Raid on bank accounts in Cyprus

[MrsJREwing]

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

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.

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.

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

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.

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.

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.

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

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

'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.

Claig

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.

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

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.

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!

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.

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.

KirstyoffEastenders

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

^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.

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.

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.

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.

"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.

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.

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

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.

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