By a vote of 36 against, 0 in favor, with 19 abstentions, Cyprus lawmakers today rejected a provision that would have made a proposed $8.7 billion bailout contingent upon taking 6.75 percent of the value of all bank deposits.
European Member of Parliament Daniel Hannan gave his opinion of the provision yesterday in the Daily Mail:
Ordinary savers and pensioners – the people who did the right thing, the people who had provided for themselves so as not to have to look to the state – are being expropriated along with the gangsters.
A good number of British pensioners are among them: Cyprus is a Commonwealth country, and as many as 60,000 British savers may be affected by the toll.
Not everyone with more than 100,000 euros in the bank is a Russian money-launderer. One British restaurateur, who was in the middle of moving house, is reported to have lost 20,000 euros. He, like everyone else, can now put a precise figure on the price of propping up the euro.
Hannan continues that what is really at stake is the European Union itself:
The least bad option for a country in Cyprus’s condition is to price its way into the market and export its way back to growth. But that would mean giving up on the dream of a European federal state.
Do you remember that, when the euro was launched, we were told it would add 1 per cent to its members’ growth every year in perpetuity?
As recently as four years ago, when the credit crunch hit, the anti-British leader of the Euro-liberals, a former Belgian president called Guy Verhofstadt, was sneering that the UK would soon be begging for permission to join.
Now we see the truth. The dream of political union matters more to Europe’s governing caste than the well-being of the people they represent. Shame on them.
A message not only to those in Europe, but also to those of us here watching our states spend themselves into oblivion.
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Comments
For the English majors among us, can you tell me if this is a bad thing for Cypriots, and eventually a bad sign for the U.S. when we go under? Or is it that the residents of Cyprus standing up against the bully EU a good thing?
The Cypriots are screwed either way. They get a haircut or their banking system fails unless the ECB can come up with a way around this mess.
There are no good alternatives here. Each solution had good and bad points. The “haircut” at least forced the Russians, who hold a substantial portion of Cypriot banking assets, to pay up. But it clobbered the regular Joes. Letting the banks fail forces the bankers responsible for the mess to suffer but it doesn’t lessen the pain on the little guy.
Cyprus is essentially calling the ECB’s bluff. We will see whether the ECB is willing to let Cyprus go down the drain.
What’s surprising is that the Cypriot parliament rejected a second plan that would have left intact the savings of people up to the Cypriot equivalent of the FDIC limit. But it would only have covered savings up to roughly $25,000.
I suspect Germany thought they would go for that compromise but that’s the one that was solidly rejected.
Pass the popcorn, please.
Zero Hedge has been providing outstanding coverage on the Cyprus fiasco. See this article:
What does no vote mean to Cyprus and the Eurozone
http://www.zerohedge.com/news/2013-03-19/what-does-no-vote-mean-cyprus-and-eurozone
This cartoon pretty much sums up the whole issue succinctly:
http://barbadosfreepress.files.wordpress.com/2013/03/cyprus-bank-bailout.jpg?w=500
Yep, that’s pretty much it!
Apparently the Socialists have run out of other people’s money.
Given: there is presently about $19 billion of Russian money in the banks of Cyprus.
Given: the banks of Cyprus are the biggest money laundering institutions in the Middle East.
Given: the Russian mob probably owns a good portion of that $19 billion
QED … they don’t want to be on the receiving end of the Russian mob
The proof is left to the student.
You have to wonder why the ECB chose to go up against the Russians. Evidently European bureaucrats and pols are no brighter than ours.
There is a simple other reason to reject the “bank haircut” option.
Just ask yourself if you would keep money in a bank if it was subject to a government-driven “bank haircut” ?
To proceed would have lead to the destruction of banks in Cyprus and well as … you get the idea.
It would have been real wrath of God type stuff.
Fire and brimstone coming down from the skies! Rivers and seas boiling!
Forty years of darkness! Earthquakes, volcanoes…
The dead rising from the grave!
Human sacrifice, dogs and cats living together… mass hysteria!
I have a simple question:
how did Cyprus run up so much debt?
It’s a small island. Comparatively there aren’t that many people. They have an economy that they (and the Greeks, and the Ottomans, and the Brits) etc have managed for centuries. It’s pretty well established. Local farming. Fleecing British vacationers. Depositing all that sweet, sweet, money for the Russian mafia.
It’s a simple life. La dolce vita, one should think.
So how did the Cypriot banks get so far in the hole? The country now has a debt-to-GDP that is over 125%. Where’d all the money go?
Are they run by Democrats?
From Business Week: http://www.businessweek.com/articles/2013-03-17/how-europe-let-cyprus-get-into-this-mess
“Cypriot banks took in billions of euros in deposits, including from Russian oligarchs who’ve set up business on the Mediterranean island nation. Naturally, they had to put all that money to work somewhere. Reaching for attractive returns, they invested depositors’ money heavily in Greek loans and bonds—and took a beating when Greece’s economy skidded. The Cypriot banks also invested heavily in the sovereign debt of Cyprus itself, a fatal embrace in which any losses forced on the holders of government debt would wipe out the banks.”
Thank you!
I read somewhere that the banks were so inundated with deposits that they couldn’t find creditworthy local businesses to lend to. They made the mistake of putting the money into Greek government debt.
Since I didn’t save a hyperlink and don’t have time for an in-depth search, please take this answer as unsubstantiated.
Oops! You snooze you lose! 😉
Think “Lord of the Flies” – the Cypriots wanted to be like the big European states, so they spent like the big European states were. They were just acting like they thought they were supposed to act.
But *what* did they spend it on?
stevewhite’s question is a good one. A more in-depth answer would be welcome.
The EU today is similar to the US early in its history. A number of largely autonomous states who, after coming together to create a country, ended up with political winners and losers.
Soon the losers will realize what a bad deal they’re getting and try to leave the Union.
The only question is whether the EU is going to break up or fight countries that resist EU authority. I think the former.
I disagree, egd, and I think that’s why the ECB is pledging to find a way through the Cypriot dilemma. They do not want even so small a country as Cyprus leaving the EU because it could well trigger a mass exodus.
Like the several united states, joining the union was a one-way trip.
Slightly OT but financial related…are there any tax attorneys here who can settle a dispute between mr. creeper and me? He claims the IRS can charge your credit card for taxes owed without your authorization…that your credit card limit is an asset. I say it’s an unauthorized charge that the card company must remove upon your notice. Anyone know the real answer?
Maybe Mr. Creeper is trying to hide extravagant expenditures on someone named Iris? (j/k)
LOL! Iris doesn’t stand a chance against me. mr. creeper is a machinist and I came complete with compressor and table saw. Iris would need a lathe and a milling machine to compete. mr. creeper is a sucker for a pretty Warner/Swasey.
This is a theory he has come up with which makes sense to him. I can’t find anything online that addresses it one way or the other.
Well, California just levied a five year retroactive tax rescinding incentives for small businesses and charging some folks six-figures complete with penalties and interest.
Apparently, it’s legal.
“California’s top-end taxpayers — already steamed over a recent hike in the nation’s highest state income tax — are now fuming over a new $120 million retroactive tax grab on small business owners.
In December, the state’s tax authority determined that a tax break claimed over the past few years by 2,500 entrepreneurs and stockholders of California-based small businesses is no longer valid and sent out notices of payment.
“How would you feel if you made a decision, which was made four years ago, (and) you absolutely knew was legally correct and four years later a governing body came in and said, ‘no, it’s not correct, now you owe us a bunch more money. And we’re going to charge you interest on money you didn’t even know you owed’,” Brian Overstreet told Fox News from his office north of San Francisco.”
Just like it was legal for NYS to criminalize millions of gun owners overnight with the surreptitious passage of the SAFE Act.
We are Cyprus.
Obama, Reid, and Pelosi are deeply saddened by this. Lieawatha, too!
Give ’em some more free stuff. That’ll bring ’em along.
“represent” ?
It would be more appropriate to say, “rule”.
Otherwise, spot on, as usual.
This is nowhere near the end of such madness.
http://market-ticker.org/akcs-www?post=218912
Russia could get a Meditteranean port very cheaply.
Get rid of fat Brits & bring in Russian beauties & few sailors in their cute Tsarist outfits.
The big danger is that the Turks wil leave their goats & wives behind & cross the border & tip the island over.
In reality Cyprus has just been waving not sinkin for 40 years .