I'm asking out of complete naïveté in matters of global finance, but what's to stop Cyprus from pulling an Iceland?
Cyprus parliament delays vote on deposit levy to Monday
31–40 of 52 posts
Re: Cyprus parliament delays vote on deposit levy to Monday
#32Why good financial management is not a competitive factor amongst banks? As in: bank with us because we are financially sound (instead of: because we pay higher interest, or whatever). It's not happening yet.
There's no reason it couldn't be. Within the US there are public figures available stating which banks have been the best and which have been the worst in the last few years. There is nothing to stop customers banking on this basis. They still don't, perhaps largely because the government insures up to $1xx,xxx in deposits (I forget the number) so a lot of people are covered no matter what happens to their bank.
I believe in the US the government insures up to $250,00.
Re: Cyprus parliament delays vote on deposit levy to Monday
#33as a Cypriot who will lose part of his money I believe voting for this measure is the best of the two options even though both are bad for us.
What's the other option? In the USA, taking 7+% of everyone's savings on short notice would initiate a civil war. Can't imagine how another alternative would be worse.
So that is they prefer to instead skim a little bit off the top slowly through inflation. In the end it doesn't matter, but it just prevents people from revolting.
Re: Cyprus parliament delays vote on deposit levy to Monday
#34Earlier quoted context omitted.
There are no more than a few hundred million in bonds. The banks were funded by deposits not bonds. The junior bonds probably will be wiped out but the amounts are tiny and there are no details released yet.
That does change things. Debt restructuring is a bit like musical chairs. If there was truly no group left to haircut, to avoid default this had to be done. On the other hand, that €10B euro could have come from somewhere outside the country, especially since it was the forced Greek bond haircut that caused the crisis. I find it hard to believe that northern Europe isn't taking advantage of this crisis to increase th…
It could have been a gift not a loan. But Europe is not willing to do this, partly as it would set a precedent, partly as half the depositors in Cyprus were not Europeans, partly for other reasons...
Re: Cyprus parliament delays vote on deposit levy to Monday
#35as a Cypriot who will lose part of his money I believe voting for this measure is the best of the two options even though both are bad for us.
What's the other option? In the USA, taking 7+% of everyone's savings on short notice would initiate a civil war. Can't imagine how another alternative would be worse.
A civil war over 7%?
Re: Cyprus parliament delays vote on deposit levy to Monday
#36as a Cypriot who will lose part of his money I believe voting for this measure is the best of the two options even though both are bad for us.
The Cypriot government during the loan negotiations at Eurogroup on Friday was essentially blackmailed. They were presented with the deposits haircut and increase in corporate tax. Our president threatened to leave the negotiations cause stealing depositor's money is unacceptable and was threatened that if not accepted the European Central Bank on Tuesday will stop providing liquidity to one of the main Cypriot banks…
That doesn't seem like "blackmail", but a frank assessment of the situation.
Re: Cyprus parliament delays vote on deposit levy to Monday
#37Maybe this is a terrifically ignorant comment, but it seems like the government mismanages their finances, as a result, they want the everyman to throw away 10% of their bank deposits? WTF?
The banks, highly leveraged and competing for offshore deposits with interest rates double the EU average, mismanaged their finances. Consistent with being an offshore financial centre, the banks' assets are about 5x GDP.
When the banks started to fail, the bailout team had three options. It could refuse aid and let the Cypriot economy crater - Iceland, in a similar position in 2007, crashed 60% and is still 1/3 below pre-crash levels. It could also extend loans in exchange for austerity, similar to what was done elsewhere. This would mean the 1/2 of Cypriot deposits from Russia, Britain, and Greece would run for the doors, leaving the islanders to deal with the banks themselves. Or they could do something fast.
Europe has no euro-wide deposit insurance. When you leave the weak to completely fend for themselves they sometimes fall, and they often break. This exacerbates the differences between the strong and weak in a way that is often damaging for everyone.
P.S. When any government mismanages its finances, someone takes losses. Sometimes it's as a one-off tax, sometimes as a permanent tax increase, sometimes as a reduction in benefits, and often times as inflation or default.
Re: Cyprus parliament delays vote on deposit levy to Monday
#38Earlier quoted context omitted.
The Cypriot government during the loan negotiations at Eurogroup on Friday was essentially blackmailed. They were presented with the deposits haircut and increase in corporate tax. Our president threatened to leave the negotiations cause stealing depositor's money is unacceptable and was threatened that if not accepted the European Central Bank on Tuesday will stop providing liquidity to one of the main Cypriot banks…
That doesn't seem like "blackmail", but a frank assessment of the situation.
in the case of Greece the debt was haircut (hence the bail-out) - this is what partly caused the problem in Cyprus. Now in the case of Cyprus, the deposits are hair cut (a bail-in). Not giving the 1st option to Cyprus is the blackmail.
Bottom line its all about the natural gas.
Re: Cyprus parliament delays vote on deposit levy to Monday
#39Earlier quoted context omitted.
What's the other option? In the USA, taking 7+% of everyone's savings on short notice would initiate a civil war. Can't imagine how another alternative would be worse.
What would the two sides be? One side is presumably every citizen, but that leaves no citizens on the other side. Sounds more like a revolution.
There are plenty of Americans who have essentially zero savings.
Re: Cyprus parliament delays vote on deposit levy to Monday
#40Maybe this is a terrifically ignorant comment, but it seems like the government mismanages their finances, as a result, they want the everyman to throw away 10% of their bank deposits? WTF?
The banks, highly leveraged and competing for offshore deposits with interest rates double the EU average, mismanaged their finances. Consistent with being an offshore financial centre, the banks' assets are about 5x GDP. When the banks started to fail, the bailout team had three options. It could refuse aid and let the Cypriot economy crater - Iceland, in a similar position in 2007, crashed 60% and is still 1/3 belo…
Hint: this situation doesn't have anything to do with Cyprus's government being irresponsible with money.