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Germany And IMF's Initial Deposit Haircut Demand: 40% Of Total
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:
- 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.
- 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.
- 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%.
- Such an uncontrolled situation would push the whole banking system into collapse with all the attendant consequences.
- 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:
- Ensuring the liquidity of the banks and the rescue of the banking system through their recapitalization.
- 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.
- 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.
- This option results in a drastic reduction of public debt, makes it manageable and sustainable and relieves future generations from the burden of repayment.
- 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.
- 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.
...
Already bank customers are gathering outside major and cooperative banks, Skai television reported on Saturday morning, as angry depositors demand their money.
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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.
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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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I'm going to give everyone at Z/H a laugh. Back in the mid 2thousands, I opened F/X accounts in Cyprus to have CFD and paper metal trading (privileges). Someone give me a gun!
Were you intoxicated at the time?
Cypridiot.
If he wasn't, maybe he should have been.
Shit, wrong Cypress...
http://www.youtube.com/watch?v=Kmrz85sA-0Q
"Ya gotta lotta sharks out there...tryin to take a bite of something..."
@New:
Easier now, in the good old days, the oligarchs all had Chechen 'associates'.
The foreign banks and lenders being backed by politicians of bigger and stronger countries and global financial institutions are insisting that the Cyprus banks repay them in full even though this is likely to push the Cyprus economy in recession in the foreseeable future.
Moneylending to Cyprus by the foreign banks and lenders was a commercial decision whereby they received a higher interest rate to compensate for the risk they took in lending to Cyprus. The losses of this mess ought to be borne by lenders who enjoyed supernormal profits in good times and knowingly took the decision to lend to Cyprus banks. The losses should not be borne by the depositers and taxpayers of Cyprus or the taxpayers of other European countries by funding endless bailouts.
The best way out of this mess for the citizens of Cyprus is default.
http://www.marketoracle.co.uk/Article35345.html
www.letstalkmoney2012.in
Don't worry children, 40% is coming.
All to save the almighty automobiles. After all, no borrowing, no euro = no gasoline.
How about bailing out the depositors and getting rid of the cars instead? It would cost less and after ten years or so nobody would regret the absence of cars.
After all, we haven't had cars for millions of years and it never bothered anyone!
In ten years people will regret not having money. There wll be no cars, regardless.
That's right ... 40% ... they will come for your children, next.
Love the pre-emptive apocalypse schtick.
Can we keep the taxis and buses? ... pretty please???
Sure you're not a neo-ludite closet greenie? ... a unabomber in drag? ... (not that there's anything wrong with that!)
Don't worry, the cars will stop soon enough, you don't even need to do a thing.
You been runnin keorsene through your veins? Before cars, EVERYONE had a stiff neck, a nightmare scene woke ya, huh.
Rise up ye minotaurs. The cretin banksters have declared war.
seems a faction in germany is eager to bring on the fourth reich ...
Yes, but instead of vilifiying the Jews this time they should go after the real enemies, The Bankers
Oh never mind. I forgot the winners in war get to right the History. My bad
vilifying ? That is a bit of an understatement.
really ? you are funny...the Third Reich would never have occurred if US banks had not withdrawn their capital in 1929
The economy they refer to is their financial economy, they should only tax above 50,000, anything more than that is the political greed effect STILL taking hold.
--
Ha! ... "averted" ... gawd! ... we really need to find that alien-pod that these bastards keep spawning from.
Which is a good thing because the orderly theft of everyone's money is clearly a much superior and moral alternative to a perfectly legal orderly bankruptcies and systemic resets, thus sans the un-repayable poisonous debts in the system, thereafter. So this insane and irrational move ensures the defaults will inevitably still happen, but only after the savings of everyone have been destroyed first, thus no deposit guarantees this time, thus making the final situation so much more catastrophic in every conceivable way (and I don't mean merely financial).
A strange new definition of "averting" a "disorderly" default, this is!
These guys are not very good at this whole create the problem and provide the 'solution' schtick, the proposed emergency 'solution' is actually supposed to work and to appear credible.
Oh it's a sad day when his own mind plays tricks on him as he turns blue in the face looking for the big one solution.
The fact that the 100.000 euro deposit garantee wasnt respected is the cornerstone of the story.
Apparently this is a guarantee fit for northern europeans, not darker skinned semi-europeans.
The moneylaundring thing is just Gebbelist propaganda, they should know, its part of their heritage.
Switzerland, Luxemburg,Lichtenstein, no problem there apparently, they speak German.
This is clearly no longer a union, it is cutting edge postmodern postcolonialism.
And it is primarily Nationalist. And Socialist.
The Germans did it again... NationalSocialism must have a deep rooted appeal in that nation's psyche...
I feel your pain Cyprus. As a decedent of US citizens long ago (but now just a lowly US "consumer" who can be shot on site at any moment by the strongman of our corporation.) I too have been the victim of a managed bankruptcy process. Unfortunately for both of us it it's a never ending process so get used to it.
Any recommendations on the best brand of home safe?
A jar sealed with candle wax and squirreled away for another day. Deputy dog can't even find it.
http://www.stockinger-safe.de/
"On Tuesday, March 19 we would either choose: the catastrophic scenario of disorderly bankruptcy or the scenario"
Now theres a fucking concept for "capitalism ....for fucks sakes..... Is Bankruptcy not possible for a bank...???? Is that not where the word "bankruptcy" comes from....?
Fuck Off bankers and take the hit Yious got comming and desrve fully.
Death would be too easy.but what yous deserve.
I like the rescuing of 8000 banking jobs......they will be needed when the new depositors flock to the banks next week
I get a bead on how to actually trade these things via forex kong.com.
Considerations here have it that this may ( or may not) be the type of event that the U.S looks to "pin on the EU" as markets top out and we see a reasonable correction downward. If so.....JPY should pop big time as we USD with monies flowing to the safe havens.
I've proposed matching large banks cross-borders wherein
each is owed large sovereign debt from the other's
nationality; and, then cancelling each other's sovereign
debt in matching current value.
I call it the debt cancellation party.
http://www.youtube.com/watch?v=rkZ2_nKo7II
Japan particularly needs the relief so as to
cope with the Fukushima disaster, of course.
In the process we'd be helping ourselves.
Beyond that, there seem to be many possibilities available
once policy makers stop treating TBTF bankers like they're teflon.
The only losers should be the large banking holding co holders
who create the adversity from which they seek their profits.
Where they blow up economies they alone should take the losses.
When a person falls off a cliff after the first 90 ft. it might as well
be for a mile. So it doesn't matter how much they owe.
The depositors can be protected with a new class of bankruptcy
and/or the government using 2 sets of books:
one for business as usual
another for business with contracts annulled as needed:
so much of what the banks engaged in hardly even
constituted legitimate business, and even where their
counterparties may not be at fault they should have
known not to do business with shady bankers.
Such things as selling protection for ever more risk with
ever less reserves for ever larger bonuses is not legitimate,
and the government has the ability to do whatever is necessary
to wall off depositor funds.
The existence of a wall between fiduciary liability and depositors'
funds has to be affirmed in all government branches.
A Ponzi artist can go to jail before raiding clients' funds or afterward.
Which would you prefer?
Does anyone have a link/source to the "stunning 40% of total deposits that Germany's FinMin Schaeuble and the IMF demanded" statement? I need it to settle a bet