
Cyprus savers lose 10% of money after shock bailout - seanp2k2
http://www.irishexaminer.com/breakingnews/world/cyprus-savers-lose-10-of-money-after-shock-bailout-588134.html
======
arbuge
This seems pretty morally hazardous to me. It penalizes good savers and lets
debtors go scot-free. The message it's sending is that taking on an excessive
loan or mortgage is fine; on the other hand you could be screwed if you live
within your means and save up for a rainy day.

I'm not familiar with Cyprus' particular situation but I'm guessing that if
they need a bailout, excessive spending and debt are factors contributing to
that problem to begin with...

~~~
tomp
Savers are not good for the economy. People should either spend the money they
earn, or invest it. Economically speaking, of course.

~~~
eru
What's the difference between saving and investing?

~~~
coldtea
In investing you SPEND your money.

If you're conservative in your investment you'll get them back. If you're
lucky, you will get more than you put in. If you are unlucky, you might lose
it all.

~~~
eru
What do you think banks do with your money? They certainly do not keep it in a
vault. Hint: bank runs are possible.

~~~
coldtea
> _What do you think banks do with your money? They certainly do not keep it
> in a vault. Hint: bank runs are possible._

No matter what they do with your money, they are expected to keep it as it
was, at least nominally (maybe with a little interest).

Bank runs and bank defaults can be possible but are far far far far rarer than
yourself investing and losing your money.

So your argument is like:

"You think chainsaw-tied-on-your-head-skiing is dangerous and you'd rather
stay at home? Do you know how many people die at their homes?".

------
kmfrk
Relevant clarification:

    
    
        People with less than €100,000 in their Cypriot bank 
        accounts will have to pay a one-time tax of 6.75%, 
        those with more will lose 9.9%. 
        
        The measure is expected to net €5.8bn in additional 
        revenues, Mr Dijsselbloem said, greatly reducing the 
        country's financing need.
    

Nevertheless, this sounds insane.

~~~
sbarre
Really? I think it's a valid move. If people in a certain economic zone are
using one of the countries as a tax shelter, and that is causing problems with
regional stability, then an adjustment is required. The saying "we're all in
this together" comes to mind..

Even though the tax shelter is legal, it doesn't change the fact that if the
regional governments are going to step in and provide bailout money for the
country that was the tax shelter in the first place, then the financial
residents (so to speak) of that country should be made to chip in..

If Cyprus didn't have such an imbalanced tax and banking system (that led it
to be a shelter in the first place), they wouldn't have needed the bailout..

~~~
iwwr
It stems more from EU governments generally abhorring tax competition. Cyprus
was in too weak a position to negotiate.

~~~
arkitaip
"tax competition" sounds like an euphemism for tax evasion.

~~~
to3m
Not really. It's more like, say, Ireland's corporation tax being lower than
the EU average (though not as low as Cyprus's...), in order to encourage
companies to set up there, rather than somewhere else.

------
RockyMcNuts
Roundup of news stories at <http://www.linkfest.com>

(project of mine - sort of crude proto-HN for finance)

Tough choice... banks are busted, so do you make depositors whole and bail out
Russian mobsters with German taxpayers' money? (Cyprus is a big offshore money
laundering center, much of the deposits are from offshore)... or create a
precedent where money in EU banks is not safe, raising the specter of bank
runs?

Bank runs it is... distinct possibility Cyprus could be the Reserve Primary
Fund of the EU crisis.

(When Lehman failed and that big money market mutual fund broke the buck,
everybody started withdrawing money from money markets, and the US had to
guarantee all MMMF and bank deposits.)

(going to further speculate...Germany and the EZ said we will only pony up X,
depositors have to take some of the hit... no one in these banks or the Cyprus
government was eager to be the point person advocating the mobsters taking a
bigger hit by exempting locals or small depositors...so the small local
depositors got sucked in.)

~~~
rescripting
Off topic and unsolicited request: Can you make the font size of the article
titles larger than the surrounding text? I'm getting a 'wall of text' feel
from the design that is making it hard for me to delineate where one news item
begins and ends.

~~~
RockyMcNuts
Thanks, will add it to the list! definitely looking for feedback, feel free to
ping me offline via the contact form, or linkfest (at) linkfest.com !

( also hackers who might want to work on this sort of thing )

------
csomar
This is baffling to say the least. This is the worst move any
country/president can make in my opinion. You are teaching people how not to
trust and work with the system.

By having money(wealth) stored in banks, you can control the economy. You'll
have more control over inflation, taxes, leverage... By having money stored in
people mattresses, you'll lose this control.

It'll be even hard to estimate the amount of money in the system, and if it's
even moving. The EU is handling this crisis all wrong to protect their
interest.

~~~
pfraze
Doesnt their interest include trade? It's aggravating how we got to this
point, but I'm not sure yet whether this story is bad behavior or bad PR.

------
barredo
1\. isn't Cyprus considered some sort of Tax Haven?

2\. this is a terribly non-progressive levy

Edit.

From: [http://www.economist.com/blogs/schumpeter/2013/03/cyprus-
bai...](http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bail-out)

> That idea had been in the air for a while, not least because a lot of those
> uninsured deposits came from outside Cyprus, and from Russia in particular.
> The politics of saving wealthy Russians with money loaned by thrifty Germans
> were always going to be tricky.

> What had not been anticipated was a 6.75% loss for savers with deposits in
> Cypriot banks below the insurance ceiling. Cypriots woke up this morning to
> find bank branches closed to them. By the time they will be able to get at
> their money, it will be too late. The offer of equity in banks to replace
> the value of their savings is meant to be a balm but it’s not a choice they
> would have made. Why this decision was taken is not yet clear. The most
> plausible explanation is that the Cypriot government itself preferred to
> spread the pain rather than wipe out non-resident depositors and jeopardise
> its long-term prospects as an offshore financial centre for Russian and
> other money.

Interesting.

~~~
dnu
3\. it proves that it's better to spend spend spend, than to be a sucker and
save

~~~
Evbn
It is true, though. Money is currency, not a store of value. Buy durable goods
or invest in growth projects. Working to accumulate pure money is just piling
IOUs on people. If you do that, you are going to face inflation in the future,
which you deserve , because your non-spending took away other people's
opportunity to create things of value. (Or, if they produced in excess of
demand, then prices will drop in the future, and conpensatory inflation is no
problem to you.)

------
codesuela
For people who like me are not familiar with the debt problem Cyprus is facing
and would like a little more info:
[http://www.nytimes.com/2012/04/12/business/global/in-
cyprus-...](http://www.nytimes.com/2012/04/12/business/global/in-cyprus-a-
national-quest-to-shore-up-teetering-banks.html?pagewanted=all&_r=0)

------
jl6
There's going to be a major demand in Cyprus over the next few days and weeks
for a non-bank store of wealth.

~~~
solarexplorer
bad luck: banks are closed over the weekend and monday is a holiday. By
tuesday the new tax will already be in place and the respective amount in all
accounts frozen.

~~~
tomjen3
Well hopefully people will demand the money the only way they can.

At the point of a gun, a sad way to go for decent people but only fair.

~~~
jl6
More likely they'll take the hit now, then if the crisis passes, launch
lawsuits against the government to claim it back. Or a political party will
adopt a manifesto pledge to return the stolen money upon election victory.

------
tomjen3
And this is one of the reasons I look forward to bitcoins - the state can't
steal them.

------
seivan
This is going to get standard in Europe. Already happened in Hungary, has
happened in the UK and will happen again. Even Germany is going to suffer for
this. As they already do with their fucked up taxes.

Sweden has started to screw with pensions which are basically savings.

It's fucked up. I can't stand it. High tax countries not being able to handle
it and tax even more from savings/pensions.

It's unsustainable. And recently there were many articles praising "the nordic
model"... fuck it's a joke.

As far as I've seen the only countries managing their economy is Singapore.
They got a sustainable model.

Don't spend peoples money. Low taxes means that whatever they spend it's not
coming from the people.

~~~
arbuge
The nordic model works for Norway, mainly because they have a gusher of oil
money coming in.

~~~
seivan
Hah yeah, Sweden does not have oil (but minerals) but what they do have is
fucked up taxes. Robbing people of their money to cover up for stupid ideas.

------
tomp
One has to admit, EU politicians (and their financial advisors), are cunningly
smart... First, they force Greece to default, now they force Cypriot banks to
default, but they never actually call it _default_ , so the reaction of the
financial markets is quite tame.

~~~
gasull
Where's the default? I don't read anywhere that Cyprus is defaulting in part
of its debt.

EDIT: Why the downvote? Please explain what percentage of the debt is being
defaulted, that is, what is the percentage of Cyprus debt that isn't going to
be paid at all?

~~~
coldtea
Having the dept repaid by stealing deposited money, is close enough to default
in my books.

Especially if that only repays a tiny amount.

Same thing with Greece. The dept is always the same as it was, and the default
is only avoided by getting a quick additional loan every X months. Which is
essentially a default in "life support".

~~~
gasull
That's not a default, it's a new loan. Answer this question: What percentage
of Cyprus debt has been defaulted? That is, what percentage isn't going to be
paid at all?

~~~
coldtea
> _That's not a default, it's a new loan._

A new loan that can never be repaid, and its only purpose is to prevent an
immediate default, it just as good as a default in my books.

Maybe not from the point of view of the creditors (they will get some of their
money back), but still having very similar consequences to the debtors:
difficulty in loaning new money, financial destruction, a take-over-of-control
by the creditors' intermediaries and the liquifying any valuable state assets.

It already started with indiscriminately stealing 6% from the bank account
holders and can only go downhill.

> _That is, what percentage isn't going to be paid at all?_

Lots of it. Following the same process as with Greece et al, there is
definitely going to be a "haircut".

~~~
gasull
> _A new loan that can never be repaid, and its only purpose is to prevent an
> immediate default, it just as good as a default in my books._

That's quite a stretch of the term "default". A default is when a debtor
declares that he can't pay and therefore he won't pay. Getting into a new loan
doesn't qualify as default.

> _Maybe not from the point of view of the creditors (they will get some of
> their money back), but still having very similar consequences to the
> debtors: difficulty in loaning new money, financial destruction, a take-
> over-of-control by the creditors' intermediaries and the liquifying any
> valuable state assets._

With a real default, there would be less financial destruction. At least the
bleed of paying the loans would stop.

> _It already started with indiscriminately stealing 6% from the bank account
> holders and can only go downhill._

Agreed.

> > _That is, what percentage isn't going to be paid at all?_

> _Lots of it. Following the same process as with Greece et al, there is
> definitely going to be a "haircut"._

Then it will be a (partial) default on the new loans, but it isn't yet.

------
DrJokepu
I wonder what steps they are taking to avoid a complete, Armageddon-style bank
run in Cyprus?

~~~
tomp
Why would that happen? Unless you expect more "tax", bank runs aren't
reasonable... The article states that you wouldn't be able to withdraw more
money than you have (today - 10% tax) anyways.

~~~
DrJokepu
People being human beings and often driven by emotions rather than rational
decisions, even if only a proportionally small group of depositors lose their
confidence in banks and chose to withdraw their savings, such an event could
quickly snowball into a complete panic where the one-off 10% levy is the least
of people's problems as if people expect that the banking system will collapse
(and once again, rational decisions play no part here, much of the banking
system is built on trust) they would desperately try to get hold of their
savings even after the levy has been imposed.

------
gasull
Can someone explain to me what happens with money people have in assets?

If someone has an investing account that has money invested in stocks or ETFs,
are those assets liquidated partially to pay up to the the 10% of the levy?

Does only not invested money count?

------
waterlesscloud
Odds that the "connected" types were tipped off and moved their money?

~~~
tomjen3
As good as the sun rises tomorrow.

This does not increase my confidence in keeping my money in the bank. The
usual argument is theft + lack of interest but the banks barely pay any
interest anymore and the lack of theft....

