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Old 2013-03-22, 11:17   Link #21
monsta666
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Well beyond a certain point it becomes a unsecured claim but this bank levy - at least in its initial iteration - seemed to be imposed on everyone. And while you could say this whole saga is just another case of the EU pushing its weight the thing that does make this particular story notable is the fact this is the first time they have come up with the idea of a bank levy. Before all the EU demanded was various fiscal and employment or pension reforms.

Quote:
Originally Posted by willx View Post
The big mistake hurt was an attempt by the EU to get the government of Cyprus to void its own deposit insurance limits.
That is an understatement.

The mistake or should I say blunder is so big it makes me pause for a moment and consider whether such clever people and technocrats could really think that such a bone headed idea was the best possible move. I think and this is where we could move into the realms of conspiracy that perhaps Cyprus was used as a testing bed to try out new ideas and see what the public reaction is. Cyprus is a small economy - one of the smallest in Europe - so the risks can be contained if things do go belly up. Well it is only an idea and a far-fetched one at that. However it does pay to consider other possible alternative reasons why this decision came to pass. In any case we will see how this pans out in due course.
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Old 2013-03-22, 11:29   Link #22
ArchmageXin
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Quote:
The mistake or should I say blunder is so big it makes me pause for a moment and consider whether such clever people and technocrats could really think that such a bone headed idea was the best possible move. I think and this is where we could move into the realms of conspiracy that perhaps Cyprus was used as a testing bed to try out new ideas and see what the public reaction is. Cyprus is a small economy - one of the smallest in Europe - so the risks can be contained if things do go belly up. Well it is only an idea and a far-fetched one at that. However it does pay to consider other possible alternative reasons why this decision came to pass. In any case we will see how this pans out in due course.
I fail to see how could any EUcrats not realize screwing with a country's deposit Insurance tend to cause panic and bank runs...
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Old 2013-03-22, 11:54   Link #23
Vallen Chaos Valiant
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Quote:
Originally Posted by ArchmageXin View Post
I fail to see how could any EUcrats not realize screwing with a country's deposit Insurance tend to cause panic and bank runs...
Their initial excuse was that "the deposit insurance is designed for when a bank went under. Since this is about keeping a bank afloat, the deposit insurance doesn't apply".

No one believed it for a second. This is bad policy and who ever advised the politicians to do this should be named and shamed.
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Old 2013-03-22, 18:11   Link #24
AmeNoJaku
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Quote:
Originally Posted by Vallen Chaos Valiant View Post
Their initial excuse was that "the deposit insurance is designed for when a bank went under. Since this is about keeping a bank afloat, the deposit insurance doesn't apply".

No one believed it for a second. This is bad policy and who ever advised the politicians to do this should be named and shamed.
Wolfgang Schäuble, Michael Sarris and the rest of the eurozone finance ministers who unanimously agreed on the plan last Friday.

I could have never imagined a worse outcome for Cyprus (and by extent all Europe) a couple of weeks ago...

Let me recap what events were confirmed by all sides:

1) In the eurogroup (meeting of the eurozone finance ministers), Germany proposes a 15% one-time tax on all bank deposits above 100 thousand euros to complement the austerity policies in return for the 10 billion euro loan and more loans to its banks from European Central Bank.

2) Cyprus argues that this will trigger a bank-run, and says that it would be better to tax all deposits... and unanimously the eurogroup agrees that this is a better idea.

3) After pressure from the people the plan is rejected by the Cypriot parliament and the bank holidays are extended so that the government could negotiate another plan with Germany and Russia.

4) Germany threatens to stop supporting the Cypriot banks, i.e. burden Cyprus state with their debt (in between Cyprus debt as a percentage of its GDP is still lower then Germany's).

5) Cyprus completely cuts down all communication with Germany, unearths the previous' communist government plans to seize citizens' assets (pension funds, bonds, etc.) in order to cover the money needed to save its banks (before the eurogroup's meeting). In the meantime, only then starts negotiating with Russia some for of help and that was the first time someone from the eurozone discussed the details with them.

6) Russia flatly rejects all propositions that Cyprus made... the reasons for this are complicated, and I read multiple versions which are mutually exclusive.

7) Cyprus leaks its "plan B" instead of presenting it to the new eurogroup, which enrages even more Germany.

8) Yesterday, Cypriot bankers and government started discussing the size of the tax necessary and if they will have in addition to the austerity measures, split all its banks into small deposit and investment entities, taxing the first and letting the later go bankrupt. All this now that Germany is unwilling to let ECB support them, and loan the original 10 billion euros.

[rant]IMHO, all the sides here must get a Darwin awarded for capitalism, not only they annihilated a country (without sovereign debt for 0.02% of EU's current GDP*), but along with it destroyed the little trust markets had left in euro, in addition to degrading even more european foreign relation to post-WWII levels. These guys (mainly Cypriot and German conservatives who played the key roles in this weeks fiasco) care more about getting re-elected without having any plan about what to do when manage it.

Should I put it in a very oversimplified way, assuming the eurozone was an economical and not just a monetary union, it would only take an increase of 1% to taxes across all countries and their sectors, when the crisis started with Ireland back in 2009 to balance all PIGSS+France/Cyprus sovereign debt and give them the time to clean up their banking systems... but now the sovereign debt has exploded to disproportional figures, all banks require ECB's liquidity (taxpayers' money), taxes have increased more indirectly more then 1% in Germany and have tripled in the weaker countries, and most eurozone countries are 2-3 years in recession, with official unemployment (<1 year after getting fired) over 10%, Spain and Greece close 30%

In Cyprus case, unless they follow Iceland's example in addition to exiting at least the monetary union, there are a lot worse coming, with the IMF. They managed to rebuild their country without anyone's help, after the English occupation, the Greek coup, and Turkish invasion. But since I am not one of them, I guess it isn't my place to offer advise on the matter.[/rant]
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Old 2013-03-22, 18:14   Link #25
Ridwan
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Had the 19th century European policy makers seen this coming, I wonder how they would've reconsidered their Hellenophilia and the eastern question thing
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Old 2013-03-22, 18:51   Link #26
AmeNoJaku
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Quote:
Originally Posted by Ridwan View Post
Had the 19th century European policy makers seen this coming, I wonder how they would've reconsidered their Hellenophilia and the eastern question thing
The what?! Helping a country go from 90% to 140% sovereign debt, while buying out cheaply all its industries, and forcing it export to them all its highly educated workforce, is not particularly friendly. Still the rhetoric is necessary since all European states in lesser or greater extent have moral systems based on Greco-Roman culture, a little corrupted by middle eastern religions. And since you are probably referring to the expulsion of the Ottoman Empire from the Balkans, keep in mind that this was a general strategy in all countries not just Greece, and that most muslim fought alongside christian nationalists (not only Greek, since Albanian, Serbian, and Romanian fought alongside in 1821/1912 and earlier unsupported revolts) against an empire that was very corrupt and oppressive to them, in the end the Turkish nationalist destroyed that empire with a popular revolt... just saying

EDIT: As with Cyprus, I don't won't to exclude Greek's (or other PIGSS) own faults for the current mess, Greece in particular still defends an ottoman public sector, created by the fascist military junta and the conservatives in the 70s, exalted by social-democrats in the 80s, and sustained by all parties to this day.
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Old 2013-03-22, 19:14   Link #27
Bri
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Quote:
Originally Posted by AmeNoJaku View Post
These guys (mainly Cypriot and German conservatives who played the key roles in this weeks fiasco) care more about getting re-elected without having any plan about what to do when manage it.
That seems quite a universal approach in politics.
Quote:
Originally Posted by AmeNoJaku View Post
Should I put it in a very oversimplified way, assuming the eurozone was an economical and not just a monetary union, it would only take an increase of 1% to taxes across all countries and their sectors, when the crisis started with Ireland back in 2009 to balance all PIGSS+France/Cyprus sovereign debt and give them the time to clean up their banking systems... but now the sovereign debt has exploded to disproportional figures, all banks require ECB's liquidity (taxpayers' money), taxes have increased more indirectly more then 1% in Germany and have tripled in the weaker countries, and most eurozone countries are 2-3 years in recession, with official unemployment (<1 year after getting fired) over 10%, Spain and Greece close 30%
Direct income transfers are sensitive topic for politicians. The sovereign debt crisis was more of a symptom than a cause. The high interest rates on sovereign debt were in large part driven by a fear of the high systemic risk in the European banking sector, not so much by the unsustainability of public finances in the PIIGS. Had the interbankmarket remained functional and the ECB quicker on the provision of liquidity, things might have turned out different.
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Old 2013-03-22, 19:31   Link #28
AmeNoJaku
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Quote:
Originally Posted by Bri View Post
That seems quite a universal approach in politics.

Direct income transfers are sensitive topic for politicians. The sovereign debt crisis was more of a symptom than a cause. The high interest rates on sovereign debt were in large part driven by a fear of the high systemic risk in the European banking sector, not so much by the unsustainability of public finances in the PIIGS. Had the interbankmarket remained functional and the ECB quicker on the provision of liquidity, things might have turned out different.
I warned that would be overgeneralizing

Anyway, you are describing the vicious circle that the current policies for euro has created, states need finances and being unable to print money they lend from banks, reducing their credibility, and being unable to pay their sovereign debt, forcing the banks into insolvency, only to burrow even more to rescue them, putting both sides in an even worse situation... details of course are different from country to country, but all them were forced into this endless spiral because of the rules that ECB has for the banking system within the eurozone, dictated by IMF, German bankers and their main clients, who coincidentally are the legal financial supporters of the conservatives in the coming elections. Dunno, the way I see this situation, whether euro is left with Germany, or a true financial union is created, now the damaged has been done, and there is absolutely no desirable alternative left to avoid years of recession, social and political instability. I just hope it won't lead up to a war like it did in the 30s.
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Old 2013-03-22, 19:54   Link #29
Bri
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Quote:
Originally Posted by AmeNoJaku View Post
I warned that would be overgeneralizing

Anyway, you are describing the vicious circle that the current policies for euro has created, states need finances and being unable to print money they lend from banks, reducing their credibility, and being unable to pay their sovereign debt, forcing the banks into insolvency, only to burrow even more to rescue them, putting both sides in an even worse situation...
I'm not sure if it's a vicious cycle. Most EU governments have a fairly decent grip on their budget deficits and interest payments on debt are far from overwhelming annual budgets. Monetary expansion without structural reforms only brings relief in the short term. Unfortunately the spending cuts in combination with a recession are very painful, and people are getting hurt on the individual level.
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Old 2013-03-22, 20:00   Link #30
AmeNoJaku
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Quote:
Originally Posted by Bri View Post
I'm not sure if it's a vicious cycle. Most EU governments have a fairly decent grip on their budget deficits and interest payments on debt are far from overwhelming annual budgets.
That was the case with Ireland, Portugal, Greece, and Cyprus before the accepted more debt from IMF and ECB.

Quote:
Originally Posted by Bri View Post
Monetary expansion without structural reforms only brings relief in the short term. Unfortunately the spending cuts in combination with a recession are very painful, and people are getting hurt on the individual level.
But I agree in general principle, since they decided to deal with their problems in this way (accumulating more debt, and being bound by euros current macro-economic targets) at the worst possible time (global recession), it is bound to be destructive for the people.
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Old 2013-03-23, 00:44   Link #31
willx
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^ This all touches on a very simple subject that no one has seemed to jump on yet -- the above discussion basically described countries as people with no self-control. When presented with an option to borrow against its future to consume now .. it went ahead and did so. So is the problem a fundamental one of human nature? Can we (people or countries) not be trusted with a fractional reserve banking system or fiat currencies?

I don't know if it's intentional, but I see the temptation for blame to be laid on the greater financial system and the "leader" EU countries for willing to be lenders. Are we saying global financial markets were too lax on Ireland, Portugal, Greece and Cyprus? It's their fault cause they enabled recklessness?
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Old 2013-03-23, 01:13   Link #32
AmeNoJaku
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Personally, should we play the blaming game, I think that people are responsible from being so easily swayed by what a small minority offers. All of these "accusations" I made most of the time mention the ideological background of the masses they represent... nonetheless, it was, is and will always be the responsibility of capable leadership to guide the majority through hard choices, and this is the problem main problem of Europe today (as it was in the 30s), there are only clowns and crooks left, thankfully no psychopaths yet, though Sarris and Schäuble could potentially qualify, one being a pedo and the other manic-depressive (according to sigma (cypriot) and SDZ (german), respectively... neither though particularly reliable).
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Old 2013-03-23, 02:10   Link #33
Ridwan
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Quote:
Originally Posted by AmeNoJaku View Post
The what?! Helping a country go from 90% to 140% sovereign debt, while buying out cheaply all its industries, and forcing it export to them all its highly educated workforce, is not particularly friendly. Still the rhetoric is necessary since all European states in lesser or greater extent have moral systems based on Greco-Roman culture, a little corrupted by middle eastern religions. And since you are probably referring to the expulsion of the Ottoman Empire from the Balkans, keep in mind that this was a general strategy in all countries not just Greece, and that most muslim fought alongside christian nationalists (not only Greek, since Albanian, Serbian, and Romanian fought alongside in 1821/1912 and earlier unsupported revolts) against an empire that was very corrupt and oppressive to them, in the end the Turkish nationalist destroyed that empire with a popular revolt... just saying
I'm not going to defend the morality (though it's different over the necessity) of the Hamidiyan despotism, but I take any tone taken straight from Lord Kinross or any ex-Ottoman national historiographies (including Turkish ones) with a grain of salt. And Albanian one was more motivated by fear over being genocided by neighboring christians rather then "centuries of oppression under Turkish yoke"(tm).

I can't exactly say for the Slavic Balkans since their communist experience kinda severed their pre-Cold War ties to the west*, but Greece and Cyprus certainly had received a lot of free passes due to christianity and idealized fantasy of ancient greek civilization with which modern greek cultures have little in common, including entrance into EU which has caused all this. Indeed, this experience should've shown everyone that distant Hellenic heritage and christianity doesn't automatically make a country western europe and suitable with western european system. On the other hand, they are indeed victims of as much their own fault as they are of half-attentive western meddling, which has more often then not, ended up terribly for the economy of the subjected countries.

*)though again, there's also Romania and Bulgaria which have had worse track records in human rights then Turkey but had their entrance forms got stamped almost immediately after submission.
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Old 2013-03-23, 05:38   Link #34
Bri
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Quote:
Originally Posted by willx View Post
^ This all touches on a very simple subject that no one has seemed to jump on yet -- the above discussion basically described countries as people with no self-control. When presented with an option to borrow against its future to consume now .. it went ahead and did so. So is the problem a fundamental one of human nature? Can we (people or countries) not be trusted with a fractional reserve banking system or fiat currencies?
It's perfectly acceptable for people and countries to borrow against the future for immediate needs or investments. However debt needs to be managed, and this is where self-control comes in. Some countries people lost the faith of their creditors that they would able to service their debts. This lack of faith does not necessarily have to be rational and can be become a self-fulfilling prophesy.

Most of the time creditworthiness is a very useful mechanism to control spendthrift. However when lax creditors meet proliferate spenders, that is a recipe for disaster.

Quote:
Originally Posted by willx View Post
I don't know if it's intentional, but I see the temptation for blame to be laid on the greater financial system and the "leader" EU countries for willing to be lenders. Are we saying global financial markets were too lax on Ireland, Portugal, Greece and Cyprus? It's their fault cause they enabled recklessness?
I guess there is some innate need to blame an 'evil' faction when in reality limited rationality and conflicts of interest lead to suboptimal outcomes.

Financial markets did not have enough information to make a proper assessment of the creditworthiness of these countries. When current events triggered a reassessment, the high reaction speed was more of an issue than the underlying problem.

We should also not forget the crisis brought some serious design flaws (contagion risks) of the ECB/European banking system to the light.
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Old 2013-03-23, 08:37   Link #35
Mentar
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Good lord.

Quote:
Originally Posted by AmeNoJaku View Post
Let me recap what events were confirmed by all sides:
Your "confirmed recap" has so many factual errors that I wonder where the heck you got that from. Sources would be nice.

Let's start with what you omitted:

0) Cypriotic banks are de-facto bankrupt and unable to meet their obligations (which would trigger insolvency) due to massive reckless betting on Greek obligations and various other hi-risk business transactions gone bad. The amount they need to avoid default is around 16 billion Euro (for reference: the entire Cypriotic GDP is a bit above 20 billion Euro - so you can see how deep they slammed the cart into the ditch). Since by EU law, the state guarantees the first 100.000€ of deposits in the banks for each debitor, such a bank insolvency would trigger a national insolvency of Cyprus, as well.

Therefore, Cyprus requests loans from the Troika. The EU makes clear that they will not go beyond ~10 billion Euro, so 5.8 billion Euro have to be provided by Cyprus. HOW they manage to do that is up to them.

Quote:
1) In the eurogroup (meeting of the eurozone finance ministers), Germany proposes a 15% one-time tax on all bank deposits above 100 thousand euros to complement the austerity policies in return for the 10 billion euro loan and more loans to its banks from European Central Bank.
As far as I know, that's not what happened. Amusingly, the first suggestion of a one-time tax was made by Cyprus politicians.

Quote:
2) Cyprus argues that this will trigger a bank-run, and says that it would be better to tax all deposits... and unanimously the eurogroup agrees that this is a better idea.
The EU group didn't care how Cyprus did their part. Then, Cyprus president Anastasiadis presents the deposit levy plan as his best choice:

http://www.thejournal.ie/cyprus-bank...35916-Mar2013/

Quote:
3) After pressure from the people the plan is rejected by the Cypriot parliament and the bank holidays are extended so that the government could negotiate another plan with Germany and Russia.
No. Not Germany, Germany has no special stake in this. What happened instead was that Anastasiadis turned populistic, started to denounce his own suggestion as some kind of Nazi capitulation demand, declared that he "expected the tax to fail in parliament" (effectively killing it), and a wave of anti-EU and particularly anti-Germany riots broke out. He cut the communication line to the Eurogroup and started to babble about creating other solutions.

Quote:
4) Germany threatens to stop supporting the Cypriot banks, i.e. burden Cyprus state with their debt (in between Cyprus debt as a percentage of its GDP is still lower then Germany's).
No again. After hearing nothing from the Cyprus side, the ECB (not Germany) set an ultimatum, saying that if there was no solution how Cyprus would manage their share, the credit lifeline would be cut next monday.

Quote:
5) Cyprus completely cuts down all communication with Germany, unearths the previous' communist government plans to seize citizens' assets (pension funds, bonds, etc.) in order to cover the money needed to save its banks (before the eurogroup's meeting). In the meantime, only then starts negotiating with Russia some for of help and that was the first time someone from the eurozone discussed the details with them.
Again, Germany isn't involved, you're confusing them with the Eurogroup and Troika. Also, explain to me why the Eurogroup would have to discuss Cypriotic sovereign inner matters with Russia?

Quote:
6) Russia flatly rejects all propositions that Cyprus made... the reasons for this are complicated, and I read multiple versions which are mutually exclusive.
Then please let me explain: The suggestions were all ridiculous and financially unfeasible. Cyprus was suggesting that in exchange for some exploitation rights for gas fields found close to Cyprus, Russia was to help them out financially. The main reasons were that

1) The same gas fields would have led to conflicts with the Turks on who was authorized to exploit them

2) Loans wouldn't have helped anyway, since the EU 10-billion limit was based on the upper limit of sustainable national debt by Cyprus. You can't fix that by simply securing one loan to pay off another. It would have had to be in the form of "direct payment", and that was obviously impossible.

And so, after all the Chest-beating, the Cyprus side realized that it was actually in trouble and needed the help of the hand it has bitten in and insulted so heartily.

Quote:
7) Cyprus leaks its "plan B" instead of presenting it to the new eurogroup, which enrages even more Germany.
Germany still didn't care HOW the Cyprus part was financed. That's the hilarious part: For the first time in ages, Berlin did NOT lead the negotiations and left them to the EU group (its leader Dijsselbloem, a honorable Dutch, took responsibility and apologized).

What enraged Berlin was the fact that Cyprus didn't contact the Eurogroup at all _for several days_. Imagine that. Cyprus is close to state bankruptcy, and simply didn't talk. This kind of ridiculous and irresponsible behaviour ticked Merkel off.

Quote:
8) Yesterday, Cypriot bankers and government started discussing the size of the tax necessary and if they will have in addition to the austerity measures, split all its banks into small deposit and investment entities, taxing the first and letting the later go bankrupt. All this now that Germany is unwilling to let ECB support them, and loan the original 10 billion euros.
Total BS again. If Cyprus can field their part, Germany will naturally support the plan. And - oh wonder - all of a sudden, the deposit levy is back in the talks again. However, due to the trustworthiness of Cyprus politicians, it remains to be seen whether or not they can pull it off. At least they are negotiating again, and they will muddle through somehow.

Quote:
[rant]IMHO, all the sides here must get a Darwin awarded for capitalism, not only they annihilated a country (without sovereign debt for 0.02% of EU's current GDP*), but along with it destroyed the little trust markets had left in euro, in addition to degrading even more european foreign relation to post-WWII levels.
It's the opposite. To maintain trust in the Euro, they have no other choice than to enforce stability mechanisms. What Cyprus demanded was effectively "Hey, we gambled away 80% of our yearly GDP and are broke. Give us the money, 17 billions. Now.", and the EU said "Oh no you don't. We'll lend you enough money so that you BARELY squeeze through with a maintainable national debt. The rest needs to be done via cuts."

Realistically, if the EU would just refuse to toss good money after their bad one, then the deposits would lose ~60% of value in a bankruptcy. Compared to that, ~10-15% where it's going to end up for accounts bigger than 100.000 € is a MUCH better deal. Small creditors will be left alone, I guess.

That's the risk you take if you go for offshore banks for money laundering. If everything runs fine, you reap big rewards. Now they lost. That's free market, too - it must go both directions.

Quote:
In Cyprus case, unless they follow Iceland's example in addition to exiting at least the monetary union, there are a lot worse coming, with the IMF. They managed to rebuild their country without anyone's help, after the English occupation, the Greek coup, and Turkish invasion. But since I am not one of them, I guess it isn't my place to offer advise on the matter.[/rant]
Hilarious. If they default, then they're completely (censored). Except for their banking sector, they have nearly nothing left, and nobody would place their money there for half a century. But the collapse was triggered by their own greed and reckless risk-taking, nothing else. This "it's someone else's fault - particularly Germany's" screed is seriously getting on my nerves.
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Old 2013-03-23, 11:04   Link #36
sneaker
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This.

Also, stop saying the ECB is controlled by Germany. There is a reason why one of the PIIGS is their president - Germany has barely any control at all, that's one of the main reasons the ECB has been willing to ignore all predefined rules, because Germany cannot stop that. Germany has two members in the ECB council, exactly as much as Luxembourg and Cyprus.
It's sad that some people feel entitled to German money/guarantees and any kind of demand suddenly constitutes a new Nazi oppression. You are forgetting what you are demanding: that other EU member's taxpayers should pay for you after your low-tax and high-interest economies failed. PIIGS' politicians act like without austerity everything would be fine but they forget that without intervention from the richer(*) states they would be totally bankrupt. Or maybe "forget" is not the correct word. They know that - they just put the blame on foreign powers to get re-elected.

(*) Germany isn't actually all that rich. IIRC German wages were the only ones within the EU to actually go down after the Euro implementation while Greece was at the top with some 40%. A recent study says German households are actually much much (factor 2 - 4) poorer than the average Italian, Spanish or French household. Germany was considered the "ill man" of Europe for a long time, while still being its biggest contributor, even during the time of the re-unification. Another recent study estimates some 45% percent of the all time net payings within the EU have been lifted by Germany alone. It does not matter whether you worked hard or whether your economy will go down the drain - that's mainly your own responsibility and just because you are an EU member it does not entitle you to anyone else's money.

There's also a nice quote by Dhomochevsky from the news thread to put things into perspective:
Quote:
Originally Posted by Dhomochevsky View Post
You can not really compare the banking situation in Cyprus with that in Spain, Italy and so on.

As you said, Cyprus is a tax haven and they were paying really high interest rates.
Something like 4% to 5%.

For comparison, the interest rate in Germany is about 0.4%, while the inflation rate is somewhere around 2%. This is about the same in other european nations. We non-Cyprus europeans are losing our banked money continuously all the time, due to sub inflation interest rates. And for some reason we are not yet lynching the bankers (shouldn't we start soonish?).

But now for some reason, the people in Cyprus are on the barricades, when even if they all lose 10% of their money, they would still come out ahead of any other european, if they had their money banked in Cyprus for 3+ years. This seems a bit hypocrite to me.

Add to this, that the non-tax haven europeans had to use a huge amount of their tax money, to bail out banks and uphold the banking system. A banking system that Cyprus greatly profits from. This too is money lost for us, even though it did not directly disappear from our bank accounts (it never got there in the first place).
Not so much lost for the people who used Cyprus as a tax haven, because well... that's the point of tax havens right? To not pay much taxes.

So with this in mind, I think it's understandable that I am not feeling a lot of sympathy to the people who have their money in Cyprus banks and are screaming 'EVIL EU' right now...
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Old 2013-03-23, 11:11   Link #37
Vallen Chaos Valiant
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No matter what one might feel about Cyprus being a tax haven, that doesn't change the fact that the attempt to take money from ordinary savings account is stupid.

Cyprus bank run is guaranteed. And EU better hope the panic stays within Cyprus.
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Old 2013-03-23, 11:24   Link #38
sneaker
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Originally Posted by Vallen Chaos Valiant View Post
No matter what one might feel about Cyprus being a tax haven, that doesn't change the fact that the attempt to take money from ordinary savings account is stupid.
Whether all that was clever or not... well, that's a different story.

But even if it was stupid, it is still in the right of the contributing countries behind the Troika to act stupid - it does not constitute any form of entitlement. Just like Cyprus all the countries behind the Troika are sovereign themselves. It is no country's right to demand anything from the other countries, however great their misery may be.
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Old 2013-03-23, 11:38   Link #39
Vallen Chaos Valiant
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Originally Posted by sneaker View Post
Whether all that was clever or not... well, that's a different story.

But even if it was stupid, it is still in the right of the contributing countries behind the Troika to act stupid - it does not constitute any form of entitlement. Just like Cyprus all the countries behind the Troika are sovereign themselves. It is no country's right to demand anything from the other countries, however great their misery may be.
Nations are free to set terms when they loan money to one another. That's how it is always done. But fractional reserve is the literal cornerstone of modern banking, and threatening savings accounts means threatening the very core of the financial system.

I don't have any issues with nations negotiating with one another. My comments concern the suicidal act of triggering a bank run.

Now, technically a bankrun has already started. There is a reason why capital control is on in Cyprus and all the banks are still closed. So the problem is no longer "how to prevent a disaster" and more "how to minimise the fallout".

People of Cyprus are going to empty their savings ASAP, this is now the reality. The question is what is happening after that.
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Old 2013-03-23, 12:06   Link #40
Mentar
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Join Date: Nov 2003
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Quote:
Originally Posted by Vallen Chaos Valiant View Post
Nations are free to set terms when they loan money to one another. That's how it is always done. But fractional reserve is the literal cornerstone of modern banking, and threatening savings accounts means threatening the very core of the financial system.
That's funny ... why didn't the Cypriotic banks think about that earlier? Ask yourself: How do you reconcile responsible banking with "oops, lookie there, we have losses in the range of 80% our GDP"?

Quote:
I don't have any issues with nations negotiating with one another. My comments concern the suicidal act of triggering a bank run.
And this is what is raising my hairs in wild anger. In case you haven't noticed, the disaster has already happened. The banks are BANKRUPT. The depositors already HAVE lost 60% of their money, and the EU plan allows them to limit these losses to 10-15% instead. But rather than thanking the EU to save them 40-50% of their deposits, they scream bloody murder. Or, to be more correctly, it's mostly the uninformed nationalistic mob who does.

It was never an EU demand to involve the "small people". Small people don't have saving accounts of 100k+ Euro. This was the brilliant idea of the Cypriotic politicians before they turned a full flip-flop and the media started the riots.

So, the "Bank Run" was bound to happen under all circumstances anyway, unless the EU ponies up the full amount just for the sake of keeping it all under wraps. And that - I'm sorry - would not only be wrong, it would also be unsustainable. Sure, we could do it the US way and just print 80 billion Euro each month to distribute them wherever, but that would be irresponsible.

The Cyprus banking sector has to go McSplat and start anew, this time without the bloated offshore banking racket. One more tax haven less. Expensive hit with a 10 billion Euro bill, but at least this money isn't completely wasted.

Quote:
People of Cyprus are going to empty their savings ASAP, this is now the reality. The question is what is happening after that.
People of Cyprus won't be touched much anyway, how many people do you expect to have 100k+ Euro deposits in their bank accounts? It will go just like Greece... after half a year, much of the money will come back. And in the meantime, some Russian oligarchs took a bit of a hit. My heart isn't bleeding much.
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