This weekend a scary thing happened to Cypriots and anyone keeping money in Cyprus (think Russians). If you have under 100,000 Euros before the banks open on Tuesday you will donate 6.75% to the bailout of Cypriot Banks. In return they’ll give you stock. Now if you have over 100,000 Euros you can count on donating 9.9%. Solidarity…
What should you expect on Monday?
Lots of very pissed off savers and empty bank machines. Think how you would feel coming back from a weekend 10% poorer, because the government, the ECB, and your trusted bank decides to confiscate your savings.
Backpedaling might be on the agenda, in either case, this is sending some fear into the markets, it’ll surprise me if the markets shrug this off. As little as Cyprus is for the EU, the precedent will put fear into the Italian, French, and Spanish markets. Today the parliament was presumably going to ratify the money grab. But they’ve just postponed the debate until Monday, which probably means there is dissension in the political ranks… If the measure is rejected The Question will resurface. How does a country exit the Euro Zone? Presumably, Cyprus is the least painful to throw under the bus but that question has a consistent habit of killing the buzz. And that’s what’s going to happen this week. Buzz Kill.
According to Ekathimerini.
This is the first time in the euro zone that a levy has been imposed not on the interest of bank accounts but on the capital itself. In addition to that there is a levy on interest, too, and an increase in the 10 percent corporate tax that has been one of the main driving forces behind Cyprus’s financial progress after the 1974 Turkish invasion, generating growth by attracting foreign direct investment.
Notably, the account haircut does not affect bank accounts in Cypriot bank branches based in Greece, according to sources from the Greek Finance Ministry.
Tax on interest will amount to between 20 and 25 percent.
Changes will have to be ratified by the House of Representatives, the republic’s parliament within the weekend, while an emergency cabinet meeting is taking place on Saturday morning in Nicosia to assess the situation.
* Updates coming fast and furious this morning:
- Here’s a decent Business Insider rant.
- Putin hits out at “dangerous” Cyprus bank deposit levy
- France Open to Reworked Cyprus Deal – duh…
- Cyprus Central Bank: Banks Closed Until Thursday