Soldato
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"Never ascribe to malice that which is adequately explained by incompetence."
Nate
Nate
Cypriot Austerity Measures
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Possibly because the German Finance Ministry was the driving force behind the deal. I think people are underestimating just how much influence Germany has wielded in EU and Eurozone economic policy, it is no secret that they have been seeking to rid the Eurozone of low tax economies such as Luxembourg, Malta and Cyprus for some time....this is rather opportune for them and it shows in how they are trying to dictate another countries business model, as the Luxembourg Finance Minister pointed out yesterday. The same kind of self interest is apparent in how they are trying to institute EU wide banking reform that would be beneficial to Frankfurt while detrimental to London.
The real issues will come when perfectly safe businesses begin to struggle and fail simply because 40% of their cash reserves has disappeared overnight. This in no way helps the Cypriot economy or the long term security and stability of the Cypriot economy.
Invested self interest seems the flavour of the day.
Invested self interest seems the flavour of the day.
Soldato
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It certainly helps it from the position of all depositors losing 100% of their deposits, which would be the case if Cyprus wasn't provided with the loan.
Nate
Perhaps, although there would have been other alternatives if Cyprus was outside of the Euro. It also doesn't relate to other bailouts where such conditions were set which would potentially destabilise the economy as much as if they simply left the Euro and devalued. There is far too much of the political and not enough of the economical about this bailout.
Germany may well want the "low tax" or generally weaker economies out of the EU. I believe the EU welcomed them joined under the idealistic "ever greater unity with everyone" plan, not for sane economic reasons. Describing Germany as economically sane and the EU in general as crazy seems reasonable.
Some further news. The headlines are limiting people to withdrawing 300 a day and, weirdly, limiting businesses to 5000 euros of transactions per day. The 5k per day limit is hopefully poor reporting, not many businesses could survive if that severely throttled.
The EU has happily torn up both freedom of movement and freedom of capital movement (i.e. trade). Which is interesting, given how central they are to EU legislation. It has also seriously breached the contract held between the bank of Cyprus and anyone who deposited money there. Not the human rights act though, which turns out to have a clause in it to the effect that "the EU can ignore this act if it wants to".
It doesn't seem reasonable that the member states are required to rigidly adhere to a supreme and slightly crazy set of laws that the EU itself is happy to ignore.
Some further news. The headlines are limiting people to withdrawing 300 a day and, weirdly, limiting businesses to 5000 euros of transactions per day. The 5k per day limit is hopefully poor reporting, not many businesses could survive if that severely throttled.
The EU has happily torn up both freedom of movement and freedom of capital movement (i.e. trade). Which is interesting, given how central they are to EU legislation. It has also seriously breached the contract held between the bank of Cyprus and anyone who deposited money there. Not the human rights act though, which turns out to have a clause in it to the effect that "the EU can ignore this act if it wants to".
It doesn't seem reasonable that the member states are required to rigidly adhere to a supreme and slightly crazy set of laws that the EU itself is happy to ignore.
I know all the focus is on the depositors in the bank, but doesn't the actual liability of the bailout go, in order :-
Shareholders > Bondholders > Unsecured Depositors
And isn't this how Capitalism is supposed to work? Rather than failing private companies being sustained by the tax payer.
Shareholders > Bondholders > Unsecured Depositors
And isn't this how Capitalism is supposed to work? Rather than failing private companies being sustained by the tax payer.
1/ The EU isn't capitalist, never has been. It's a weird blend of socialist and communist.
2/ The EU law is supreme over English law. It is also retrospective. So the EU can pass legislation tomorrow which says it can, at its sole discretion, ignore any contract it likes written under English law.
2/ The EU law is supreme over English law. It is also retrospective. So the EU can pass legislation tomorrow which says it can, at its sole discretion, ignore any contract it likes written under English law.
Soldato
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There are very few bondholders in these banks. They only amount to a few hundred million - they are getting burned too IIRC.
Nate
Cyprus didn't get in this mess solely because of the EU or Euro, they got in this mess because their idiotic banks made rubbish investment decisions. In fact taking money from the EU is probably their easiest way out of this mess (not saying that's right).
As for taxing individual banks heavy %s and leaving the rest, how exactly is that fair? Why should a few people have to pay 80% and others 0%? A sweeping 5% on everything is far more balanced, at least then everyone still has 95% of their money
As for taxing individual banks heavy %s and leaving the rest, how exactly is that fair? Why should a few people have to pay 80% and others 0%? A sweeping 5% on everything is far more balanced, at least then everyone still has 95% of their money
it's fair because the larger penalty is suffered by those whose bank failed the most. If you bank with HSBC and Barclays went bust would you be happy to lose part of your savings to help out the Barclays' customers?
The two banks in Cyprus that aren't in the lime light are Hellenic (ironically named) and the Cooperative bank, both of which are solvent and comparatively in good shape. As the old adage goes, investments can go up as well as down
So Cyprus is bankrupt because of 2 banks? I thought the problem was much bigger... Surely these 2 banks aren't solely to blame for the mess? Certainly not 100%...
Soldato
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Yep, the banks took on Debt that Cyprus can't cover - hence the need for the Loan. Save the banks, but sell the country into perpetual Debt.
Same thing happened in Ireland, only we had a nice big pension fund stashed away that the banks gobbled up, as well as a bailout. That was 3 banks mainly that did that.
Nate
I'm no economist! lol
the biggest problem have been the huge amounts written off when Greece went TU (Laiki and BoC were heavily exposed) and large numbers of non-performing loans or NPLs by housebuilding firms which have essentially gone bankrupt. Public finances - ie money owed by the Goverment itself - is also a part of the problem but nowhere near as much as the two main banks.
Laiki was too far gone to save, so the decision was made to use any useful parts to assist in keeping BoC afloat.
What use is there being one if things like this keep happening.
Thank you for your explanation though