Germany And IMF's Initial Deposit Haircut Demand: 40% Of Total

Tyler Durden's picture

As the President of Cyprus proclaims  to his people that "we' should all take responsibility as his historic decision will "lead to the permanent rescue of the economy," it appears that the settled-upon 9.9% haircut is a 'good deal' compared to the stunning 40% of total deposits that Germany's FinMin Schaeuble and the IMF demanded. This action, his statement notes, enables the rescue of 8,000 banking sector jobs and ensuring the liquidity of the banks, "allowing the economy to proceed decisively to a new beginning." Ekathimerini reports," this is the first time in the eurozone that a levy has been imposed not on the interest of bank accounts but on the capital itself," and was the only way to bridge most of the the gap between the EUR17bn Nicosia needed and the EUR10bn the ESM was offering, though tax on interest in Cypriot banks will also rise to 20-25%. It is the 40% haircut requirement that concerns us the most as clearly going forward that means other nations, starting Monday (or Tuesday given national holidays) see deposit outflows surge, as the willingness to take such steps is now painfully clear.


Statement by the President of the Republic of Cyprus,

It is well known that the deep economic crisis and the state of emergency in which the country has found itself did not come about in the last fortnight since we have undertaken the administration of the country.


The state of emergency and critical nature of the times do not allow me, as they do not allow anyone, to embark on a blame game.


In the extraordinary meeting of the Eurogroup, we faced decisions that had already been taken and came across faits accomplis through which we were faced with the following dilemmas:


On Tuesday, March 19 we would either choose: the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy.


A possible choice of the catastrophic scenario option would have the following consequences:

  1. On Tuesday, March 19, immediately after the holiday weekend, one of the two banks in crisis would cease to operate, since the European Central Bank, following the decision already taken, would terminate the provision of liquidity. The second bank would suspend its work, and neither could avoid collapse. Such a phenomenon would instantly lead 8.000 families to unemployment.
  2. The State would be obliged to compensate depositors in response to the obligation regarding guaranteed deposits. The capital required in such a case would amount to about 30 billion euros, which the State would be unable to pay.
  3. A proportionate amount corresponding to the deposits of thousands of depositors for deposits over 100.000 Euro, would be led to a vicious cycle of asset liquidation, and these depositors would suffer losses of over 60%.
  4. Such an uncontrolled situation would push the whole banking system into collapse with all the attendant consequences.
  5. Thousands of small and medium enterprises, and other businesses would be driven to bankruptcy due to their inability to trade.

As a result of the above, the service sector would be led to a complete collapse with a possible exit from the euro. That, in addition to the national weakening of Cyprus, would lead to devaluation of the currency by at least 40%.


The second choice was the controlled management of the crisis, through the decisions taken and which can be summarized as follows:

  1. Ensuring the liquidity of the banks and the rescue of the banking system through their recapitalization.
  2. Rescuing 8.000 jobs in the banking sector and thousands of others which would be lost as a corollary of not maintaining the operations of banks.
  3. Total rescuing of deposits, with just the exchange of a small percentage of savings with shares of the two banks. Currently, these shares do not have their full value, but with the economic recovery they will repay most it not all of the amount that will be cut.
  4. This option results in a drastic reduction of public debt, makes it manageable and sustainable and relieves future generations from the burden of repayment.
  5. It saves provident and pension funds and avoids taking other tough measures such as wage and pension cuts that were put on the negotiations table.
  6. It avoids further recession and the risk of the vicious circle of a second memorandum.

We are not aiming to gloss over the situation. The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures. It's a decision that leads to the historic and permanent rescue our economy.

In the next few hours we will all have to take responsibility. Tomorrow I will address the Cypriot people.


Via ekathemerini,



Already bank customers are gathering outside major and cooperative banks, Skai television reported on Saturday morning, as angry depositors demand their money.



This is the first time in the eurozone that a levy has been imposed not on the interest of bank accounts but on the capital itself. In addition to that there is a levy on interest, too, and an increase in the 10 percent corporate tax that has been one of the main driving forces behind Cyprus’s financial progress after the 1974 Turkish invasion, generating growth by attracting foreign direct investment.

Notably, the account haircut does not affect bank accounts in Cypriot bank branches based in Greece, according to sources from the Greek Finance Ministry.

Tax on interest will amount to between 20 and 25 percent.


Cyprus state broadcaster CyBC reported on Saturday that German Finance Minister actually entered the Eurogroup meeting on Friday proposing a 40 percent haircut on Cypriot bank accounts. Sarris stated on Saturday that this had also been the proposal of the International Monetary Fund.

Sarris stated in Brussels that in view of the threat from the European Central Bank for banks in Cyprus to shut down and chaos to ensue, the increase in interest taxation and the haircut to bank accounts became necessary. “A disorderly default, that was a genuine possibility, has been averted,” he said.

“It allows our economy to proceed decisively to a new beginning.”


Opposition leader Antros Kyprianou, the General Secretary of leftist AKEL, accused the government of not consulting the other parties, saying that "the government bears full responsibility for developments in the economy as instead of choosing the road of consensus it has decided to go it alone."

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ShortTheUS's picture

Shared sacrifice.... BITCHEZ!!!

Supernova Born's picture

The lords of the fiat banksters giveth (to themselves) and taketh away (from the serfs).

Gold, like never before, bitchez.

killallthefiat's picture

I agree to "Gold, like never before, bitchez."  Why everyone with 'means' greater than $2000 does not pull that excess 'inventory' ('inventory' as viewed by the globalists) out of the bank, I just do not understand.  They might learn the hard way like the Cypriots.



american eyedol's picture

i just hope my 401k won't burn, i was told when i was 25 if i put 4-8% away that i could retire at 55. Especially in good quality mutual funds.

LetThemEatRand's picture

And of course by not paying tax on that money now you are absolutely guaranteed to pay a lower tax rate later when you "retire."

Water Is Wet's picture

If those stupid Cypriots had owned stocks they would have all of their money and more.  Now they have to work doubly hard or the government will have to take their money again.  Fags.

nope-1004's picture

This quote says it all:

The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures

Spineless fucking idiots in control of a losing proposition, so they will delay the inevitable for as long as the public will take it.  Public hangings of banksters not far off.


flacon's picture

I posted this on another thread and I am reposting it here. THERE WILL BE BANK RUNS next week. 



Cypriots that I know are planning on taking every last Euro out of the banks on Tuesday. This is also confirmed by reading comments on local Cyprus newspapers. People are irate over this. 


I lived in Cyprus for 11 years and still have ex-pat relatives living there now. Fortunately for them all their money is either in paper (a small portion) and the rest is in those two shiny metals. 


List of Cypriot newspapers:


Here is a popular one:



knukles's picture

Betcha, while probably the single most telling Watershed event yet in the dissolution of the Eurp and European Union, following the continual  mass raping of the public by those of the New Versailles, that the press here in the Americas will pooh pooh, demean, deride and greet this news with otherwise pre-programmed propaganda that all's now well, it won't happen here and to buy stocks.

Nothing could be further from the truth.

The thieves live.
We here in the States were Corzined.
The stage has been set.

God help us for the inequities of the powerful and selfish, the tyranny of evil men has come down upon us all.

Big Slick's picture

 "the only [option] that would allow us to continue our lives without adventures"

Adventures lie in your future, my friend.

StychoKiller's picture

A ride on a Guillotine is waaay too much "adventure" for me, thanks!

Wile-E-Coyote's picture

OOhhh Yeah Spain and Italy just sat bolt upright. There will be blood!

Oldwood's picture

This may not be dissolution of the EU or Euro as much as it has metasticized, poisoning the world economy with the resultant dependencies for more cash. The whole world is sickly and weak. This contagion will likely be used to finish the job ending with a single non-elected central world government that will claim to be intuiting the people of the worlds wishes to pursue the utopian dream, without the mess and pretense of democracy. Just sayin...

Buck Johnson's picture

Yes your 401k will burn, count on it.  There has been over the course of the financial crisis in the US that they put out feelers about having the 401k's put into the SS (social security) fund and/or have it as a requirement for all 401k's to invest all their money in US Treasuries.  They are coming for those 401k's, trust me.

Ballin D's picture

This so much. I work with a 'class' and everyone thinks im an idiot for not contributing to my 401k (no matching). Im hoping the job lasts long enough that Ill get my last laugh when theyre forced into negetive return treasuries. They can enjoy their tax free capital gains for now, Ill keep control of my FRNs. 

Go Tribe's picture

Don't worry, you're safe. Until virtaully any small-brained bureaucrat or the bank CEO cartel running the government decides they can make better use of your money than you can.

caconhma's picture

It appears that zionist banking mafia lost its head or whatever left of it. They have declared an open war to every single human  working being on this Earth.

AS for Germans, they just love to be hated.


It is indeed the time for gold and guns. The nice lies about democracy, freedom, and fairness are over. The gangsters have shown their real faces.

WmMcK's picture

And anyone with 'means' less than $2000 should at least buy some food /Pb/Ag.

tallen's picture

Bank Run 2.0 starting. I'm looking forward to getting my Party like it's 1929 hat on.

Every dollar/pound/euro/frank/yen in a bank is leant out, then deposited, then lent out again, to such a huge degree today due to the computerisiation of the financial system. Any rush for withdrawals is going to crash the system and cause huge deflation. (Yes I'm a gold bug, tho deflation isn't always a bad thing for gold. 1929 onwards prooved to be a great time for gold mining stocks and gold.

AlaricBalth's picture

"Jeroen Dijsselbloem, president of the Euro Group, declined to rule out that a similar tax scheme was being planned for depositors in other countries besides Cyprus, but he emphasized that such a plan was not being considered at the present time, the New York Times reported."

In other words, you can count on it.

SHRAGS's picture

"believe nothing until it has been officially denied"


Claud Cockburn
Go Tribe's picture

Long home safe company stocks.

Snoopy the Economist's picture

"And anyone with 'means' less than $2000 should at least buy some food /Pb/Ag."

So if the gubmint can take your money right from the bank then why can't they place additional taxes on gold sales? And while most people have 'boating accidents' how is that not like 'cheating on your tax returns'? Do people see cheating the IRS as an easy game?

So then, how does gold save your wealth if you eventually have to reconvert to FRNs and pay heavily to do so?

In the worst case scenario where there is no gubmint then the shiny metal is nice to look at but all that matters is food, water and ammo.

I'm looking for intelligent responses here.

thewhitelion's picture

There are worse things than taxes.  Fiat currencies have a disturbing habit of failing entirely.

GMadScientist's picture

This is the same government that will arrest you for settling your debts in anything but their company scrip?

Ask Romney or Feinstein how easy they think the SEC and IRS can be.

The shiny has a very long track record of being accepted more places than Master Card and Amex combined.

Snoopy the Economist's picture

"Gold, like never before, bitchez."

So if the gubmint can take your money right from the bank then why can't they place additional taxes on gold sales? And while most people have 'boating accidents' how is that not like 'cheating on your tax returns'? Do people see cheating the IRS as an easy game?

So then, how does gold save your wealth if you eventually have to reconvert to FRNs and pay heavily to do so? 

In the worst case scenario where there is no gubmint then the shiny metal is nice to look at but all that matters is food, water and ammo.

NoDebt's picture

Did anyone else notice the false choice in those two sets of alternatives that were presented?

Sounds so very cut-and-dry, doesn't it?

If we're going to break some rules anyway I GUARANTEE you would like my solution a LOT better than the one that just got implemented if you're a Cypriot (or even a Russian tycoon!).  I could even do it without Cypress leaving the Euro Zone.

Hint: nationalize the banks, even if only for a day, pick and choose which debts get repaid and which ones get the middle finger.  Further hint:  ECB, IMF and a lot of other large "outside interests" would get the middle finger.  Clean slate on debt and no need to leave the Euro Zone since there is no mechanism to forcibly boot a country out once it's in.  Next phone call is to Russia to say, in so many words, "we covered your ass, now it's time to cover ours."


Renewable Life's picture

Note to Self: Double your monthly silver purchases ASAP!

Can't wait to see what those fucks on CNBC have to say about this???
I think at some point the cheer leading bullshit might get drowned out by the screaming fear of self interest, when these stooges realize suddenly, the bankers they have all been "loving" all these years, are really the tyrannical communist dictator type motherfuckers they read about in books growing up! It's all just news, until its your 10% that's confiscated on a Saturday without warning!!!!!

breakyoself's picture

I want to say they will ignore it, but I wouldn't be surprised if that man looking chick is over there because all hell has broken loose.

Agstacker's picture

Good luck finding stories about in on the MSM, of all the major networks (ABC, NBC, CBS, FOX) only NBC wrote about the savings being stolen (and the front webpage article was bout the rape trial).  CBS had a small blurb about a 'bailout' and as for the other networks, nada.  

sunnydays's picture

Yeah the people have to scarifice their money for the over spending of the government for themselves.  They have to give their money so the banks can give themselves bonuses.   They think they saved banking jobs?  When everyone withdraws their money, except for those businesses that have to have money in the bank, they will find out the hard way.   How stupid.  I am still astounished at the stupidity of doing what they did.  People around the world will not go to their banks and withdraw what they have. 

Groundhog Day's picture

He who withdraws first and converts to metals first withdraws best.  The bankers think they have all the control until everyone asks for their money back

Seasmoke's picture

Start at 40 and go down for the good of everyone to every time

Not Too Important's picture

Raise the price of gas $1.50, then back it down .75 and people are grateful.

Rinse, repeat.

Peter Pan's picture

For the sake of raising a paltry 6 billion euros the TROIKA either is either risking total panic in the market or it is flying a kite for more such actions both in Cyprus and Europe.

This whole approach is messy but in the end it may set in motion a series of developments that will bring to a head the whole question of debt sustainability, debt write-offs and even the issue of whether Europe is a dead horse which cannot recover simply by being flogged.

The situation is serious therefore expect more lies. Nothing more nothing less.

cifo's picture

It's a small price to pay for such an experiment.

Lore's picture


glenlloyd's picture

Cyprus was a perfect place to float this trial balloon, and it won't go over well, in fact if anything this will precipitate more crises and probably bring about the end more quickly.

To pretend that this was the only way, the right way, to deal with the crisis is foolish. All these politicians and their platitudes and promises makes me sick.

It's like saying we should have taxed you a lot more over the last decade and we didn' now we're going to just take it from everyone.

Safe manufacturers just got a windfall...

brace_brace_brace's picture also 100 armed men already attacked the Cyprus presidential palace this is just the beginning of the end bitchez, soon in theaters in the good old USSA

Fish Gone Bad's picture

I went back and re-read the article.  Here is what it really said, "Cyprus owes 40% of everything it owns.  We are taking 10% now and once we can John Corzine this, we will come back for the rest." 

Does ANYONE think that they made a mistake about the 40% ???  Absolutely not.  Are they done?  I don't think so.  Not by a very long way.  If you live in Cyprus, take it all out, now. 


Lore's picture

From the BBC: "While Cyprus may be one of the eurozone's tiniest economies - its third-smallest - there could be serious repercussions for other financially over-stretched economies, such as those of Spain and Italy" <-- He forgot Portugal and all the rest. How long before this reaches American shores?  Is Iceland the only nation with balls? 


thisandthat's picture

This article by an Icelander paints a very different reality to what people from outside tends to believe:

Lore's picture

Okay. Hopefully, my sentiment is clear:  PUBLIC FUNDS SHOULD NOT BE USED FOR BAILOUTS.



squid virtuous's picture

Stocking up on popcorn, and some cash, just in case ...

McMolotov's picture

"It's just a flesh wound."