EU facing serious problems it seems

[Royal]

Was it not the customers of just TWO banks in Cyprus that were affected ?????

Yes, that was the final plan which was carried out.

However, the original Troika plan was for a 6.75% 'tax' on ALL Cyprus bank deposits under €100k and 9.9% 'tax' on ALL Cyprus bank deposits over €100k. The Troika plan was to get the Cyprus bank depositors to pay €5.6 Bn towards the bailout in return for a €10 Bn loan.

Of course whilst this was being openly discussed, the banks were all closed so people had no choice about withdrawing their money.

It was called a 'tax' which was somehow meant to legitimise this cunning plan of daylight robbery dreamt up by The Troika.

Normally, when a bailout is given, a country needs to raise taxes (i.e. everyone is made to contribute). In the case of a bank, it is normally the bond holders who lose money. The Cypriot banks did not have sufficient bond holders to raise €5.6 Bn hence the novel and contentious plan which was a warning on two fronts:

1. Cyprus was not to be an offshore financial investment opportunity (Merkel diktat).
2. Other countries take note - we imposed this on Cyprus and we can impose it on you in the future...

[trevnhil]

But how could it be 'Fair' to come to the rescucue od ALL the people on Cyprus, by 'Taxing ' just those who used two banks.

Surely the Haircut should have been made on the deposits over 100,000 in ALL banks..

[Royal]

But how could it be 'Fair' to come to the rescucue od ALL the people on Cyprus, by 'Taxing ' just those who used two banks.

Surely the Haircut should have been made on the deposits over 100,000 in ALL banks..

It wasn't fair.

The 'tax' was levied on the two largest banks because of the belief that the main depositors to be hit would be 'tax-evading' Russians (Cyprus has a double taxation agreement with many countries including Russia). Whilst there were no doubt many Russians who suffered losses, there were many other Russians who were given the wink in advance and escaped this 'tax'.

However, in the absence of viable private pension schemes in Cyprus, many Cypriots relied on substantial bank deposits to provide an income in old age. Much of these deposits came from the sale of land during the boom times. Shamefully, the 'tax' didn't distinguish between depositors and the effects will be felt for some time - not just in Cyprus but in the Eurozone as a whole. The EU simply bullied and blackmailed the Cyprus government into the sorry affair which will not have gone unnoticed by other Eurozone countries.

I wholeheartedly agree with outasite that it was simple theft.

[Royal]

Also, if the EU had forced Greece to repay the money owed to the Cyprus banks instead of writing it off then Cyprus wouldn't have needed the haircut !

Agreed.

In 2010 and again in 2011, the European Banking Authority (EBA) bizarrely decided that Cyprus banks, which were heavily exposed to Greek sovereign debt, had enough assets to pass their 'stress tests'. However, in 2012 the European Central Bank (ECB) and International Monetary Fund (IMF) imposed a 53.3% 'haircut' on private holders of Greek debt which plunged the banks here into the crisis that inevitably would result in 2013.

The idiot Communist President could have prevented the problem arising by a veto of the haircut, but failed miserably to do so, damaging his own banks and people as a result.

[Devil]

Isn't it great that we have so many knowledgeable experts in politics, finance and economics on this forum?

[Firefly]

Pot calling kettle Devil ?

Jackie

[Royal]

Isn't it great that we have so many knowledgeable experts in politics, finance and economics on this forum?

You left out history, Devil

Something we can ALL learn from...

[Jimgym]

Isn't it great that we have so many knowledgeable experts in politics, finance and economics on this forum?

Yes, sadly none of them appear to be Remainers.

[Royal]

Isn't it great that we have so many knowledgeable experts in politics, finance and economics on this forum?

Yes, sadly none of them appear to be Remainers.

[jeba]

Jeba
If I am reading your answer correctly you were shafted by a company, Schefenbacker. Cypriot citizens and people who had more than €100k in private bank accounts were shafted by the mighty European Union, and no matter what spin is put on it that money was STOLEN and the criminals who instigated the theft are in power to this day. And I personally no longer wish to be a citizen of a criminal cartel who can do something despicable with impunity. I have nothing but utter contempt for the idiot politicians who have built the EU to the despicable entity it is today. And I would probably be banned for life if I was to put my feelings about Merkel, Juncker et al into words.
Finally, Royal, I admire your posts and comments usually, but I have to disagree with your comment that this was legalised theft. It wasn't, and thieves in all the countries I have visited and lived in are jailed as criminals when they are caught. Theft is a criminal offence. Just saying.

No, I wasn´t shafted by Schefenacker. I just had bad luck. They certainly didn´t want to go bankrupt following the Lehman crisis. Just as Cypriot banks didn´t want to go bankrupt. It´s basically the same thing. And I don´t see why depositors of Cypriot banks should be bailed out when private investors in other companies were not. I´d have called myself lucky if I had been treated like Cypriot depositors who had borrowed their money to banks which had had more responsibility for their misfortunes (by borrowing to everyone who could breathe) than Schefenacker (and many other companies) had. Not bailing out a bank ort a country or only partially bailing it out isn´t the same as stealing from it.

[holitec]

Jeba, depositors were not bailed out, they got any amounts over 100k stolen and given junk shares in exchange.

Buying shares is a high risk operation, sometimes you win, sometimes you lose - but we all know that can happen and manage our portfolios accordingly.

What happened here was different - my account simply was converted from Laki to BOC, I did not even have to sign a single document. As posted above, if the Greek bonds held were not actually junk, the banks would have been ok, although there were a few NPL on their books which did need dealing with.

You should have been here and seen what happened, it would have been an experience for you.

In the overall scheme of things, it would not have been too painful to guarantee bank deposits and sort out the npl's later - after all 20bn in the EU pot is only 24 months of just the UK net contributions, and for the ECB probably a couple of hours printing press time and a few days QE. No, Cyprus was the experiment to see if this will work in other countries at a later date - look out Italy, Portugal etc.

[jeba]

Jeba, depositors were not bailed out, they got any amounts over 100k stolen and given junk shares in exchange.

That´s not true. Firstly, the haircut was only 30% (or was it 40% ?) of the amounts over 100k and not all of it and secondly, it wasn´t stolen. It was lost because the debtors were bankrupt, not because the Troika enriched themselves. If I deposited money beyond the 100k covered by insurance with a bank I should know that every cent above the guarantee level is at risk in case of a bankruptcy of that bank.

Buying shares is a high risk operation, sometimes you win, sometimes you lose - but we all know that can happen and manage our portfolios accordingly.

I wasn´t talking about shares - I was talking about bonds. I hadn´t taken on equity risk like a shareholder.

When Schefenacker went bankrupt I was also given some worthless options traded at an Indian exchange for my bonds without my consent or without even having to sign anything. This was no different and completely within the law. And Schefenacker is just one example I chose because it affected me most. There were many others. Another one which also affected me following the Lehman crisis was ATU, a German company which was bought by an American company which moved the headquarter to the UK because under German law they would have had to pay back their bondholders in full. Under UK law they didn´t have to but got away with paying 2.5 cent on the Euro. That also turned out to be legal. Again I would have deemed myself lucky had I received 70% of face value back.
[/quote]

[Royal]

Totally different scenarios.

You invested your money and enjoyed the benefits and the risks of that investment. In your case it turned sour - other investors have benefitted greatly.

Savers in the bank of Laiki and BoC had not invested their money for great gains - they had deposited it for safe keeping and the banks did not go bankrupt or move location. It was a novel and contentious method of theft...

[Poppy]

Well if I remember correctly the gains were pretty good and I was receiving 6% on my fixed term/ step up savings and obviously this was not sustainable.

[jeba]

Totally different scenarios.

You invested your money and enjoyed the benefits and the risks of that investment. In your case it turned sour - other investors have benefitted greatly.

Savers in the bank of Laiki and BoC had not invested their money for great gains - they had deposited it for safe keeping and the banks did not go bankrupt or move location. It was a novel and contentious method of theft...

No, it wasn´t that much different. As I said, I had borrowed my money (not invested in equity) to a company which went belly up just as depositors in Cypriot banks had done. Basically the same scenario with the only exception that depositors in a bank enjoy some insurance cover. Which protected the first €100k, so they should count their lucky stars that they got those 100k back plus most of what was above that amount. I was just less lucky. If you can blame anyone so it should be those who caused the Lehman crisis (e. g. the rating agencies which rated poorly performing loans as safe just because they had been combined into a bundle). Blaming the EU for the losses is like reinventing the stab-in-the-back legend.

[jeba]

Well if I remember correctly the gains were pretty good and I was receiving 6% on my fixed term/ step up savings and obviously this was not sustainable.

Exactly.

[outasite]

Sorry, Jeba I have evidently been living under a mis-apprehension. You see I was under the impression that CYPRUS was on the brink not any of the banks. And I was under the impression that the EU instructed Cyprus to take funds from people's accounts which Cyprus proceeded to do. So I stand corrected and apologise to the EU for thinking you were ever a corrupt, stinking cesspit of thieving non-elected snout in trough bullies. And whilst I realise that even the bullying EU let those people keep the first €100 thousand, if I had had a million euros I would be €400 thousand the poorer. What a fair deal from an institution that is founded on lies, lies and more lies. Oh and bullying...Do not do as we do, do as we say. I cannot wait to be out of it.

[jeba]

Sorry, Jeba I have evidently been living under a mis-apprehension. You see I was under the impression that CYPRUS was on the brink not any of the banks. And I was under the impression that the EU instructed Cyprus to take funds from people's accounts which Cyprus proceeded to do. So I stand corrected and apologise to the EU for thinking you were ever a corrupt, stinking cesspit of thieving non-elected snout in trough bullies. And whilst I realise that even the bullying EU let those people keep the first €100 thousand, if I had had a million euros I would be €400 thousand the poorer. What a fair deal from an institution that is founded on lies, lies and more lies. Oh and bullying...Do not do as we do, do as we say. I cannot wait to be out of it.

The EU didn´t instruct Cyprus to do anything. The Troika merely linked covenants to a loan, which is completely normal in business life. Why should other countries´s taxpayers have bailed out depositors of Cypriot banks completely and without conditions? If you had deposited 1 million and fetched interest rates double as high as those you would have got e. g. from a German bank surely you´d have been aware of that there was a higher risk associated? At least you should have been.
Why only is it that I have a sense that your apology may not be completely sincere?

[Poppy]

Although as I have posted many times I am not a fan of the EU, I think Jeba is right and they did put Cyprus back on the right road.Cyprus did not have to agree to their terms but they did.We all had plenty of warning and I would venture to suggest that much of the "stolen" money was probably laundered money anyway.

[trevnhil]

Nobody sent us a letter saying if you are in Laiki bank or Bank of Cyprus we will be raiding your saving over 100,000