Size matters when it comes to bank bail outs and European politics. In the most brazen bail out deal yet, the citizens of Cyprus just had their savings seized to give the money to the banks. I kid you not. Here is the Eurogroup statement:
These measures include the introduction of an upfront one-off stability levy applicable to resident and non-resident depositors. Further measures concern the increase of the withholding tax on capital income, a restructuring and recapitalisation of banks, an increase of the statutory corporate income tax rate and a bail-in of junior bondholders.
Bail In means private citizens are responsible for the bail out. These masked terms mean anyone with over €100,000 has a whopping 9.9% of their money seized and anyone with deposits in a Cyprus bank below €100,000 is going to lose 6.75% of their savings deposited in Cyprus financial institutions. Unbelievable. The savings deposit seizure was announced when the banks are closed, so instead of a run on the banks, we have a run on the ATMs. Needless to say those ATMs are limited in withdrawals and also ran out of money fairly quickly . Lockdown of Cypriot Savings was preplanned and has already taken place before the announced private deposit seizure.
This so called bail out, orchestrated by the International Monetary Fund, the European Central Bank and the European Commission amounts to €10 billion in funds. Yet the seizing of almost 10% of deposits in bank accounts is estimated to bring in €6 billion, with all of those seized deposits going to re-capitalize Cyprus banks. The Republic of Cyprus was left holding the bag on Greek debt, after the hair cut given to Greece bond holders, which disproportionately left Cyprus taking huge losses Cyprus has been hammered by sovereign credit ratings downgrades as they were odd man out in the game of Greek sovereign debt swaps musical chairs.
The bail out terms also requires Cyprus to raise the corporate tax rate from 2.5% to 12.5%, which should possibly give flight to any multinationals operating in Cyprus for tax reasons. This below news report really exposes the bail out terms and how this is just toasting Cyprus citizens in their retirement savings and will decimate what's left of their economy.
The below BBC video clip captures one man threatening a Cyprus bank with a bulldozer. One interviewee rightly said this undermines the safety and security of the entire Cyprus economy. Spontaneous protests are also erupting as citizens gather at government headquarters.
Cyprus has already be subject to severe austerity measures from a previous bail out last November, where pensions and public salaries were cut, taxes were raised and a host of other public benefits curtailed
The reactions to this outrage are swift and furious. The Economist article headline shouted unfair, short sighted and self-defeating.
There is no moral imperative for whacking Cypriot widows and leaving senior bank bondholders untouched, as appears to be the case here; or not imposing any losses on sovereign-debt investors in Cyprus; or protecting depositors in the Greek operations of Cypriot banks, as has also happened. The euro zone may cloak this bail-out in the language of fairness but it is a highly selective treatment. Indeed, the euro zone’s insistence that this is a one-off makes that perfectly plain: with enough foreigners at risk and a small enough country to push around, you get an outcome like Cyprus.
The Washington Post called it the start of the next financial crisis.
For the past six months, the global financial markets have become increasingly complacent, convinced that the euro-zone crisis is, for practical purposes, over. Cyprus is the test of whether that is correct, or whether the complacency was instead misplaced.
The Cyprus President claimed he had no choice but to sell out his citizens, else the entire economy would collapse. Now where have we heard dire warnings like that previously before unprecedented bail out terms (TARP)?
President Nicos Anastasiades said Cyprus had little option but to accept the bailout deal, which imposes a levy on the country’s bank deposits — an unprecedented step in the eurozone crisis. Without it, he said, Cyprus’ banking system would have collapsed on Tuesday. Anastasiades said that’s when the European Central Bank would have stopped providing emergency funding to Cyprus’ troubled banks. Such a collapse would have driven the country to bankruptcy and possibly out of the eurozone, he said. The president said the deposit levy rescues banks, keeps the country’s debt load manageable, and avoids the risk of deeper pay cuts and tax hikes. “We’re not aiming to gloss over the situation,” he said in his first public statement after the EU-IMF meeting in Brussels agreed on the bailout early Saturday. “The solution taken may be painful, but it was the only one” worth taking.
Many Cypriots are calling the seizure of almost 10% of savings accounts outright robbery:
This is a clear-cut robbery,” said Andreas Moyseos, a former electrician who is now a pensioner in Nicosia, the capital. Iliana Andreadakis, a book critic, added: “This issue doesn’t only affect the people’s deposits, but also the prospect of the Cyprus economy. The E.U. has diminished its credibility.”
The Euozone has just crossed the Rubicon, directly making citizens pay for financial follies of the global banking system. Spain just issued a denial this would happen there as panic is spreading across the Eurozone. Some predict the same fate will happen to Spanish citizens and their savings as well as Portugal. Spain already has been decimated by austerity measures, all to save the banks. We fully expect to see Europeans stuffing their savings into their mattresses, buying hard commodities like gold and moving assets abroad as fast as they can. Seizing private savings will have repercussions and ripple across Europe as people realize nothing will stop governments from bailing out the financial sector at their expense.
Cyprus Parliament has to vote on the terms, scheduled for Sunday in an emergency session and with the country erupting in outrage, panic and protest, the bail out is uncertain to actually pass.
The reality is citizens are already paying dearly for the out of control financial crisis which turned into a sovereign debt crisis. Taking money directly from people's pockets just makes it official. Banks can get away with murder and will always be bailed out. They can even trade on sovereign debt and bring down entire nations by toasting their economies. Yet when it comes to the people, they will pay. They will pay with their jobs, their pensions, now their savings and all too often their very lives.
Comments
I cross-posted the following on the Agonist
Pay Attention! The EU and IMF confiscate private deposits
By Numerian, on March 16th, 2013
The next stage of the global financial collapse has now arrived.
In an announcement this weekend, the EU and the IMF have come to the rescue of Cyprus, at the request of the government, by offering Euro 10 billion in aid, in exchange for which the Cyprus government will impose a “one-off tax” on all private deposits in Cyprus banks. Depositors with Euro 100,000 or less in a bank account will be assessed a 6.75% tax, and deposits over this amount will be taxed at a rate of 9.9%
However politely this is described in press releases, this is nothing more than a confiscation of private property from people who did no wrong. The Cyprus banks prior to the 2008 financial collapse played a game similar to the Iceland banks – offering lavish interest rates on deposits to attract hot money, and investing the money in a real estate bubble that has now collapsed and crippled the banks. Most of the money came from Russian business interests.
Iceland chose a different tact in dealing with its crisis. It essentially stiffed the IMF and the governments of the UK and The Netherlands, which were the source of hot money for Icelandic banks and which fully expected the Icelandic government to cover the losses. The government refused, it allowed the banks to go under, it placed the losses on the the bank shareholders and bondholders, and it jailed the top bankers involved in the debacle. Iceland’s economy took a severe hit, but the pain was relatively short term and the economy has recovered nicely.
Elsewhere in Europe and the US, governments have chosen to protect bank management, bank shareholders, and bank bondholders, arguing that a “systemic crisis” will result if the banks are allowed to fail. The total deposits in the banking system of Cyprus account for less than 1% of total EU deposits, but nonetheless the EU is now arguing that a systemic crisis will engulf Europe if any bank is allowed to go under.
What is likely to happen after this decision is a systemic crisis of a different nature – bank runs throughout all the periphery countries, such as Spain and Italy, which have also asked for EU and IMF help for their banking industries. The citizens of Cyprus rushed to the ATM machines Saturday evening when this announcement hit the news wires, but the ATMs quickly ran out of cash. Cyprus is on holiday Monday – the announcement appeared to be timed to coincide with the holiday weekend – and the central bank of Cyprus is now going to impose a freeze on electronic transfers in the banking system until the “tax” is withdrawn from each account.
This development in Cyprus is getting very little press in the US and other countries, but it will. A basic doubt has been raised about the sanctity of private property in the banking system anywhere in the world. You can be assured that savvy investors will be paying attention to this development. You should too.
Right, they didn't seize the banks and nationalize them
They seized private accounts of regular people. The first video above gives the percentages and there is some bogus claims that the Russians are getting hit, it's their accounts, offshored in Cyprus banks. Not true, the majority are just regular citizens saving up for retirement.
I agree with you this is an amazing story, we're not having governments socialize industry or even communist seizing private sector and making them part of the state here, we're in reverse! The private banking sector, per the IMF/EU Commission/ECB is seizing private assets to hand over to private banking.
The more I read about it the more astounded I am
I believe Cyprus had a deposit insurance program - one article said it was set at Euro 100,000 and under. Theoretically, therefore, all deposits at this level should be guaranteed by the government against bank failure. All amounts above this level are subject to bankruptcy proceedings and loss of capital. The bailout money should have been used to support the deposit guarantee fund so that a bank run is avoided and the average citizen is protected. Larger depositors should have known of the risks, just as in any other developed country people are regularly reminded that deposits over a certain size could be at risk of loss.
Why do governments hesitate to use the bankruptcy courts for insolvent banks? I understand the systemic risk arguments, but what is going on in Cyprus invites a far worse problem - bank runs in multiple countries, ultimately bringing about the very systemic crisis that was hoped to be avoided.
This action brings about an overall crisis of confidence in the entire global banking system. The US is not immune from the questions that will be in people's minds. Monday should see some fierce demand for gold, unless the central banks are able to suppress the price somehow. Even gold is a suspect investment these days. A paper purchase of a gold ETF is only as good as the balance sheet of the bank issuing and managing the ETF. Gold certificates, attesting to your ownership of physical gold in a bank vault, have been proven in the MF Global collapse to be worthless. The bankruptcy trustee can simply confiscate the gold for the benefit of the other creditors. Physical gold itself is relatively difficult to get. The US Mint ran out of its 2013 gold coins in the first week of January, and this has been happening for several years now. Even though investors will want to buy gold, there is no easy way to get gold that you can actually count on in physical form in times of crisis.
Land and commodity speculation may be revived, as long as people can hold on to something physical, fungible, and easily sold if necessary. Not many commodities qualify. I suppose the US dollar will also be subject to a buying frenzy as the last safe currency with liquidity (it's hard to get Swiss francs or Singapore dollars, for example - two other favorite safe havens). Investors are running out of choices, and how many will want to keep throwing money into the stock market when the market is dominated by financial names that are now subject to bank runs?
That's why this looks like the next leg of the crisis. The IMF and the EU/European Central Bank have labeled the entire banking industry as an untrustworthy recipient of your money, but there are few alternatives left short of putting paper notes under your mattress. We seem to be devolving into a barter economy ultimately, as safe fiat money dies out.
You should write an article on this
I agree, the precedent is incredible and if they had just nationalized the banks, wiped out the debt, used bankruptcy this wouldn't even be happening.
With Congress being absolutely insane and if anyone saw Ryan's "budget" I hope there is no doubt of the absolute ineptitude that makes Obama not look like the corporate corrupt disaster he and the Democrats are, it's hard to write.
We're talking until we are blue in the face against governments selling out the people, come hell or high water and damn the consequences.
So who trusts banks and governments now anywhere?
So, is having no faith in one's own government or the banking system paranoia now or straight-up reasonable? Honestly, when a national government looks out for supranational groups like the IMF and their people (i.e., Goldman Sachs and other bankers and individuals) at the price of legalized theft, why would anyone trust their own government to look out for them? No sane person in any nation that has ties to the IMF or can be hit by the IMF should feel their $ is safe in a bank. The banksters are helping sow the seeds of their own destruction. They are waking people up to the fact that governments don't represent their own citizens, that money the people busted their asses can be stolen to help international bankers, and the people have no say in it. In fact, if they speak up and try to prevent foreign governments from stopping the theft and abuse, their own governments will crush them and help foreign forces while labeling them "hippies" or "Commies" or "lazy and uneducated." Protecting one's own money and nation are now denigrated and labeled by international criminals, how twisted. The Germans originally wanted 40% of their money? Man, that's bold.
No sense in looking to their governments for help, no faith or trust in governments, public servants, corporations, or banks, and honesty and hard work and ethics are treated like crap while crime and theft are now international policies that people have no say in - yeah, this will end badly very soon for those pushing this criminal agenda. This isn't just Cyprus, or Greece, this can happen anywhere across the globe. Just remember who and what were responsible so they don't escape trials for these crimes. Sure, bust ass in jobs that can cripple you, beg for low-wage jobs from corporations, and save scraps so that one day the same people meeting in beautiful vacation spots planning these actions that never faced hardship can laugh at the peasants and homeless as they literally steal people's money - how's that for justice and democracy?
If there aren't nationalistic groups across the globe demanding an end to the EU (or at least withdrawal), IMF, etc. and an end to enriching Goldman Sachs alum and others like them at the expense of 99% of the global population, it would be shocking. People have nothing left to lose (except whatever the IMF and EU allow them to keep, apparently). Theft, bailouts, destroying the international financial system, protection from criminal prosecutions in the past, present, and future (here and abroad), so who wants this to continue?
Seize the Caymans
Imagine what would happen if they seized the Cayman Island bank accounts? Probably one of the most well known tax havens in the world? Corporations would take over since that's primarily their money. Regular people getting 10% of their money seized, is ok, freezing offshore accounts, not.
Two sets of rules, one for poor individuals and the other for the super rich and corporations.
Cyprus Parliment Delays vote until 3/18 on bank accounts
They delayed the vote until Monday, here. Question is if it is not law can people withdraw their money? I doubt it, but they are being strong armed by the IMF, if they had any guts they would nationalize the banks, wipe out the debts through whatever bankruptcy process they have, similar to Sweden.
All notice how Iceland said screw you Europe and they have recovered their economy.
Banksters and governments steal from others - not themselves
This is key - the banksters and their puppets/cohorts in the EU, World Bank, IMF, national governments (e.g., the US Government) know exactly who will be hit and when because they formulate the plans themselves! The criminals actually meet, exchange emails, phone calls to plan out the crimes and call them bailouts. The terms of the bailouts are known to every individual in the IMF, EU, US Congress before we know, or Cypriots know, or Spanish know. So that's weeks or months beforehand that every 1%er in power and with friends in Goldman, JP Morgan, Deutsche Bank, Morgan Stanley, etc. knows which bank will be hit, which accounts will be seized, at how much, and everything else because they actually plan it or have friends and colleagues in on the planning. The poor average Joe on the street has no say in it, has no clue about the terms until he reads about it as his $ is seized against his will. So the banksters plan the crime so they aren't affected, probably make money off it by betting against the targeted banks and nations (banksters love betting on bad news they know about due to insider information), and then sit back and laugh. There are no doubt many, many trades that will show up showing certain banks and individuals were making money off this deal long before it was public.
Watch in the coming days and weeks as our government does and says nothing about this. Watch as Treasury, the White House, FDIC (which really should care about reassuring/lying to Americans and saying this could never happen here), the Fed, Senate Banking Committee, Commerce give their approval because they have no problem with it. The US is the biggest contributor to the IMF, so they helped plan this. They get $ from banksters like Goldman and have bankster alum running parts of the US Government before they return to bankster jobs, so they love these actions against the average person that enrich big banks. And watch as the media controlled by the big banks says nothing about this. CNN.com was running stories on local crimes and the only mention of Cyprus was in the business section saying Cyprus received a big bailout. Fox etc. will remain silent because rules and private property only matter when it's the big people, not little ones. Nope, the politicians and media will go along because they are part of it.
It's great, banksters do everything in their power to get rich through crimes and controlling governments, they do everything they can to avoid taxes (including leaving their own countries like John Paulson might be doing), and then when governments are placed under conditions they can't afford by banksters, the banksters plan thefts of other people's money. And they even profit from those thefts beforehand because they negotiate the terms and have all the inside information to trade on long before it's public. It's so obvious, but no one in power cares or will do anything because they are the criminals themselves. Robespierre, anyone? Does someone have Google Maps for Versailles?
Cyprus "panic" now spreading
As expected the globe is waking up to this move and the latest is parliament will have a "long session". Seems they are delaying their timing in order to pass it and not have a revolution.
Why don't these countries stand up to the banks, just seize them nationalize them, declare bankruptcy on the debt similarly to Iceland.
Is not being in the EU that bad long term considering so many are being absolutely decimated? Who cannot say Spain is destroyed?
Since the news is moving fast we won't update this article until there is a major event.
Potential bank victims globally see what can happen
Like I said, if the IMF helped plan this and approve it, anyone in the IMF nations or within reach of a computer link to the IMF should be afraid. That's everyone in the EU, the US, Japan, and everyone else. Just look at who funds and controls the IMF and that's a whole lot of citizens that can have money stolen from them.
If our "democratic" governments planned this and allowed this, how can they be trusted at all? Shouldn't the WH and Congressmen, the US banking regulators, the EU, IMF, see the implications of these actions and see the threat it poses to global economies as people can't trust banks anywhere with their money. Of course they should, but stealing from regular citizens is good for them in the short-term, they don't care about the complete destruction of faith and trust these actions (along with every other act since the bailouts) have taken.
Act accordingly, if people have a dime in banks, time to consider how much can be kept safely in a bank that cooperates with governments like these. These criminal acts by unelected banksters will only hasten the demise of the system and force people to go local, stop relying and trusting big banks and governments, and demand justice for those that allowed these crimes.
In the future, there will be individuals and trades that were no doubt made based on these bailouts and inside information that will probably come to light. E.g., an IMF employee or bankster with a friend at the IMF trading on the secret bailout deal before it was made public. When that happens, no one should be surprised. They steal and they make money not only through the theft and national rape, but through insider information too. Criminals, one and all. But they are given immunity expressly by our governments. If 99% of the population standing outside a Cypriot politician's office is robbed, should he look out for the bankers in Germany or the US or his own citizens? The same anywhere in the world.
Banks and politicians concerned about "uncertainty" - guess not
For the talking heads on TV from banks and big business and government, please, I'd love to hear how seizing people's money will help cure all of this scary "uncertainty." Because it seems this would be the exact opposite of creating certainty. In fact, the Euro collapsing under its own weight would be much more certain and calming then seizing people's money as a short-term fix for one country in one union. Not only does that create short-term panic across the EU and globe, but it also destroys the system long-term.
These fools may be paid/steal billions of dollars and run governments or companies, but that never gave them an edge in insight, intelligence, or ethics.
Cyprus vote delayed until Tuesday
As expected, they are delaying the vote thinking this will blow over. They shut down the banks until Thursday. Way to go Eurozone, created a panic.
We're here to rob you today, no tomorrow, next week, don't worry
Sure, delaying robbery forced onto victims from people hundreds and thousands of miles away all depends on when a vote is taken to soothe the victims. The criminals are funny, not bright, but damn they are funny. I'm guessing any Cypriot politician that values his life and property will vote for his own neck and vote against this crime. After all, Merkel, or Bernanke, or Lagarde won't be the ones running from tens of thousands of robbed victims. Same goes for any politician from here on in. War has been declared from ivory towers, time for the pissed on populations to take a stand.
robbery comes in many forms
Demanding pensions be cut, layoffs, "austerity" all to pump up the banking system has been going on since 2009 and we see the results. Spain is decimated, Greece is in a permanent depression, overall the European GDP has tanked.
They never mention Sweden's banking crisis or what Iceland did as an option.
Why this story is so important to the United States, beyond ramifications on the global economy is this is a first. It crosses a line never crossed to just take private savings.
Apparently the MSM deems robbery "chipping in" and "a levy"
From The Washington Post: "lawmakers in Cyprus on Tuesday rejected a bailout plan that would have rescued the country's banks but forced savers to chip in for the cost." See, robbery and theft of people's money isn't robbery or theft when the IMF or EU or US Government does it, it's merely "chipping in." Fan-f'ing-tastic! Next time someone holds a gun to my head and demands my wallet, he's not robbing me, I'm merely chipping in to save his own financial situation. I won't bother resisting or telling the cops.
Funny, these international banksters refuse to pay one more dime in taxes or work an honest day, but taking people's money against their will is fair and just and not a crime? I love that bankster-owned press twisting words and meanings beyond repair in their service. Just let the Euro die already, it's done. Anymore of these crimes planned by the Davos crowd will only piss off more people and speed the revolution.
you won't see much about that in WaPo
You'll also read plenty about Cyprus being a tax haven for the Russian Oligarchs to get their funds in Euros.
But that's not what the local press is saying, most accounts are regular Cyprus citizens.
The FT (which is really a superior financial news organization), does mention seizing private bank accounts is unprecedented.
In other words, certain sources have credibility, others sure do not.
Bankster Larry Fink doesn't really worry about Cyprus - dolt
BlackRock's CEO Fink said, “It has some symbolism impact on Europe, but it’s not a really major economic issue."
That's pretty ridiculous for several reasons.
1) I'd hope a bankster in charge of the largest asset manager in the world would worry about everything involving finance and $, because how could he ever justify a salary of $50,000, or $500,000, or whatever 100s of 1,000,000s he makes otherwise. I'd hope someone that overpaid would understand the long-term implications of destroying faith and trust in global financial systems YET AGAIN.
2) Even if he isn't concerned, he should at least pretend to be to make people believe he might have thoughts worthy of their trust (for those people that still believe that lie).
3) if he isn't really concerned, it means he has inside information on what will happen regarding further actions regarding the EU, IMF, and government policies globally - which we don't have access to and which show YET AGAIN the game is once again only for the elite.
4) People like this would bitch and moan if someone took a penny of their money, one penny. But he's such an arrogant, removed 1%er that stealing other people's money just doesn't phase him, it's other people's money after all. Someone dents his SUV or whatever, he'd demand the death penalty. Stealing other people's money on a national scale, not a problem because he just doesn't care about other people.