Cyprus promotes a saver mentality

[The Mad Monk]

[dannubis]

[MrFun]

Mad Monk

[Ben Kenobi]

Just wondering the relevance on the off-chance it wasn't an account hack.

You mean Mr. Fun is like this in real life?

[Uncle Sparky]

You really don't see the symbolism? 2/3 of these men have lost their shirts!

[MrFun]

[Dauphin]

You mean Mr. Fun is like this in real life?

You're missing out on MrFun times.

[DinoDoc]

Is there anyway this deal doesn't create a run on banks in Cyprus especially and other vulnerable countries like Spain and Italy if customers see this happen and worry that the E.U. will try to impose similar conditions on them?

[Dauphin]

If they honour the deposit insurance, it'd allay a lot of fears.

[Dinner]

Pure idiocy to renegade on the insurance. That could set a precedent, money will (should) move out of the banks and into the mattresses or perhaps Switzeland or US. This is a braindead move.

I blame Merkal as she supposedly is the one who pushed for this. I understand she will be facing reelection in a year and she knows bailout poor southern European countries is not something which is popular in Germany. Thus she wanted to find a way to make those countries fund more of their own bailouts but this is bone headed to the extreme.

[Hauldren Collider]

So, this isn't actually a tax. It's actually just a haircut. A partial default. Of course people are going to lose savings.

[Dauphin]

So, this isn't actually a tax. It's actually just a haircut. A partial default. Of course people are going to lose savings.

These people (the low end savers) aren't institutional or sophisticated investors. So no.

[Dinner]

So, this isn't actually a tax. It's actually just a haircut. A partial default. Of course people are going to lose savings.

It's a tax of 5%-10% specifically on savings account deposits but not on other types of accounts. To get the 10% hit you'd have to have at least $600,000 in your savings account. Personally, I have no idea why anyone would have $600,000 parked in a savings account earning 0.025% interest. Even a CD would do better.

My understanding of the order of events is that Cyprus has always had very strict banking secrecy laws which means people like Russian mobsters, South American drug lords, corrupt politicians, African military dictators, and American billionaire tax cheats like to hide their money there. The private banks took these deposits and used them to make loans & investments (mostly in Greece buying Greek government bonds but also giving construction loans to build beach houses which were supposed to get sold to people from western Europe but in fact mostly got sold to Greeks themselves). The Greek government bonds have had to be written down as part of the bail out terms while investments in Greek property assets have also performed poorly and this made the banks in Cyprus insolvent.

The bankers are, as always, very well connected politically so they got the government of Cyprus to agree to bail them out but it turns out a tiny impoverish island nation who's whole economy is based on tourism and laundering dirty money didn't have the funds to do this. Thus they went hat in hand to the ECB begging for a bailout themselves. Merkal is facing reelection next year and knows bailouts paid for by German taxpayers are very unpopular in Germany so she tried to come up with a way for Cyprus to fund a large part of the bailout itself but the only thing worth taking in the whole country was the cash stashed by the thieves/mobsters/corrupt politicans/etc thus the one time bank deposit tax was born.

It's going to back fire on them too because now we're going to see depositors in banks across the troubled parts of the EU fearing their savings might be next so they'll either close their accounts and stuff the money under their mattresses or they'll move it some country where it doesn't look like this might happen. Either way it will only make things worse.

[Dauphin]

$600,000? WTF did you get that figure from?

[Dinner]

People under $600k pay the 5% rate on savings account balances while people above $600k pay a 10% tax on account balances.

This is what I'd read. I saw this last Saturday.