Saturday, 16 March 2013

Cyprus does deal with EU to steal savings

Cyprus has agreed a bailout deal with the EU and IMF that involves the legalised theft of up to 9.9% of savings held in Cypriot banks.

The deal has been agreed today and the Cypriot government is expected to pass an emergency law tomorrow to make it legal.  Monday is a public holiday so depositors won't be able to go into branches until Tuesday to get their money out.  Accounts are already being emptied via cash machines.

The new tax on bank savings is 9.9% on savings of €100k or more and 6.75% on anything below €100k.  Banks have already been instructed to take the money out of accounts.

It is highly likely that we will see runs on all Cypriot banks on Tuesday and I would expect most of them to close before lunchtime and for the Cypriot government to order them to remain closed for a few days.  The Bank of Italy permitted Italian bank BNI to freeze all accounts for a month last year and Cyprus is in a far worse financial position than Italy.

Cyprus was forced to go cap in hand to the EU after Russia refused a second big loan because Cyprus was unable to give it preferential creditor status because of EU rules.  We said in October last year that the terms of any bailout for Cyprus would be "punishing to send a message to any other €urozone country that is thinking of suckling at another teat" and we weren't wrong.  Thousands of military personnel based in Akrotiri and Dhekelia have had their money stolen as well as the many thousands of ex-pats living in Cyprus and Cypriot ex-pats living overseas.