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Insane EU: Bank depositors in panic as they pay for Cyprus €10bn bailout

Bank depositors will have to finance 60% of  the 10-billion-euro bailout for Cyprus agreed between European Union and International Monetary Fund in Brussels in the early morning hours of Saturday. Eurozone ministers force depositors at Cypriot banks to pay a one time levy to raise  6 billion euros. The so-called “emergency solidarity contribution” will force savers to see their bank deposits undergo a 6.7%-9% “haircut”,  while bondholders will not suffer any losses at all.

Savers with more than 100,000 euro in bank deposits will pay a 9.9% levy.

Savers with less than 100,000 euro will pay 6.75% contribution to the bailout.

There is no minimum deposit capital cap.

The decision will not affect bank deposits in Cypriot banks in the Greek bank network (Cuprus state RIK TV).

Tax on bank deposits interest is expected to be 20-25%.

The bailout is needed to recapitalise Cypriot banks, without it Cyprus would  most likely default.

“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. Finance Minister Michalis Sarris stated on Saturday  that this had also been the proposal of the International Monetary Fund.”(ekathimerini)

Changes will have to be ratified by the House of Representatives, the Cypriot parliament within the weekend, while an emergency cabinet meeting is taking place on Saturday morning in Nicosia to assess the
situation.

anastasiadis cyprus

Cyprus president Nicos Anastasiadis, assumed office 28. February 2013

Risks of bank run

The decision bears the high risk of a bank run with depositors most likely to rush and withdraw their money to avoid the levy. The decision will come into force on Tuesday, after a bank holiday on Monday.

According to media reports, Cyprus blocked the electronic money transfers as soon as the decision was taken.

Hit by this decision are not only Cypriots but also Greeks who had transferred their money to Cypriot banks during the crisis, Russians and Brits.

Panic and Anger

Dozens of people formed long queues outside credit societies on Saturday morning as Cypriots rushed to withdraw their money. The General Director of co-op credit societies  told media that “the system was frozen” and announced the closure these money institutes over the weekend.

Co-op credit societies, normally open on Saturdays, were shut for business in the coastal town of Larnaca as depositors started queuing early in the morning to withdraw their cash.

“I’m extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans,” said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.

“They call Sicily the island of the mafia. It’s not Sicily, it’s Cyprus. This is theft, pure and simple,” said a pensioner. (full story & Brussels background Reuters)

As the panicked bank depositors tried to find alternative solutions and rushed to ATMs, those were soon “out of order” as they dried out of cash.

Unconfirmed information claim that the bank withdrawal system was holding back a percentage for the levy.

Speaking to state TV RIK, Cypriots complained that they were caught “asleep” as rumors and leakages to the press before the bailout agreement were claiming that bank deposits below 100,000 would be not touched.

Cyprus becomes the fourth country after Greece, Ireland and Portugal to turn to the euro zone for financial help in the wake of the region’s debt crisis.

This is a radical, unprecedented and immoral departure from all previous aid packages mechanisms, where citizens will have to pay twice for their own bailout. And almost equally: the one with 100,000 euro deposits and the one with 10,000 or even 100 euro.

By blocking all the money transfer and withdrawal systems, the EU finance ministers topple any democratic procedures of the same European Union by prohibiting “free move of goods and money”.

Additionally, the decision cancels the EU protection of bank deposits up to 100,000 euro.

But who cares? Depositors burned, bondholders saved, banks survive – a modern European bail-in!

 

 

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19 comments

  1. Depositors will be compensated by equity in the banks.

    according to Cyprus Mail.

  2. keeptalkinggreece

    tell it to the Cypriots depositors. You think they will escape with only one bailout?

  3. at least people have a small chance of getting their money out
    when we were told we were being ‘bailed out’ in ireland it was under the condition that we would guarantee our banks
    this resulted in a debt to the irish tax payer of 64 billion unless the world and euro economies improve the bond market
    s will slam shut for us and we will go back to square one like in a game of snakes and ladders

  4. No they won’t escape that if they are going the same political route as Greece has. But that’s not the point they are complaining about here. That’s about the savings that will get a haircut between 6 and 10%. But they are better off then those who lost all their money when Van Deijsselbloem nationalized the Dutch SNS-Bank. Those with preferred stock lost everything. And those were mostly the small middle-class people. They didn’t get equity in return. They just lost everything.
    Your conslusion: “Depositors burned, bondholders saved, banks survive” is not true it seems. When the banks survive the depositors, that will be share-holders now, will still have what they have now, won’t they?

  5. Rule of law? We don’t need no steenking rule of law.

  6. keeptalkinggreece

    you really believe the value of banks shares will go uneffected? Look what had happened with the shares of Greek banks. they had forecast of 20+ euro (NBG, Piraeus) in 2008, they are now below one euro.
    http://www.capital.gr/xa/quotes_table.asp?sector=8300

    and what if I have a deposit of 10K euro for an operation or my child’s study? I will pay with bank shares?

  7. At least they have a chance of getting out without to much damage. Unlike those middle-class families who lost everything in one evening when SNS-bank was nationalized. That was something that hadn’t happened in Holland since the Russian communists nationalized the railways!
    The people, who are so lucky to háve 10K in the bank, will lose 675 euro. And the rest they can withdraw and put… well in Switzerland and other tax-havens? They still will have 9375 euro in their hand now. Their loss is roughly the amount we had to pay bi-monthly for TEBE! Small time depositors of, say, 1K will lose a stunning 67 euro! That would be a loss even a Greek pensioner would still be able to cough up if needed.
    There is of course this fundamental question about the state grabbing part of your money to bail the banks out. But is it fair that those who do NOT have any money in the bank have to show solidarity time and again by paying higher taxes and special levies to bail out those banks and those who have savings?
    That is the same criminal injustice we suffered in Greece when the government put up a sur-charge on oil because they were not able or willing to tackle the fraud that is going on in that sector! We were and are all paying for the thieves who robbed us in the first place and are still robbing us blind.

  8. keeptalkinggreece

    that it is” criminal to have the state grab people’s money.
    and will cause a bank run

  9. A friend, former heavy weight in the banking world, and of Israeli origin, has just referred to this as “The Final Solution” or “EndLösung”. Coming from a respectable individual with his professional and personal background, that is quite a statement to make.
    I can only hope that they get what they deserve, a bankrun in Greece, Portugal, Spain, Ireland and Italy would put so much strain on the banking system that it would result in the only possible solution to this, annihilation of the banking system and replacement with a different system. “Economics as if people matter” would be a good start.
    I hear that our friend Madame Lagarde has given her blessing to this policy of “burden sharing”. does that mean that she will accept a cut in her index-linked, tax free pay?

  10. The law serves and rules. It serves the few and rules the many…

  11. I see only one problem here, a very big one though: that the EU is breaking the “100,000 euros are always safe”-rule. Rich guys can be happy: if you have 10 million stashed away in Cyprus you still walk home with 9,010,000. But sombody with 1,000 receives 932.50. Well, I’d prefer the partition to be 1,000 to 100,000. Then most normal people would get all of their money.

  12. The problem is not the amount or percentages, the problem is the action itself. This is plain and simple theft, The Biggest Bank Robbery of the Century has just been performed, and those involved in it have now most definitely dropped the mask of respectablilty and honesty and shown themselves for what they are, a bunch of thieving gangsters. They, and their puppets in the various regions need to be rounded up and locked away for ever. Like they demanded to be done to the stray dogs in Athens. Unlike these guys, the strays in Athens actually knew who to bark at, and did…

  13. I completely second your anger in regard to any deposit under 100,000 euros. This is the most outrageous thing to do, an illegal act of stealing money from ordinary people who trusted the law. This may be the last straw the break the euro’s back.

    In regard to deposits above 100,000 the action itself is supernice and undeserved towards the deposits’ owners – it is however a most cunning and obscene robbery of the poor Cypriot taxpayers who are now billions in dept just to bail out their hopeless banking industry.

  14. If Cyprus dont like it then they free to go find other funding.Losses for depositors wiht a bankruptcy will be way higher.
    I am just surprised the EU core contries are willing to prop us Cyprus banks at all. Doubt there is much room for negatitions.
    Anyways people should be carefull where they put their money. This is a warning from things to come.