firms levying huge fees and not giving good tax advice.

ariadneoliver Thu 21-Mar-13 17:23:15

I've been following this interesting thread since the start, nothing to add really to the analysis so far so just marking my place.

This brief report shows the lack of trust in banks now, at the moment in Cyprus cash is king I wouldn't bet on that changing any time soon.

www.businessspectator.com.au/news/2013/3/21/european-crisis/cyprus-faces-threat-bank-run

MoreBeta Thu 21-Mar-13 18:05:53

Wondering when those nice orderly queues at the ATM turns angry and what people will do when they run out of cash (credit cards are being turned down already) and they cant buy food.

Emergency food shipments for Cyprus?

ariadneoliver Thu 21-Mar-13 18:53:55

Could be MoreBeta people will need food and if they have no way of buying it the government will be forced to do something. I have to say my slightly conspiracy theory plan of having part of my savings in physical gold no longer looks quite as 'out there' as it once did.

MiniTheMinx Thu 21-Mar-13 19:25:56

I suppose gold is the answer. I have always collected antiques, always thought they would constitute the largest part of my pension but in the short term, couldn't be exchanged to buy food hmm perhaps I need to rethink !

Some Cypriot people interviewed for R4 said they felt it was better to just trust in the government and they wouldn't try to take all their money out. Not sure I would be quite so confident. Shops have stopped taking plastic.

claig Thu 21-Mar-13 19:51:14

In 1933 in America, FDR confiscated people's gold, so it may not always be safe.

Apparently Russia offered better bailout terms than the EU and IMF

www.telegraph.co.uk/finance/financialcrisis/9377443/Cyprus-offered-better-bail-out-conditions-by-Russia-than-EU-and-IMF-says-president.html

A man on Channel 4 News said that the way that the EU has handled it will now mean that Cyprus needs a second bailout.

Some consoiracy sites are saying that this is intentional and are even saying that the runs on banks are intentional in order to weaken the country further so that it has to accept the conditions offered.

They are saying that the reason is that Cyprus sits on hundreds of billions of natural gas fields off its shore and that Greece itself sits on potentially trillions of dollars of oil fields and gas fields of its coast and that it will be Europe's biggest gold producer by 2016.

The runs and the bailouts enable asset stripping and signing away of rights on important assets due to the desperation of requiring a short-term bailout. The worse the bankruptcy becomes, the less say they have in protecting their national sovereignty and protecting their assets.

claig Thu 21-Mar-13 20:21:37

Incredible!

In August Digital Journal reported "Analysts gauge that Greece is in fact the richest country in Europe due to its wealth of, yet unexploited, oil and gas deposits. Greece may be on the brink of bankruptcy but its assets have much appeal, especially as the rights to exploit them can be snapped up on the cheap due to the Greek crisis. Whichever country claims the rights has access to what is deemed the largest deposits of oil in Europe, cited in a strategic European position.

digitaljournal.com/article/334152

That is how it is done. That is how a country is taken over by finance rather than weapons.

The same with Cyprus. They said on Channel 4 News that Cyprus was a rich country 5 years ago, then it joined the EU and now it is bankrupt.

Same old story, same old game, same old people.

claig Thu 21-Mar-13 20:26:55

Expect more problems for Greece and possibly runs that spread from Cyprus until the robbers have grabbed everything they want.

MiniTheMinx Thu 21-Mar-13 20:31:44

That sounds a lot like American Corporate Economic war Claig in other words American foreign policy.

Have just been reading a couple of blogs about the fact that the Greeks are sitting on a goldmine.

Have you heard of a chap called Michael Parenti www.youtube.com/watch?v=GEzOgpMWnVs&list=PLE758B9E7EF58E6C1 he is a political scientist, lecturer and historian. A lot of what he says might interest you.

If you are right Claig, this is imperialism, economic war and only made possible because of capitalism, those elites you talk of are no one other than those 0.1%

claig Thu 21-Mar-13 20:34:57

It is known as the austerity shuffle and it is the same for nations, or for us here in the welfare state or in employment.

The greater the austerity, the less rights you have - whether that be rights to oil and gas fields or to benefits, wages and employment rights.

Under austerity, the rich get richer and the poor get poorer and the elite laugh all the way to the bank.

MiniTheMinx Thu 21-Mar-13 20:42:19

Can you not see that neo-liberalism is indebting nation states, its happening here too. We lose our jobs, our wages stagnate, we lose welfare, eventually we are told that health can't be afforded and that education will need to be privatised........and so it goes.

This isn't about nation states though, this is pure and simple, a class war.

claig Thu 21-Mar-13 20:46:28

Yes I have heard of Parenti. If I remember rightly he is a socialist, a bit like Chomsky and Zinn etc.

Yes it is imperialism and yes it is done by the 0.1% and they use finance, fiddles and any means they can to get their way, and that includes wars if necessary for them to achieve their goals.

They use the "markets" etc. but they do not believe in free and fair competition which real capitalism requires, they are instead manipulative moguls who used any means they require.

claig Thu 21-Mar-13 20:56:20

Yes, I agree that is what is happening. I don't think it is a class war, I think it is the 0.1% versus the 99.9%, and the class that they always want to hold back is the middle class, the "squeezed middle".

The aristocrats don't fear the working class, they fear the rise of the middle class and social mobility, and the communists main enemy was the bourgeois - the poor old decent middle classes.

claig Thu 21-Mar-13 21:00:43

That is why the paper that is most reviled by all of the progressives, the intelligentsia and the elite is the paper of the middle classes - the Daily Mail.

MiniTheMinx Thu 21-Mar-13 21:01:51

Democracy can not exist under capitalism because...

Capitalism isn't the free market. Never been the definition. Capitalism is "The accumulation of capital" Capitalism has monopoly tendencies which means that political, financial and therefore social power becomes concentrated in fewer hands. These elite, this class you speak of "bankers" in your case, my definition would incl bankers and the corporates as the capitalist class. Finance both sides in a war, it is a state/corporate finance and military nexus, the interests being the consolidation of class power and wealth. When did the Americans last have a president that worked for the good of its nation state and not the capitalist class? That is why we need socialism. Chavez, Evo Morales, all socialist, all keeping the American corporate class out and benefiting from their own oil/gold etc, to the benefit of their people.

The best thing Cyprus could do.........tell the EU to get stuffed?????

MiniTheMinx Thu 21-Mar-13 21:04:15

"The aristocrats don't fear the working class, they fear the rise of the middle class"

we don't have Aristos they went out with feudalism! some have survived by co-opting capitalist interests.

The middle class??? well what can I say smile don't exist because they are as you rightly pointed out part of the 99%

claig Thu 21-Mar-13 21:10:04

Yes, but the class structure is more pronounced here than in many other countries, for instance capitalist America has less of a class system than we have. The class system is used to keep people in their place and divide and rule us between the classes.

MiniTheMinx Thu 21-Mar-13 21:10:11

oh and middle class, bourgeoisie. We never had such a thing before capitalism. These people are known as the revolutionary class for two reasons, 1) they came out of the revolutionary process of changing to capitalism from feudalism. 2) because of the monopoly tendency they are fast becoming an endangered species, ie discontent will spread amongst educated, disaffected intellectual people who are relieved of their property and social power. The middle class are being hollowed out, started happening around 1979 when Maggie met Reagan.

MiniTheMinx Thu 21-Mar-13 21:11:04

America has a very overt class system to which they are fast becoming aware. They have a classic Marxist two class system.

claig Thu 21-Mar-13 21:13:30

'The best thing Cyprus could do.........tell the EU to get stuffed?????'

I think that would be very dangerous for them and they may then find that the elite set Turkey on them. Countries are used as mere pawns in a chess game and wars are often manipulated to weaken those who defy the interests of the elite.

MiniTheMinx Thu 21-Mar-13 21:19:18

You are right of course.

claig Thu 21-Mar-13 21:23:00

Listening to Parenti. He makes good points about what he calls teh owning elite group which he calls group A.

In my opinion, the bankers and politicians and CEOS are not the real leaders of group A, because the real 0.1% does not work at all. It doesn't have to go to the office. It owns the office. The EU politicians and technocrats who were former employees of Goldman Sachs, are not the real elite, they are only functionaries and employees themselves.

MiniTheMinx Thu 21-Mar-13 21:33:20

I agree. But this is a class war. The vast wealth and power......these people that made money off of funding all sides in the first and second world war made their money and therefore built up their social/political because of capitalism.

claig Thu 21-Mar-13 21:35:00

Parenti says tha the goal of the imperialists is to "deracinate the population and get them to exist at subsistence levels". I agree with that and that is also what austerity if pushed to extremes also creates.

The bankruptcy of formerly solvent and prosperous countries is to get them on their knees at subsistence level so that they will hand over all their assets and gas fields and potential billions in revenues to the imperialists.

claig Thu 21-Mar-13 21:37:23

'get them to exist at subsistence levels'

of course that is what the conspiracy theorists believe that the global warming scam is all about too. I will browse to see if Parenti believes in global warming. If he does, he needs to get his act together!

MiniTheMinx Thu 21-Mar-13 21:56:11

I think there are money interests on both sides of that confusion.

claig Thu 21-Mar-13 22:13:00

Blimey, it gets even more complicated.
It is not only the EU and Russia who are vying for control of the Greek and Cypriot gas fields and the Greek oil fields, but it seems that America may be another player too.

'Geithner's name has cropped up many times recently in the excellent blog by John Ward, the Slog, with speculation that the U.S. is planning to ride to the rescue of Greece in the event of a split with the Troika, in order to facilitate U.S. desires to grab the rights to Greece's rich oil and gas deposits. Perhaps Geithner's creative, dynamic solution is to exploit Greece's need for cash, with the U.S. desire for control of yet more oil reserves.'

...

'American interest in Greece as a major oil and gas source, as well as convenient military base, could lead to the US supporting Greece in the case of a Grexit, in order to take control of the rich resources

...

With the corrupt record of Greek politicians thus far, they stand to become rich through the cheap sale of Greece's oil and gas exploration rights. The Greek people are likely to be the losers as the politicians and oil companies bleed the Greek assets dry, for cents on the dollar.

digitaljournal.com/article/329803

MiniTheMinx Thu 21-Mar-13 22:20:37

I will have a read. It doesn't surprise me. The FED, The WTO and the IMF are the three faces of corporate fascism. That's why the likes of Chavez and Evo Morales wouldn't touch their loans and bailouts and advice.

claig Thu 21-Mar-13 22:57:17

An article by F. William Engdahl says

Tulane University oil expert David Hynes told an audience in Athens recently that Greece could potentially solve its entire public debt crisis through development of its new-found gas and oil. He conservatively estimates that exploitation of the reserves already discovered could bring the country more than €302 billion over 25 years. The Greek government instead has just been forced to agree to huge government layoffs, wage cuts and pension cuts to get access to a second EU and IMF loan that will only drive the country deeper into an economic decline

Notably, the IMF and EU governments, among them Germany, demand instead that Greece sell off its valuable ports and public companies, among them of course, Greek state oil companies to reduce state debt. Under the best of conditions the asset selloffs would bring the country perhaps €50 billion. [5] Plans call for the Greek state-owned natural gas company, DEPA, to privatize 65% of its shares to reduce debt. [6] Buyers would likely come from outside the country, as few Greek companies are in a position in the crisis to take it.

en.wikipedia.org/wiki/F._William_Engdahl

In all the BBC news reports on the Greek crisis, I ahve never heard any BBC news reports on any of these issues. Maybe I missed them, but I watch Newsnight alot.

claig Thu 21-Mar-13 23:04:25

Sprry, link for above article is from the left wing site globalresearch which I think is run by the very clever Professor Chussodovsky.

www.globalresearch.ca/the-new-mediterranean-oil-and-gas-bonanza/29609


I like Engdahl because he agrees with what I think about the global warming scam and its objectives, unlike Parenti who in typical socialist fashion believes in it.

The quote below is from the wikipedia article on Engdahl

He claims that global warming, like peak oil, is merely a "scare" and a "thinly veiled attempt to misuse climate to argue for a new Malthusian reduction of living standards for the majority of the world while a tiny elite gains more power

claig Thu 21-Mar-13 23:15:34

Sorry that is Professor Chossudovsky

claig Thu 21-Mar-13 23:26:16

Actually I don't think globalresearch is left wing. They say they are independent. I read it a few times years ago and thought it was left wing so gave it a miss. But there is good stuff on there.

Xenia Fri 22-Mar-13 09:24:57

Some of these countries have been running themselves in a way that if any family did they would be homeless and bankrupt. Spain spent money it did not have like there was no tomorrow. Ireland had huge building projects that were never realistic. In Greece 90% of doctors and lawyers declared about £5k a year income for tax purposes. These countries are getting their comeuppance now as are the voters who voted these regimes in.

flatbread Fri 22-Mar-13 09:47:12

Land and Spain were running fiscal surplus before the crisis.

Greece is cont comparable to those two, it is a myth that all these countries are paying from their own irresponsibility.

Spain and Ireand would have been better off with thir n currency to devalue and inflate their way out of the crisis (as UK and US are doing)

Interesting analysis from the Economist

www.economist.com/node/21536871

PigletJohn Fri 22-Mar-13 09:59:33

It's very noticable that the Cypriots I hear on the radio, and the Greeks before them, seem to be taking the attitude that it's not fair somebody won't bail them out and make everything all right, with no cost in money, effort, or change in behaviour.

Sadly they blame the Germans (who have always paid the lion's share of the cost of European bale-outs) for being mean.

Xenia Fri 22-Mar-13 10:10:14

Indeed. I was going to say it was a lazy Southern warm country thing which it is to an extent but there is also the Irish and the the Icelanders

flatbread Fri 22-Mar-13 10:12:49

What exactly did the Cypriot common man do that was wrong?

They did not ask for euro interest rates to be kept so low that it woud fuel a debt spend

They did not ask for their banks to invest in Greek bonds

They did not ask for the value of these Greek sovereign bonds to be cut in half as a condition of the EU Greek bail-out.

Our country has similar issues of a gigantic financial sector and cheap debt fuelled property boom. If George Osborne decided to dip his hand into my bank account and take 10%, I would be seriously pissed. (ok, it being done by stealth through inflation anyway, but that is still a bit different than direct theft)

I am financially conservative and a saver. Why on earth should I (or the common man in Cyprus) be punished for being prudent and have saving confiscated, to pay for the sins of the central and private bankers?

Xenia Fri 22-Mar-13 10:15:54

May be a few hints in here about the common Cypriot and the work culture there (and he would have voted in politicians who led the country into its current mess).

"Working in Cyprus
Expats will find working in Cyprus is largely complicated by the large population of pensioners with a penchant for rest and relaxation and the year-round nearly perfect weather. Neither factor encourages a strong work ethic nor a thriving economy, but nonetheless, expats determined to live and work in Cyprus can still find a few opportunities.

working in CyprusIt follows that the tourism industry accounts for the largest percent of the country's GDP, with trade centres in the South supporting a stronger market than their Northern neighbours. Overall, the industry did suffer a setback at the hands of the global economic crises, but nonetheless, the market for sunseekers and holidaymakers remains buoyant and expats tend to be most successful at acquiring jobs in the hotel, catering and hospitality sector. Positions are more plentiful in the summer months during peak tourist season.

English-speaking expats can often make due in this industry without having to know Greek, however, wages tend to be low. As a result, many of the positions are occupied by Eastern European expats who find the salary more than satisfactory.

Alongside the tourism sector, the property market offers opportunity and the nation's affinity for agricultural output also creates space for fruit-picking work. Teaching English is also a possibility, but demand for these positions far outweighs supply.

Expats who do succeed in finding a job in Cyprus often must settle for a lower wage than expected. In the past the low cost of living was the means that justified this end, but now Cyprus has become more costly and salaries don't seem to have risen accordingly.

Finding a job in Cyprus

The majority of jobs in Cyprus demand some knowledge of Greek. Those expats that do speak the language, and even those that don't, will find that the best method of finding employment opportunities is through networking.

Entrusting yourself to valuable personal contacts and effectively tapping into the finding a job in Cyprusright word-of-mouth channels can be far more worthwhile than pouring over the English language newspapers (the Cyprus Mail and the Cyprus Weekly). Still, these print publications and a handful of online resources can still be good starting points and can generate good leads.

When applying for a job in Cyprus it's best to turn in your CV in person and to try to discuss your skill set face-to-face with the employer. Cypriots tend to be family-orientated and protective over the local labour market; thus cultivating even the most basic interpersonal relationship can go a long way.

Cyprus joined the European Union (EU) in 2004, thus EU citizens do not need a work permit to work in Cyprus. All other nationalities do need a work permit, which is best organised prior to arrival.

Work etiquette in Cyprus

Business should be conducted in person; phone calls, emails and other forms of communication are thought of as impersonal and thus unimportant.
Developing a relationship is paramount in Cyprus. Expect lots of face-to-face meetings, lunches, dinners and even work-related social outings.
Appointments are necessary in Cyprus and punctuality is expected; although, don't be suprised if you're kept waiting, if the topic at hand is not addressed, and if no decision is made during the duration of the meeting.
Bargaining is a way of life in Cyprus - negotiations can be lengthy and proposals should be designed to leave room for concessions. That said, once a contract is in place it is followed devoutly.
Dress is typically European - dark suits of a conservative nature for both men and women.
Business hours are generally 8am to 6pm, with a two hour break for lunch."

flatbread Fri 22-Mar-13 10:22:58

So, because the Cypriots like two hour lunches they deserve to have their country financially decimated???

Well, then the French should be next, as they love their lunch, and, gasp, even have wine during business lunches.

PigletJohn Fri 22-Mar-13 11:41:05

"have their country financially decimated???"

You're talking as if somebody is taking 6.7% of their money away.

In fact, their banks are insolvent, and somebody is offering to bail them out so that they get more than 93% of their money back.

When UK banks were on the verge of collapse, UK taxpayers bailed them out.

If the Cypriot taxpayer is not willing and able to bail out Cypriot banks, either somebody else does it, or they collapse.

The option of having a good fairy fly in, and solve the Cyprus problems at no cost to the Cypriot, is unrealistic.

MiniTheMinx Fri 22-Mar-13 11:48:39

Just noticed this and wanted to comment

"Ireland had huge building projects that were never realistic"

Xenia have you noticed what Osborne has done in the budget? Now tell me that one of the ways that capitalism solves its crisis IS NOT by building? Please explain why Paris was rebuilt? and what the heck was going on in Dubai ? Please explain why the slums are cleared in India and why we have peasant uprisings all over the globe? If you don't know, it is because huge capital surpluses must be reinvested, the money is then lent to ordinary people to buy this housing, again you have a classic cycle of capital accumulation, it stimulates growth but creates huge wealth inequality with debt overhangs and housing/land commodity bubbles. Of course using building to sup up capital surplus works in the short term, in the 50's the amount of companies making lawn mowers trebled ! house ownership boomed but so did personal debt.

flatbread Fri 22-Mar-13 12:23:33

UK could bail-out banks by printing money.

Cypriot cannot, as it does not have an independent currency.

Really, the most viable long-term solution is to stick their finger to the euro and do an Iceland.

MoreBeta Fri 22-Mar-13 14:03:40

flatbread - yes they should do that and it is the right thing for Cyprus to do and the only reason the EU is pressuring them not to do that is because every other PIIGS country might get the idea they should as well. That would destroy the ECB, all the German banks, the Euro and ultimately the EU.

EU bureacrats and politicians would then be out of a very nice high paid job. I can see why they dont want it to happen.

PigletJohn Fri 22-Mar-13 14:21:19

MoreBeta

You want to see the collapse of the bank you keep your savings in?

flatbread Fri 22-Mar-13 14:41:33

Piglet, the Icelanders did it. And they are fine now.

You seem to see it as a one time deposit grab. But it isn't. For one, there is nothing to stop the government from taking another 10% from your account next month.

People get that, and once the government did take money from depositors, every rational depositor would withdraw money leading to a bank collapse anyway.

Pointless exercise dreamt up by some EZ morons

Best to let the banks fail, decouple from Euro and devalue and print money to keep domestic depositors nominally intact.

MoreBeta Fri 22-Mar-13 15:11:51

Piglet - protect ordinary depositors and use standard bankruptcy law to deal with shareholders and other creditors and sell of assets. As flatbread says, Iceland did it and they are doing well now.

I hope Cyprus has been in touch with the Iceland President and asked for his advice. He is very clear and lucid on what they did, why they they did it and how well it worked.

Ireland on the other hand, did not allow its banks to fail and instead bailed them all out with taxpayers money. The country is still overburdened with debt they will never be able to repay.

Grabbing ordinary depositors' cash or just taxing them in some other way to repay sophisticated international investors is just not on at all.

MoreBeta Sun 24-Mar-13 16:09:20

Update onwhere we are on this story and to be frank it isnt looking good.

Cyprus Parliament agreed on Friday to impose capital controls to stop money leaving the country when banke reopen on Tuesday. It also agreed to split up Bank of Cyprus and LAIKI Bank into 'Good Banks and Bad Banks'. ECB threatens to withdrasw all support by Monday if we dont see a deal.

Cyprus Parliament is stil debating how and when and whether to impose loosses on depositors and bond holders. IMF and Germany are in the driving seat and the room for compromise is limited. Stpry is that Germany thinks that it can weather the storm of a Cyprus defaults and use it to set a precedent meanwhile IMF keep finding a bigger and bigger figure (latest Euro 6.8 billion) that depositors wil have to cover.

The Icelandic solution and Cyprus issuing its own currency looks ever more likely.

A left field solution is that UK civil servants have flown out there and I know this wont happen but I think the UK could rescue the economy of Cyprus in retirn for a long lease on a militray base, airport and exclusive negotiating rights on gas fields with gas been sold at international market prices if found. It would give us a very useful base in the Med which woudl allow us to cntrol North Africa and Middle East and handily allow surveilance and combat aircraft to take off and land without the need for an aircrat carrier. I think that is worth an annual £1 billion out of our overseas aid budget and frankly bring Cyprus into the remit fo the Bank of England and offer the Pound Sterling as their replacement currency.

There is a real danger Cyprus is taken over by criminality of all kinds. If we dont take care it could become a failed state like so many Carribean islands.

MiniTheMinx Sun 24-Mar-13 16:14:40

Have any of our civil servants flown out? sorry didn't understand that bit morebeta I guess if it were beneficial for the Russians, why not us. So much of our gas comes from Russia doesn't it?

MoreBeta Sun 24-Mar-13 16:51:36

Yes some of our civil servants have flown out to just offer advice.

I think we should be offering more given THAN THAT given the long historical links.

tiggytape Sun 24-Mar-13 17:47:18

I have been following this but wondered if anyone can answer some questions for me?
In order to be granted the bail out -which is needed to prevent a complete collapse- the Cypriots must find some of the money for themselves to convince Europe that it is getting to grips with its problems. Only then will the bail out money actually be handed over? Is that correct?

If so, why is Europe being so interfering about how that money is found? Why can Cyprus not just raise this money in any way that it feels best? Why do Germany get a veto or a say in how they run it?
For example why is plundering private savings accounts deemed preferable to creating a solidarity fund or nationalising state pension funds?
How can taking money from private accounts whilst holding the banks closed be justified (in terms of a Europe that exists for aims such as free movement of money, people and trade?)

And of course, any haircut of the savings of the wealthy will spook the less wealthy so much that surely there will be a resulting run on every bank or controls imposed to prevent this – neither of which seem very sustainable or desirable in a democratic European member country?

It seems such a spectacularly bad idea all round that I must be missing a major point and hoped someone can explain?

MoreBeta Sun 24-Mar-13 18:00:29

tiggy - yes your first paragraph is pretty much what is happening.

The reason that the Germans are interfering is because Cypriot Govt bonds and bank bonds are owned by banks around Europe and they in turn have handed those bonds over as colateral (ie security) against loans made to them by the ECB.

If Cyprus Govt or its banks default on their bonds then German banks, French banks and bansk in many other countries and the ECB will take a loss and that will deplete their capital and that wil precipitate further bailouts around Europe until eventually the ECB has no capital left and then it will have to be rescued ultimatley by Germany. Germans will never tolerate that and the Euro will cease to exist and hence so will the EU.

The prospect of cascading defaults as banks and Govts (eg Spain, Italy, etc) topple which brings down other banks and other Govts is why Brussels, IMF, ECB and Germany (who has most to lose) are interfering.

Defaults on bank bonds and Govt debt simply cannot be allowed or it will destroy the ECB, the Euro and the EU. That is why the Cypriot people are being told to foot the bill to prevent losses across the entire European banking system from boind defaults. It is also why Ireland was told to rescue its banks and make its taxpayers fund it.

This is political crisis for the EU - not just a financial crisis for Cyprus.

Domjolly Sun 24-Mar-13 20:13:31

To those who no more about this than me i know they are splitting bad and good banks up but my question is what buniness would ever invest in cyprus again for fear of a another money grab and also how can an economy work of its based just in cash i am reading somthing like 80% of services are now cash only confused

Domjolly Sun 24-Mar-13 20:18:53

tiggytape i think the germans have an election coming up and the germans are tried aof being asked to pay yet more for bailouts when there seems to be no willing on the other counties parts i belive cyprus rejected austerity

MoreBeta Sun 24-Mar-13 20:50:14

Domjolly -you spotted the next problem facing Cyprus.

If Govts impose capital controls and grab despoists (eg as they did in Argentina in 2001) and prevent free movement of capital in and out of the country then investment collapses. It makes ordinary business transactions extremely difficult.

Firms that operate in or export to countries that have capital controls have to resort to barter trade in many cases as they cannot move money across borders.

MoreBeta Sun 24-Mar-13 20:53:36

This from the Guardian.

Retailers, facing cash-on-delivery demands from suppliers, warned stocks were running low. "At the moment, supplies will last another two or three days," said Adamos Hadijadamou, head of Cyprus's Association of Supermarkets. "We'll have a problem if this is not resolved by next week."

The need for emergency aid shipments of food and fuel and medicine are not more than a fortnight away.

tiggytape Sun 24-Mar-13 21:01:22

Thank you MoreBeta - that makes sense in terms of avoiding a house of cards affect if they default on bonds. It all sounds pretty serious when you put it like that.
I think the temptation is to assume that so many countries have reached the brink of disaster recently and then pulled back pretty much without comment that a lot of it is seen as bluff to see who blinks first. Germany is under pressure not to be seen to be soft and Cyprus believes the other countries cannot afford to let her fail and therefore why allow its population to be crippled trying to keep afloat when a bailout has to be granted as much for the rest of Europe’s as for them?

LexyMa Sun 24-Mar-13 21:26:03

The UK already has sovereign land on the island of Cyprus (more than we need for our power projection requirements) - why would we 'rescue' Cyprus' banking sector for another one? (16:09 post?)

tiggytape Sun 24-Mar-13 21:42:57

And why do they have to sit up all night on a Sunday to resolve things?
Perhaps to demonstrate their dedication to getting a good deal or to give any agreement an air of last minute reprieve? I just saw the photo of the pizzas going in and wondered.

Domjolly Sun 24-Mar-13 22:12:28

I just cant see what right mined person would ever put money in a cyprus bank again

Also there will be a run on the banks they can keep them closed till chirstmas the first day they open there will be cues round the block in my view if they were gonna do this they should have voted took the money then announed it

There trying to avoid a run on the banks not doing a very good job

It seems to be a weried game of stare outs who can hold there nerve if germany dont let cyprus make ther bed the ruling party will loose the
Elections of cyprus do this money grab there will be a run on the banks as soon as allowed apevery penny will be withdrawn from the country and a black market in cash will develop its like going bak to medival times were you get paid by coin ffs

They should of just declared bankruptcy pulled out of the eu and started a fresh because whats happing now is not much better

tiggytape Sun 24-Mar-13 22:23:04

Domjolly - pretty much what I've read from experts and journalists in Cyprus says the same. The limit may be set high in terms of who is affected but once the precedence is set that says a government can force banks to shut in order to plunder savings, they'll never be trusted again. Today it might be the wealthy suffering a 'haircut' but who on earth is going to stick around long enough to find out when / if / who it happens to next?

That’s what they mean by controls – they mean that come Tuesday, they’ll stop people taking their money out by force to prevent panic and a collapse of the banks. Which is all very well but capital controls are very controversial in a supposedly free trade arrangement – they’ll be now way to move money and goods across borders freely. And can you do that forever – as you say the moment they stop everyone will empty their accounts surely?

That’s what I couldn’t get my head around – it just seems like a spectacularly stupid plan. I didn’t know about the bond arrangements that MoreBeta explained but is there no other alternative?

Xenia Mon 25-Mar-13 07:55:38

So they make those with large deposits lose 40%? Thus the rich will leave Cyprus and those who cannot help the poor who are poor themselves will stay.

We aren't I think supposed to have restrictions on free movement of capital in the EU. South Africa and many other countries abroad have capital movement restrictions and the UK used to but this will certainly be interesting.

I suppose the bottom line is if something looks too good to be true it is. Savers in Cyprus got 6% for say 5 tears when in the UK you were lucky to get 1 or 2% before tax. As UK base rate is 0.5% and inflation 3% in the UK your savings have already probably lost 10% in value so may be we have had our capital confiscation on savers already without people realising.

MoreBeta Mon 25-Mar-13 08:01:23

So a deal was eventually done in the middle of the night last night to allow Euro 10 billion of rescue funds to be released to Cyprus.

Laiki Bank has been shut down, depositors under Euro 100k have been saved. Bondholders and uninsured deposit holders over Euro £100k may lose up to 100% of their money but the total loss will not be known until the 'bad bank' assets of Laiki have ben sold off. The remainder of the 'good bank' part of Laiki will be rolled into Bank of Cyprus. Cyprus banks will reopen as soon as possible. Much worse losses have been imposed on large uninsured depositors than originally expected.

All of the above is as it should be in a bank collapse with losses being imposed where they should be and large investors 'bailed in'.

BUT..... a lot of details still to work out and a lot of difficulties glossed over.

The Cyprus economy is likely going to shrink 20% and cause yet further defaults on loans as people lose jobs and businesses fold.

I also read rumours that Euro 1 - 2 billion of cash disappeared out of Cyprus banks last week while they were closed and it seems some depositors were allowed to remove money from Cyprus while others were trapped in by capital controls that are still in place and unlikely to be lifted for many years.

This story is not over by a long way and I cant see why anyone would leave more than Eoro 100k in ANY Euro area bank now. There will be a massive withdrawal of funds once banks reopen in Cyprus and only time wil tell if that spreads into peripheral countries like Spain and Ireland and Portugal.

Still stock markets are rallying this morning as everyone breathes a sigh of relief.

tiggytape Mon 25-Mar-13 08:24:31

I also read rumours that Euro 1 - 2 billion of cash disappeared out of Cyprus banks last week while they were closed and it seems some depositors were allowed to remove money from Cyprus while others were trapped in by capital controls that are still in place and unlikely to be lifted for many years.

Yes lots of rumours about an ill defined 'special payments' clause that allowed some wealthy people to empty accounts and shift money out of Cyprus despite the banks being technically closed last week.

I cant see why anyone would leave more than Eoro 100k in ANY Euro area bank now. There will be a massive withdrawal of funds once banks reopen in Cyprus and only time wil tell if that spreads into peripheral countries like Spain and Ireland and Portugal.

Nobody in their right mind would leave larger deposits in now. In fact they are predicting that much smaller savers will also remove cash. Afterall if the wealthy have already been hit, who might they come after in case of further defaults and deals?

tiggytape Mon 25-Mar-13 08:30:03

I should say will want to remove cash.
The bank controls that stop people emptying their accounts are predicted to last for months.

MoreBeta Mon 25-Mar-13 08:45:42

Still at least there is good news!

Three tanker loads of Liquified Natural Gas are due to dock in the UK from Qatar so at least our gas and electric won't run out this week and another one is on its way from the Carribean just in case.

This Cyprus episode shows how fragile the security of things we never think about in our lives can be torn away so quickly. The banks can close over a weekend and not reopen, the gas and electric can be threatened by a bit of cold weather.

DolomitesDonkey Mon 25-Mar-13 09:41:17

"I also read rumours that Euro 1 - 2 billion of cash disappeared out of Cyprus banks last week while they were closed and it seems some depositors were allowed to remove money from Cyprus while others were trapped in by capital controls that are still in place and unlikely to be lifted for many years."

Now being a middle-class Brit I tend to sign and accept that some things simply are and that sometimes the system is too big to fight. But things like that are in fact enough to make me raise my pitchfork. Wtaf. sad

PigletJohn Mon 25-Mar-13 09:54:52

I heard a rumour that Elvis is still alive and works in a chip shop.

tiggytape Mon 25-Mar-13 10:18:08

When a government can close banks and raid personal bank accounts, you can't blame people for thinking anything's possible after that!

niceguy2 Mon 25-Mar-13 11:07:17

This Cyprus episode shows how fragile the security of things we never think about in our lives can be torn away so quickly. The banks can close over a weekend and not reopen, the gas and electric can be threatened by a bit of cold weather.

I agree. Money nowadays is not backed by gold like it once was. Nowadays money is merely backed by confidence. And what is happening in Cyprus shows what happens when that confidence evaporates.

We all know or at least should know that our banks don't have anywhere near the amount of money in their vaults to repay all our deposits if we all wanted them. But we all trust that we'd be able to withdraw our cash should we want to. It's akin to blind faith.

ttosca Mon 25-Mar-13 13:24:03

> We all know or at least should know that our banks don't have anywhere near the amount of money in their vaults to repay all our deposits if we all wanted them. But we all trust that we'd be able to withdraw our cash should we want to. It's akin to blind faith.

In fact, the banks are legally entitled to 'print money' out of thin air (not backed by anything).

Money is created by creating debt. Banks lend out money they don't have to people who then have to pay back this fictitious money plus interest.

The whole thing is madness, really.

MiniTheMinx Mon 25-Mar-13 16:01:16

In fact if you think about it, this cycle of creating fictitious money means that the debt is equally as fictitious when the debt is held by the bank who created the money. Central banks create money and in this way they are impoverishing nation states. Is that the real reason nations face bankruptcy? and not just because they refuse to implement progressive taxation?

MoreBeta Mon 25-Mar-13 19:14:22

Central banks are printing money to buy the bonds being issued by nation states. Federal Reserve owns $1.785 trillion of US Govt debt. Similalrly, the Bank of England owns a lot of UK Govt debt and ECB owns a lot of Euro Area Govt debts.

The central bansk are facilitating Govts running up debts rather than imposing real austerity. Cyprus has reached the point though that even the ECB does not want to buy any more of its debt and neither does anyone else.

Domjolly Mon 25-Mar-13 23:01:50

Just heard that the banks wont open for the number of two days, also heard that the branches of the cyprus banks have been open in the rest of the eu so they have no real idea how much money has been moved out confused

And russia is talking about punishing german and French business this is not going to end well

Domjolly Mon 25-Mar-13 23:02:24

For all we know there might be 12 euro left

MiniTheMinx Mon 25-Mar-13 23:41:54

Good grief. Where did you read that?
"russia is talking about punishing german and French business"

MoreBeta Tue 26-Mar-13 11:55:26

Domjolly - yes the London Branches of Bank of Cyprus and Laiki Bank have remained open for the last two weeks as was the subsidiary of The Bank of Cyprus in Moscow. They were allowing withdrawals in any amount apparently.

Full report was on Reuters yesterday.

I guess there will now be very very few deposits over Euro 100k left in these banks. The losses on those remaining depositors over Euro 100k will be around 50% in my view if not higher and most of those will be local Cypriot businesses and modestly wealthy Cypriots.

Domjolly Tue 26-Mar-13 15:49:59

MiniTheMinx i saw it on newsnight last night

When the ex Russian minster was pressed about the issue he said that it was theft outragous and that the EU would give the russians there money back

When the interviewer said how he said we have german and french companys in russia we can excat pressure this soundsvery bad to me i think the eu are walking a very dark path and the duch mister has already said this could becoe and i wuote a template for other countires

MiniTheMinx Tue 26-Mar-13 16:01:18

Thanks Domjolly, I didn't see newsnight (too busy working) I'll see if I can watch it later.

Just had a look at the Reuters link. Many very wealthy people have probably been taking their money out. So what will be left? Looks like those most effected will probably be Cypriot businesses, many won't survive this and the economy is expected to shrink by 15-20%. What a mess.

Interesting interview here about how banks create money and that private debt is actually a bigger problem than public debt.

www.youtube.com/watch?v=dQ74wWIxe4E&list=UUrmm_7RDZJeQzq2-wvmjueg Central bank and government bail outs, reinflating debt bubbles to stimulate the economy.

MoreBeta Tue 26-Mar-13 16:02:19

The Chairman of Bank of Cyprus just resigned and rumours swirling that bank may also be liquidated.

The Cyprus central bank has asked the EU/ECB for an additional Euro 3 bn which it is thought might be the additional amount that was removed last week while banks were closed.

Young people rioting/protesting on the streets of Cyprus. This looks very ugly. No sign of banks opening yet and with potentially the two biggest Cypriot bank being closed for good - who knows when they might.

tiggytape Tue 26-Mar-13 23:07:29

G4S (the British security firm involved in the Olympics) has been hired to guard the Cypriot banks when they re open on Thursday. But their Managing Director confidently predicts it won't be a big job:

"People have had time to digest the agreement so maybe there won't be that scenario whereby people run to the banks to withdraw"

Well that's O.K then!

Mimishimi Tue 26-Mar-13 23:46:53

I agree with MinitheMinx. All these countries were heavily pressured by private banks to issue public debt as a means of financing government programs. Bankers made huge bonuses out of this. To repay these debts whose interest payments have spiralled out of control, they are now being pressured to steal from their own citizens. Which will again yield huge bonuses for those who implement it.. ;) And then they wonder why average Europeans have given up (below dismal birthrates for decades) and they need to import labour , it's just mind-boggling.

They are thieves, now it's just in your face.

Xenia Wed 27-Mar-13 09:33:27

Everyone wants to pass the buck. Any subprime borrower who borrowed more than they could afford is at fault. Any bank which loaned silly percentages is at fault. Any nation which spent more money than it had coming in is at fault. Let us have taking of responsibility rather than constant buck passing. Any greedy Briton who wanted 6% interest on savings in Cyprus rather than 1% in the UK took a risk just as they did when they went for the too good to be true Icelandic bank rates in the UK.

Will be interesting to see if £3bn was taken out of Cypriot banks when they were supposedly closed.

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