Cypriot bail out

Wow just understood that the company that Im working at which has a normal business current account at the bank of Cyprus has just been notified that its current account will be raided to the tune of 40%.

You company should have had finger on the pulse.

Also I thought everyone knew bank accounts only had a guarantee or £85K (€100k), so you needed to spread it about.

binners:

You really just don’t get it at all, do you JY? The EU bail-outs are a back door way of bailing out European banks. Cypriot savers and businesses are presently paying a 40% tax on their savings and earnings, so that European Bankers don’t have to lose any money on their bad investments.

Bloomberg:
The European Union’s decision to recapitalize Cypriot banks by inflicting losses on depositors and senior bondholders is triggering investor concern that bank funding across the region will be hurt.

JY – I have to say you seem to be morphing into TJ

Stop the personal attacks 😉
I was always TJ light tbh so with his star gone [ and elfin] this was inevitable

Likewise the constant accusations of “ad homs” is boring as well

Yes me too but they still happen and i dont moan at them all. You saying no one has personally attacked me on here ? Not saying you have FWIW and not claiming i am never rude back either.

I used to enjoy your posts – but sadly rarely do now.

I will try harder then [ not sarcasm]

You really don’t get it at all, do you JY. The EU bail-outs are a back door way of bailing out European banks.

Its a pretty front door way of bailing out Cyprus banks and I think we all agree it is too fund their banks. However the investor are only protected to 100k and then they get nothing. This way they also get something so they have faired better than the legal protection. I agree the investors should also take a “haircut” and they have. It is also a three way thing between the IMF, Cyprus and the EU yet you focus on only one of them[ who you blame for it all] and this is what I challenge – tbh whatever they do you would be blaming them for it.
I think we can all safely assume i would let capitalism fall on its arse.

your constant defense of the Euro frankly incomprehensible

i am not defending it in the sense you mean [ i have said i sit on the fence re europe]i am merly trying to point out that the cause of all this is not the euro nor the euro elite nor the germans. I fail to see how cyprus would have faired any better if it were not under the euro – see iceland for example. I agree iceland had more options available re its own currency after the event but it was hardly immune due to being outside the Euro.
the actions are rather similar as well – witht the exception of the currency measures for obvious reasons

•Enforcement of strict Capital controls (incl. a temporary suspension of all official currency exchange) on 6 October 2008 – to help protect the ISK currency.
•Activation on 17 November 2008 of a $5.1bn big sovereign bailout package (of which $2.1bn came from IMF and the remaining $3.0bn from a group of Nordic countries) – to help finance budget deficits and the creation of domestic banks.
•Implementation of austerity measures as part of the needed fiscal consolidation.
•Activation of “Minimum deposit guarantee repayment loans” (€1.2bn from Germany; while the €4.0bn of offered Icesave loans from UK and Netherlands never was accepted) – to help finance the minimum deposit repayment to foreign account holders having lost their savings due to the bankruptcy of the Icelandic banks.

when the banks habve no money it is a mess – it is not a mess created by simply being in the euro but a mess created by being heavily reliant on banking and having many times yor countries GDP tied up in the banks – this was not the euro that did this nor the eurozone but cyprus itself that chose to do this and is now paying the price for this.

Again I dont defend the euro ,as you claim, I simply refuse to blame it for everything that happen in Europe.

I think sooner or later I will need to hide all my savings £££ under my bed to prevent bank raid.

I like TJ me. 😆

If bondholders take a hit, then it’ll be the first time. That’s not been the case in the previous bail outs.

From Todays Wall Street Journal

Up until now, senior bank bondholders in the euro zone had been exempted from taking losses on their investment, leaving taxpayers to take the brunt of the responsibility for supporting failed banks. The concern had been that touching senior bonds, a cornerstone of European bank funding, could rattle confidence across the region’s financial system.

Cyprus’ rescue deal will raise €5.8 billion ($7.58 billion) from bondholders and depositors. The so-called bailing-in of the banks was a requirement to unlock an additional €10 billion of support from the European Central Bank and International Monetary Fund.

Most of Cyprus’s contribution will come from deposits over €100,000 and junior bank bondholders. The total amount of senior Cypriot bank bondholders is small. According to European Central Bank data, Cypriot banks have issued €1.7 billion of debt securities, of which analysts estimate just €200 million is senior debt.

In Ireland’s bailout, the troika—the IMF, the European Commission and the ECB—obliged the government to pay back senior bank bondholders. In all, Ireland pumped in €64 billion, equivalent to 40% of its economic output, to keep a broken banking system from collapse over the past five years. A significant part of those sums helped pay back international bank bondholders across six Irish banks.

Sounds to me that whatever happens, the big financial players can’t lose. As everyone else has to take the hit to make sure they don’t have too. One again JY, I find your rabid defence of this principle, for an avowed lefty, somewhat mystifying

wow some unbelievable balls on this forum as usual
A company that operates in Cyprus that has a bank account there not hoarding cash but an operating account to pay local suppliers etc, now is not in a position to pay its employees, suppliers etc etc, not through mismanagement but through surprise raid on its current account.

they are now organising funds from elsewhere but its insane that the EU can do this. This is one company just multiply that across the country for all companies in the country who now are unable to pay rent, wages, bills, suppliers and this will unravel the local economy in no time at all.

Yes me too but they still happen and i dont moan at them all. You saying no one has personally attacked me on here ? Not saying you have FWIW and not claiming i am never rude back either.

Not at all but a bit of rough and tumble is to expected and isn’t noteworthy – and therefore there is no need to note it.

Good to see you taking it in the spirit it was intended.

as for pulling money out, you cant pull money out when you need to keep money in your current account to pay people. and to receive money from customers.

If bondholders take a hit, then it’ll be the first time. That’s not been the case in the previous bail outs.

This isn’t like other bailouts though. The first 3 words from the WSJ sum it up. “Up until now”, but then again up until now depositors have also been “exempted from taking losses on their investment, leaving taxpayers to take the brunt of the responsibility for supporting failed banks.” despite the guarantee of only €100k.

My point exactly Sancho! Its madness! Complete and utter insanity!! the effects on the real economy are going to be absolutely cataclysmic!!! Already they’re predicting a 20-30% contraction in the economy over the next few years. How that is going to be achievable without untold misery, rioting and revolution, god only knows!

And for what? To defend a political idea – the Euro as a currency – that looks increasingly indefensible with each (daily) passing catastrophe. But then the people who are its fiercest advocates (and beneficieries) are never the ones having to deal with the disastrous consequences, are they?

I am sure the Europhiles will explain how the bail out of a German bank this weekend managed to stay under the radar screen!

The problem with the bondholders argument is that in effect that do not really exist in Cyprus – so once the equity holders are wiped out, the depositors have no cushion.

But let us not forget (1) that the Troika sanctioned the hit on depositors <€100k going against one of their own basic principles, (2) the introduction of capital controls is de facto saying that the € no longer exists – a Cypriot € is no longer the same as a € elsewhere, (3) the Cypriots now face a possible 20% decline in economic output and (4) the idiot Dutchman had to be corrected in his observation that this was now the new template – that is after 6% was wiped off the share prices of banks in France, Spain and Italy yesterday. You couldn’t make this up.

Prediction: Cyprus will exit the € within 5 years. The maths behind the deal simply do not add up for it to work. The final bluff will be called.

the idiot Dutchman

It is not only Merkel who has to worry about the domestic situation.

Well at least he (Dijseelbloem) has spokesman to clean the mess up after him!

Wait for the real details of the capital flight that occurred DURING this process despite the banks being closed – and guess where the money was going?

Wait for the real details of the capital flight that occurred DURING this process despite the banks being closed – and guess where the money was going?

They’ll be no real surprises, everyone knows what goes on and the people in power will have been looked after, it’s always the same in these situations. Plus the loopholes that were left open whether intentional or not as in pointed out in the Reuters article.

Prediction: Cyprus will exit the € within 5 years.

I’m amazed Greece is still in it. They’ve just signed up to a lifetime of recession and misery. Their only hope is to devalue which means leaving the Euro.

Its crazy to think Cyprus has just signed up to the same economic death spiral as Greece. You’d think they’d look at what’s happened there (5%+ a year contraction in the economy, year-on-year) and concluded that taking your chances outside the Euro can’t possibly be worse than that!!

They probably thought, we’re **** with our major industry gone, so we might as well make every effort to stay in and try to get some sort of help. What would they do if they dropped out the Euro, the banks would have still folded? It’s a hard call.

It’ll be interesting to see what the Germans think about all this in September.

It will indeed. If the Germans vote in a “that’s it!! No more bail-outs!” party, then I’d give it a week, tops, before one of the big southern economies, deprived of its potential lifeline, goes belly up.

Thus triggering the collapse of the Euro and economic Armageddon that’ll make that little Lehman Brothers incident look like a picnic

Something to look forward too, eh? 😥

Do you really think the germans want to get rid of the weak eurozone members? Or put another way, why do you think the stronger member states allowed the more shonky ones to join the club?

Gotama – IMO, there is simple bail-out fatigue setting in. The “players” were all caught out by events and never got ahead of things (including preventing large deposit flight). But nothing new there…

Well…. It doesn’t really matter what anyone else thinks at the moment. Or what anyone thought when they were admitting new members like Cyprus, without asking too many questions. The German electorate will deliver their verdict in September. Nobody else’s opinion really matters!

When they had their last elections Cyprus had only just joined the Euro, and everything was looking pretty good. Things have changed ever so slightly since then. We’ll see what they have to say on the matter soon enough. I’d imagine that this is one piece of democracy that the EU can’t over-rule if it doesn’t deliver the right result.

there is simple bail-out fatigue setting in. The “players” were all caught out by events and never got ahead of things (including preventing large deposit flight). But nothing new there…

The German electorate will deliver their verdict in September. Nobody else’s opinion really matters!

I agree…. anyway, my opinion is 😀

The Germans unlike the Italians are too sensible and wont vote anti Europe.

Right, now nobody else’s opinion really matters!

The Germans unlike the Italians are too sensible and wont vote anti Europe. For now….

But if theres one thing that gives Fritz the ass ache. Other than being beaten to the recliners by the pool. Its being dragged down an econimic black hole. They tend to kick-off about that shit.

I agree and that why Mercol did what she did over the last week. But they are too sensible to bring on a bigger economic black hole by voting anti Europe.

Ok, the point i was trying to make is that the German’s have benefitted hugely from this whole fiasco. Unemployment within Germany is currently 5.3%, the lowest rate since reunification. To boot out the weak economies would result in a rapid appreciation of the currency, crippling exports and sending the country into a sprial similar to when Kohl allowed the Ostmark to be converted into the Deutschmark on a one to one basis. Whilst the constant bail outs will grate on large portions of the electorate (i think a new and fairly sensible party has garned c.20% of the vote in a recent poll) I would imagine those hoping for a German exit of the eurozone will be sorely disappointed.

Would anyone, apart from the most deranged UKIP headcases actually want the Germans to exit the Euro? Thats just madness

But at some point, unless we want to continue down the road of endless bail-outs, somebody has to address the fundamental structural problems of the deeply flawed Euro. And if I was a shrewd German politico, that’s exactly what I’d be putting to the electorate

Would anyone, apart from the most deranged UKIP headcases actually want the Germans to exit the Euro? Thats just madness

Theres a growing number of Germans who are calling for something else to be done. They’re getting pretty fed up with the line of people knocking on the door, asking for money. Growing ever longer.

Mutterings of bringing back the Deutsche Mark are getting louder, there.

But at some point, unless we want to continue down the road of endless bail-outs, somebody has to address the fundamental structural problems of the deeply flawed Euro.

I think everyone’s agreed on that!

If I was a German voter I’d have been happy to let Cyprus go and think that paves the way for larger countries to follow suit if it works out. If it didn’t work out for Cyprus then other countries would fall more in to line. But I’d want to maintain the Euro for stronger countries that can work together with in the zone.

Gotamas point on the Euro appreciation could be dealt with by a bit more QE like in Japan. 😕

binners – Member
Would anyone, apart from the most deranged UKIP headcases actually want the Germans to exit the Euro? Thats just madness

In pure Economics terms, the case for Germany leaving the € is probably stronger than anyone else doing so IMO.

Prediction 2: Three currency blocs will emerge for Europe within 5 years – (1) floating exchange rates incl UK, (2) strong currency bloc incl Germany, (3) weaker currency bloc incl PIGS

That’s the easy bit (unless the whole idea of fixed currencies follows historical precedents), the tricky bit is to decide where La Belle France fits in?

Good to see you taking it in the spirit it was intended

Well no one wants to come across as TJ tbh [ assuming not even TJ] and rough and tumble is fine and i dont mind it unless that is all there is thb. I try to avoid getting involved as I tend to get a hammer to remind me not to

One again JY, I find your rabid defence of this principle, for an avowed lefty, somewhat mystifying

What defence of capitalism or all of this have i offered? – even my last posts points out i would let banks fails. What you describe as rabid defence is me countering your “rabid hatred”- you gonna deny you dislike the euro zone now?I note you ignored the example of non euro zone Iceland in your response

but its insane that the EU can do this

so can the british govt as well- this is what I am trying to counter as its a pan European rule not some sort of unfair EU thing [ it may or may not be unfair the point is it is not a Euro zone issue] as they are the rules only 100 k is protected and without the bail out that is all they would have. TBH they have done better out the deal than without it.
Interesting they chose a low tax area of euroland to store their money though rather than more taxy but safer places [ devils advocate as I don’t know enough details to really comment]

My point exactly Sancho! Its madness! Complete and utter insanity!! the effects on the real economy are going to be absolutely cataclysmic!!! Already they’re predicting a 20-30% contraction in the economy over the next few years.

Kinda of going to happen when your banks go bankrupt and again it is favourable terms or else they would not be accepting them. What exactly could the troika do in this situation to leave you praising them? They have not enforced EU law and only protected 100k so what exactly do you want – it a serious question?

You’d think they’d look at what’s happened there (5%+ a year contraction in the economy, year-on-year) and conclude that taking your chances outside the Euro can’t possibly be worse than that!!

Yes you would think that 😉
They disagree who knows who is correct

the German’s have benefitted hugely from this whole fiasco.

They would probably be the strongest in the recession whatever currency was about but yes they are probably net winners on all this despite bankrolling everything

somebody has to address the fundamental structural problems of the deeply flawed Euro.

Well Blair is busy sorting out the middle east are you free at all?
Its not fundamentally flawed[ it is all capitalism is] it just requires a high price to keep it together – if they will politically and economically pay the price it will survive. So far they keep paying the price both the bailed out and the bailers. Will it last pfft who knows

As for poredictions it really depends on whether those affected [ those in the zone] will pay the piper if they will then it will remain for ever if they wont it will split
Whaterver happens I cannot see us ever joining unless dave really wants to annoy Farage or Binners