So the EU has reached a deal to bail out Cyprus, but unlike the prior proposal, there will be no tax levied on anyone.
Insured deposits under 100,000 Euros will be safe and transferred to a new “good” bank, but the losses will be concentrated on the larger depositors who will be stuck at the “bad” bank. And in a move eerily reminiscent of the maneuvering to get Obamacare passed, the deal is structured to avoid calling it a tax (which would require parliamentary approval).
Via NY Times:
The deal would scrap the highly controversial idea of a tax on bank deposits, although it would still require forced losses for depositors and bondholders.
“We have a deal,” President Nicos Anastasiades was quoted as saying by Greek media. “It is in the interests of the Cypriot people and the European Union.”….
Under the proposed deal, Laiki Bank, one of Cyprus’s largest, would be wound down and senior bondholders would take losses.
Depositors in the bank with accounts holding more than 100,000 euros would also be heavily penalized but the exact amount of those losses would need to be determined.
The plan to resolve Laiki Bank should allow the Bank of Cyprus, the country’s largest lender, to survive. But the Bank of Cyprus will take on some of Laiki’s liabilities in the form of emergency liquidity, which has been drip-fed to Laiki by the European Central Bank.
Depositors in the Bank of Cyprus are likely to face forced losses rather than any form of tax.
Zero Hedge summarizes what it means:
… In other words, a deal far worse then the original on proposed by the Eurogroup last week – when the banks still existed. The key appears to be the ‘saving’ of the insured depositors (crucial to avoid a pan-European bank run) and the crushing of the ‘whale’ depositors….
UPDATE: It appears the ‘deal’ to default/restructure the banks has been designed to bypass the need for parliamentary votes, since it is theoretically not a tax.
There does not appear to be a European John Roberts to declare it really a tax.