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    EU and Cyprus agree to take big depositors’ money without calling it a “tax”

    EU and Cyprus agree to take big depositors’ money without calling it a “tax”

    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.


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    Showing that the most dangerous place in the world is between a desperate politician and your money.

    Most of the lower and many in the middle class will support this action. The cycle of wealth redistribution and consolidation will continue. Nothing has changed. A new class of wealthy men and women will arise. The only difference is that the new elite class prefers to operate through monopolies and monopolistic practices enforced through granted and coerced authority. Such is the fate of poor and rich greedy bastards.

    […] As you know, the government of Cyprus is deciding what percentage of monies in the back accounts of it’s people to seize [here's the latest plan]. […]

    stevewhitemd | March 25, 2013 at 3:30 pm

    Seabisquit has it right, and folks should step back a moment and look at what happened.

    Cypriot banks, like many other banks in the world, bought sovereign debt to excess. In this case, the debt they bought was Greek. Lots of it, fueled by dirty Russian mafioso money. They had to do something with the money, and the Russians wanted their interest. And who thought the Greeks would ever default, right?

    They did. Oops.

    So it’s the Cypriot banks, not Cyprus, that are tottering. Cyprus, like the rest of the EU (and the US), has depositor insurance which covers a set amount. Above that and you’re on your own, comrades.

    What’s finally happening is that Cyprus is going to let the system work. Depositors will be kept whole up to the limit of their insurance. You have more than that in a Cypriot bank? Fool, you take a haircut (or more).

    That’s just as it should be. That’s the free market solution.

    It would have been wrong to nail the small depositors — that would have required the Cypriot government to renege on the insurance. But the large (e.g., Russian mobsters and English retirees) depositors had no guarantee, and thus their over-large deposits are lost to be replaced with ‘shares’ in the ‘bad’ banks that are being established.

    If you put a large amount of money into a bank you had better know that the bank is good for it. You can’t count on stampeding the politicians. At least not this time.

    If the Cypriot pols had simply applied their own law from the get-go this would have been a lot easier, and the people there would actually have some faith in the system.

    dorsaighost | March 25, 2013 at 4:26 pm

    Never forget, tax is always theft … at certain levels and for certain things it is accepted by most …

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