Arguments between various EU countries

[Pete G]

Be that as it may, I think it is a bit unfair to blame the EU/ECB/IMF for having confiscated deposits when in fact they merely refused to loan all the 13 or 14 billion needed but "only" gave €10 billion (which after all is more than € 10,000 per capita, babies and centenarians included) and told Cyprus to take the balance from uninsured deposits. The alternative would have been a complete Argentine-sytle bankrupcy (which would have hurt even much more) or having taxpayers of other countries contribute even more.

Not really, no.

Every other time this has happened [as in Greece, for example] the debt was borne by the Bank and the Countries bondholders [i.e. those people who deliberately took the decision to get a better interest rate by formally loaning their money to the bank rather than just having the bank hold it in trust for them [although terming it as 'trust' seems a little ironic now].

Cyprus however had only recently stated to go to European money markets to any great extent, and mainly [again somewhat ironically] from the ECB in order to provide their share of the financing for all of the infrastructural boondoggles that they'd embarked on to secure their share of the 'free' money being doled out by the EU for that purpose.

So if Cyprus had have reneged on bonds to cover the deficit, the main loser would have been ........... the ECB, and obviously that couldn't happen, so they just suggested that the EU wouldn't say it was illegal if the state just simply stole the money from the citizens.

You are quite right, of course, in that the state didn't actually spend the money, they just made it disappear [and thus reduced the liabilities], but personally speaking, if someone breaks into my house and steals my money, it makes no difference to me if they spend the money, or just set fire to it on my barbeque, they are still a thief

[jeba]

So if Cyprus had have reneged on bonds to cover the deficit,

Had they done that the damage to Cypriot citizens would have been much worse. This would have been an Argentinian scenario which would have cut the country from bond markets and from ECB funding because the ECB isn´t allowed to buy bonds from countries which are in default. At least that´s what I understood.

[Pete G]

from ECB funding because the ECB isn´t allowed to buy bonds from countries which are in default. At least that´s what I understood.

Your understanding is completely correct. In fact the ECB bailouts of Cyprus, Greece, and Portugal both technically and actually broke multiple provisions of international banking standards, EU treaty provisions and ECBs own code of practice.

It's just that they don't care, and they know that if you do, there is absolutely nothing you can do about it

[jeba]

Well, technically they haven´t defaulted, that´s why the ECB has still been providing financial assistance (e. g. by purchasing sovereign bonds - much to many German´s displeasure). Also, those who received a haircut won´t agree with you that nothing can be done.

[Pete G]

Actually they had technically defaulted [in Greece's case, anyway], the ECB stepped in to stop the formal default process being enacted [contrary to international rules] and using funds outside of the contingency set aside for that purpose [against ECB agreed rules and, as you rightly say, inordinately ticking off the Germans]

The Germans [on behalf of the EU, so they said] then demanded that other EU non-Eurozone countries contribute to the bailout, despite this being directly contrary to the ECBs founding instruments, the Treaty of Lisbon, and the fact that they had said that this would definitely, definitely be the last time they demanded a contribution on at least the previous three occasions.

As I'm sure you're aware the standard practice as laid out in ECB rules [and even the rules of other, reputable Central Banks] is that failing banks make good their differences between assets and liabilities by the destitution of interested parties in the order Bondholders, Shareholders, creditors, depositors. The ECB seems though to have an additional clause which states that, if the country of incorporation of the bank starts with a 'C' then they can arbitrarily reverse the order.

I sincerely wish to be proven completely wrong, and that those people who lodged their money in good faith somehow recover the money stolen from them, but I have yet to hear of a successful attempt to do this, and I certainly won't be holding my breath in the meantime