"Theft, pure and simple"

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Norbert Schlenker
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"Theft, pure and simple"

Post by Norbert Schlenker »

European finance ministers have agreed an £8.7bn bailout for Cyprus which includes all Cypriot bank customers handing over up to 10% of their savings.

Cyprus becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the eurozone for financial help amid the region's debt crisis, but also faces a possible run on its banks as depositors try to avoid losing up to 10% of their savings.

The savers, half of whom are thought to be Russian, will raise almost €6bn. It is the first time a bailout has included such a measure...

However, on Cyprus, initial incredulity at the decision gave way to anger. Co-op credit societies, normally open on Saturdays, were shut for business in the coastal city of Larnaca as depositors started queuing early in the morning to withdraw their cash.

"I'm extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans," said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.

"They call Sicily the island of the mafia. It's not Sicily, it's Cyprus. This is theft, pure and simple," said a pensioner.

The bailout was smaller than initially expected and is mainly needed to recapitalise Cypriot banks hit by sovereign debt restructuring in Greece.

Cypriots with savings of under €100,000 will pay a one-off levy of 6.75%, which rises to 9.9% for those with larger deposits.

The levy on bank deposits will come into force on Tuesday, after a bank holiday on Monday. Cyprus will take immediate steps to prevent electronic money transfers over the weekend...
http://www.guardian.co.uk/world/2013/ma ... lout-anger
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like_to_retire
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Re: "Theft, pure and simple"

Post by like_to_retire »

The citizens of Cyprus who have sacrificed and saved all their lives have significant savings. They are now required to pay up, where those that didn't save are let off the hook.

How is this different than the equally unfair progressive tax system in Canada?

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Re: "Theft, pure and simple"

Post by newguy »

like_to_retire wrote:How is this different than the equally unfair progressive tax system in Canada?
Well if they change the tax system overnight you can stop working. They don't come and take everything you've worked for. You can leave the country or jurisdiction if you don't like it. I have a feeling Cypriots won't be able to take their money out of the country without paying (unless of course there's a revolution first).

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Re: "Theft, pure and simple"

Post by NormR »

Brilliant, anyone with deposits in a wobbly Eruo bank / country will now flee. A great way to inspire a bank run. Idiots.
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Re: "Theft, pure and simple"

Post by like_to_retire »

They don't come and take everything you've worked for.
Really? Those that are at a 45% tax level in Canada compared to those that are at a 35% level aren't at a 10% difference? Is this not the amount they want to take from the "have's" in Cyprus"?

How is it different?

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Re: "Theft, pure and simple"

Post by newguy »

I was thinking, given how much harder it would be to make inflation in the Eurozone if they followed the rules, isn't this a more honest means of theft? In the US or Canada the government can steal 10% easily by have an interest rate lower than inflation, it will just take a few years. In Cyprus and Greece and the like they have deflation and can't lower rates enough, this just brings out into the open what other governments are already doing with 0%, QE etc...

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Re: "Theft, pure and simple"

Post by newguy »

like_to_retire wrote:
They don't come and take everything you've worked for.
Really? Those that are at a 45% tax level in Canada compared to those that are at a 35% level aren't at a 10% difference? Is this not the amount they want to take from the "have's" in Cyprus"?

How is it different?
I'm presuming when you got a job they mentioned taxes. Why did you do it if you didn't want to pay it? I don't.

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Re: "Theft, pure and simple"

Post by broke »

And poof, it's gone

Next!
Simply with a stoke of the pen and TADA... it' gone.
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Re: "Theft, pure and simple"

Post by like_to_retire »

newguy wrote:I'm presuming when you got a job they mentioned taxes. Why did you do it if you didn't want to pay it? I don't.
Are you fucking kidding me?

There are those that spend every cent that they earn through their career, and there are those that think it wise to save for the future.

The ones that save for the future are punished in retirement by a progressive tax system because they have more than the ones that spent every cent that they earned.

And your response is, "Why did you do it if you didn't want to pay it?".

The socialists have won.

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Re: "Theft, pure and simple"

Post by newguy »

like_to_retire wrote:
newguy wrote:I'm presuming when you got a job they mentioned taxes. Why did you do it if you didn't want to pay it? I don't.
Are you fucking kidding me?
Well then supposedly you'd be happy if we both paid 35% in theft/taxes? Would what cyprus is doing be ok if both the rich and poor rate was 6.6%?

I'm pointing out the difference between a system that we've all tacitly agreed to work under to one that was changed overnight.

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Re: "Theft, pure and simple"

Post by Shakespeare »

Take it to the watercooler.
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Re: "Theft, pure and simple"

Post by Insomniac »

To soften the blow of the confiscation of savings, depositors will be given shares in the lenders--a type of forced debt-for-equity swap. The precise terms are not clear, but it does have the makings of a prisoners' dilemma in terms of what one does with the shares when they are available.
http://www.zerohedge.com/contributed/20 ... ing-cyprus
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Re: "Theft, pure and simple"

Post by adrian2 »

More from the link above:
There will be an immediate tax on depositors in Cyprus. Large deposits, which are defined as in excess of 100k euros, will lose 9.9%. The government will take 6.75% from small depositors. This is expected to raise 5.8 bln euros.

Electronic transfers have been frozen and reports suggest ATMs have run out of cash within hours of the announcement. Cyprus is on holiday on Monday and when the banks re-open on Tuesday the tax will have been collected; the funds confiscated.

This is the most controversial aspect of the concessions. It is unprecedented in terms of euro area aid programs. It is not though unprecedented in modern times in Europe. Italy, it may be recalled, taxed (confiscated) 5% of savings to ensure it would be able to join the monetary union in the first place. Moreover, what is generally not appreciated is that in the EU, unlike in America, depositors do not have preferred status over bond holders. This makes them significantly more vulnerable.

Russia, not a member of the EU, has a vested interested [in] Cyprus. It is thought that the tax on small savers was required so Russia did not think that its citizens were being singled out. In exchange, Russia will ease the terms of the 2.5 bln euro loan it extended to Cyprus two years ago. In the coming weeks, a lower rate and longer repayment schedule is expected to be announced.
BTW, I would welcome more info on Italy's alleged tax/confiscation of "5% of savings to ensure it would be able to join the monetary union in the first place". I could not find anything using Google.
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Re: "Theft, pure and simple"

Post by ig17 »

adrian2 wrote:More from the link above:
Russia, not a member of the EU, has a vested interested [in] Cyprus. It is thought that the tax on small savers was required so Russia did not think that its citizens were being singled out.
FT.com: Cyprus fights doubts over Russian money
Under particular scrutiny are €25bn of deposits in Cypriot banks controlled by Cyprus-based Russian companies, almost one-third of total Cypriot banking deposits. The scale of Russian-owned deposits, along with huge two-way flows of “hot money” between Russia and Cyprus, have triggered suspicions of money laundering and tax evasion, prompting the IMF to push for a “haircut” on depositors.

<snip>

Cyprus attracted $119.7bn of Russian “investment” in 2011 while itself transferring $129.9bn to Russia the same year, equivalent to more than five times the island’s annual output, according to Global Financial Integrity, a US-based money laundering watchdog. Raymond Baker, GFI’s director, said the amounts reflected “round-tripping” of illicit funds exported from Russia to companies based in Cyprus. The funds then flowed back as legitimate investment.

“I don’t think Cyprus has cleaned up its act. It’s still a centre for disguised entities and for money of suspect origin,” Mr Baker said. ”I think the amount of legitimate Russian money coming into Cyprus would be minuscule.”

Cyprus’s financial industry took off in the 1990s as Russian commodities traders started to deposit cash in Cypriot banks. Many were attracted to Cyprus by the island’s 4 per cent corporate tax rate and favourable tax treaties with eastern European states.
Cyprus government was willing to tolerate illicit money transfers from/to Russia. Regular Cypriots ended up paying the price. :cry:
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Re: "Theft, pure and simple"

Post by ghariton »

Cypriot President Nicos Anastasiades:
It is well known that the deep economic crisis and the state of emergency in which the country has found itself did not come about in the last fortnight since we have undertaken the administration of the country.

The state of emergency and critical nature of the times do not allow me, as they do not allow anyone, to embark on a blame game.

In the extraordinary meeting of the Eurogroup, we faced decisions that had already been taken and came across faits accomplis through which we were faced with the following dilemmas:

On Tuesday, March 19 we would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy.

A possible choice of the catastrophic scenario option would have the following consequences:

1. On Tuesday, March 19, immediately after the holiday weekend, one of the two banks in crisis would cease to operate, since the European Central Bank, following the decision already taken, would terminate the provision of liquidity. The second bank would suspend its work, and neither could avoid collapse. Such a phenomenon would instantly lead 8.000 families to unemployment.

2. The State would be obliged to compensate depositors in response to the obligation regarding guaranteed deposits. The capital required in such a case would amount to about 30 billion euros, which the State would be unable to pay.

3. A proportionate amount corresponding to the deposits of thousands of depositors for deposits over 100.000 Euro, would be led to a vicious cycle of asset liquidation, and these depositors would suffer losses of over 60%.

4. Such an uncontrolled situation would push the whole banking system into collapse with all the attendant consequences.

5. Thousands of small and medium enterprises, and other businesses would be driven to bankruptcy due to their inability to trade.

As a result of the above, the service sector would be led to a complete collapse with a possible exit from the euro. That, in addition to the national weakening of Cyprus, would lead to devaluation of the currency by at least 40%.

The second choice was the controlled management of the crisis, through the decisions taken and which can be summarized as follows:

1. Ensuring the liquidity of the banks and the rescue of the banking system through their recapitalization.

2. Rescuing 8.000 jobs in the banking sector and thousands of others which would be lost as a corollary of not maintaining the operations of banks.

3. Total rescuing of deposits, with just the exchange of a small percentage of savings with shares of the two banks. Currently, these shares do not have their full value, but with the economic recovery they will repay most it not all of the amount that will be cut.

4. This option results in a drastic reduction of public debt, makes it manageable and sustainable and relieves future generations from the burden of repayment.

5. It saves provident and pension funds and avoids taking other tough measures such as wage and pension cuts that were put on the negotiations table.

6. It avoids further recession and the risk of the vicious circle of a second memorandum.

We are not aiming to gloss over the situation. The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures. It's a decision that leads to the historic and permanent rescue our economy.

In the next few hours we will all have to take responsibility. Tomorrow I will address the Cypriot people.
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Re: "Theft, pure and simple"

Post by BRIAN5000 »

What will this mean for US and Canadian markets on Monday?
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
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Re: "Theft, pure and simple"

Post by adrian2 »

BRIAN5000 wrote:What will this mean for US and Canadian markets on Monday?
Yawn...
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Re: "Theft, pure and simple"

Post by newguy »

adrian2 wrote:
BRIAN5000 wrote:What will this mean for US and Canadian markets on Monday?
Yawn...
Only if Germany explains this is a one-off punishment of savers and people can still safely keep their money in Spanish, Italian, Irish, and French banks.

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Re: "Theft, pure and simple"

Post by Norbert Schlenker »

I don't share the view that this is a benign event, with no follow-on consequences. The lesson that savers in one shaky Eurozone countrywould have been better off by 7% in a single weekend if they'd put their money under a mattress won't be lost on savers in other shaky Eurozone countries. I smell bank runs and deflation.
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Re: "Theft, pure and simple"

Post by NormR »

Norbert Schlenker wrote:The lesson that savers in one shaky Eurozone countrywould have been better off by 7% in a single weekend if they'd put their money under a mattress won't be lost on savers in other shaky Eurozone countries. I smell bank runs and deflation.
I agree. It might not happen this week, but it'll make the next downturn worse. They're playing with fire and I hope they didn't just burn their house down.

It seems that bank deposits in Euroland are below a bank's bonds in order of priority in bankruptcy, which is a bit nuts.

OTOH, weren't derivatives recently put at the top of the list in NA? So, we might be in the same bad spot ... (I hope not.)
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Re: "Theft, pure and simple"

Post by ig17 »

BBC business editor:

Why Cyprus's rescue matters to us
UPDATE 14:20: A well-placed official rings to tell me why investors should not be panicking that the punishment of Cypriot depositors is a precedent, or that lenders to Spanish and Italian banks will be spanked as well before too long.

He says the structure of the Cypriot bailout has been determined by German politics. (Aren't all eurozone bailouts fixed in that way?)

Here is the logic behind imposing a hefty levy on Cyprus deposits, according to this official:

1) Regulators and politicians are convinced that a vast amount of cash in Cypriot banks belongs to Russian money launderers.

2) Few German politicians of any persuasion would have voted for a Cyprus rescue that simultaneously rescued these launderers.

3) So the only way to get the bailout through the Bundestag is for the launderers to be taxed to the tune of almost 10% of their allegedly ill-gotten cash. And if innocent savers are hurt too, that is the way this particular "Keks" will crumble.

On that analysis, private sector lenders either to Spanish banks or to the Italian government - as two topical and relevant examples - need not fear that it is their turn next to take a write-off.
Doesn't sound very comforting to me. I doubt that ordinary folks in Spain or Italy will buy this explanation.
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Re: "Theft, pure and simple"

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New York Times:
The Cyprus Parliament must vote on the measure, and it was planning an emergency session on Sunday. Given the stunned reaction, it was not certain to pass. Nicholas Papadopoulos, the head of Parliament’s financial affairs committee, said the decision was “much worse than what we expected and contrary to what the government was assuring us, right up until last night,” Reuters reported
What do you suppose would happen if the measure is defeated?

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Re: "Theft, pure and simple"

Post by izzy »

ghariton wrote:New York Times:
The Cyprus Parliament must vote on the measure, and it was planning an emergency session on Sunday. Given the stunned reaction, it was not certain to pass. Nicholas Papadopoulos, the head of Parliament’s financial affairs committee, said the decision was “much worse than what we expected and contrary to what the government was assuring us, right up until last night,” Reuters reported
What do you suppose would happen if the measure is defeated?

George
In either event the effect on Cyprus' status as a retirement haven cum international financial centre is going to be catastrophic.
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Re: "Theft, pure and simple"

Post by Insomniac »

adrian2 wrote: BTW, I would welcome more info on Italy's alleged tax/confiscation of "5% of savings to ensure it would be able to join the monetary union in the first place". I could not find anything using Google.
I found this: http://www.bloomberg.com/apps/news?pid= ... fer=europe
As premier from 1996 to 1998, Prodi had mixed results implementing unpopular economic policies. He helped whip the inflation-prone Italian economy into good enough shape to qualify the country to join the euro at its launch in 1999. He pushed through deficit cuts of about 40 billion euros and imposed a one-time ``eurotax'' of $1,000 per household in 1998 to raise funds needed to get the deficit below the 3 percent ceiling.
Maybe the $1,000 equates to 5% of an average household's savings at the time?
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Re: "Theft, pure and simple"

Post by patriot1 »

Maybe, maybe not, but the Eurotax was not a tax on savings.
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