When you deposit money in a bank you become a protected senior creditor, but creditor nonetheleas, to the bank. The government insures the first €100 000 or $250 000 against losses, but that guarantee is only as good as the government.<p>Jeroen Dijsselbloem, president of the eurogroup, told the FT as the bailout was announced:<p>“<i>If we want to have a healthy, sound financial sector, the only way is to say: ‘Look, where you take the risks, you must deal with them, and if you can’t deal with them you shouldn’t have taken them on and the consequence might be that it is end of story.' That’s an approach that I think we, now that we are out of the heat of the crisis, should consequently take.</i>" [1]<p>If you want a dollar asset as close to risk free as possible, buy Treasuries. If you are afraid of inflation buy inflation-protected Treasuries, TIPS.<p>Not Bitcoins? No, not Bitcoins. The purchasing power of your savings has a higher probability of being retained when backed by the full faith and credit of the U.S. government than a cryptocurrency. This may very well change, but it is not the case today, particularly if you pay your bills and buy your food in dollars. Speculate in Bitcoins, use them to transact if you must, and perhaps participate them as a form of activism, but do not convince yourself that you are George Sorosing the global financial system.<p>[1] <a href="http://www.ft.com/intl/cms/s/0/68c9c18e-955e-11e2-a151-00144feabdc0.html#axzz2OWQybIgY" rel="nofollow">http://www.ft.com/intl/cms/s/0/68c9c18e-955e-11e2-a151-00144...</a>
Background and summary (forgive me if some details need correcting):<p>Cyprus is a tiny country with a GDP not much higher than Tim Hortons. Yet, it had something like 150 billion in private funds stored in two of its banks: the Bank of Cyprus and Lakie. Why? Because the majority of the funds (I am generalizing) belongs/belonged to Russians who took advantage of the people on the conversion out of communism (dirty money). As North Americans have Swiss bank accounts, the Russians have Cyprus. Obviously, other people have their money in here too.<p>Greek's insolvency impacted Cyprus greatly, because a large portion of the Cyprus population are of Greek descent. Thus, when the banks were figuring out where to invest, a large portion of the funds went to Greece. As a result, the banks lost a ton of money, and are on the verge of making the country insolvent. The IMF said the government needed to come up with a large amount of money.<p>At first they tried to pass a bill that would skim 10% off all Cyprus bank accounts that had over 10k Euros. There was unimaginable outrage, because as you can guess, that affects a good portion of the population. In response, they changed the bill to only affect those with over 100k Euros. Interestingly, this time, mostly the Russian dirty money was affected, and there was not as much public outrage (stealing stolen money). As a result, now 30% of all bank accounts over 100k Euros are being seized.<p>All the North Americans probably don't realize why this is such a big deal. In North America, we have money in companies, hedge funds, etc. In Europe, from what I've been told, banks are the major (almost exclusive) depository. Thus, you can imagine that this is a much bigger deal.
Yes, blame Angela Merkel and not the bank executives at your bank that loaded up on Greek debt while Greece was careening towards insolvency.<p>I appreciate the PR nightmare here for the E.C. People are going to be madder at the E.C. for wiping out depositors at this unviable bank than they would have if the E.C. just let the whole Cypriot banking sector collapse and let everyone lose their money.<p>See: <a href="http://online.wsj.com/article/SB10001424127887323501004578386762342123182.html" rel="nofollow">http://online.wsj.com/article/SB1000142412788732350100457838...</a>
Comment #7 in that thread says it all:<p><i>“So you trusted a small tax haven island with your money. The plan failed. Your next step: trusting even smaller tax haven island with your money. Pure logic.”</i>
Oh boohoo.<p>The OP appears to forget that without the European Commission, <i>all</i> of his money would be lost.<p>It's like getting mad at the guy who chainsaws you out of the car that you folded around a tree because he sawed your car into two pieces.
>I'm not Russian oligarch, but just European medium size IT business<p>I fail to see the difference, honestly.<p>The OP, by running a business within a society where many services essential to that business are provided by the government and paid for by the citizens and businesses within that society, profited directly from other people's taxes - but refused to contribute.<p>I feel about as bad for him as I do for any of the other gangsters, Russian or otherwise.
Putting money in an uninsured bank is an investment the same stocks or property.<p>If the asset you invest in fails you lose your money.<p>Don't see how this is the European Commission robbing anyone.<p>I thought (But could be wrong) without the bailout all the money would be lost. Isn't this them giving someone who's lost it all 20% of their money back?
Apparently he didn't read up on deposit insurance. In most EU countries, anything over Euro 100,000 is not safe.<p><a href="http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country" rel="nofollow">http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country</a>
The OP does not seem to understand that the bank account was not robbed by European Commission, it was just lost because it was a bad investment.<p>He put money in a bank that failed. Presumably, he made the investment for reasons of convenience of operating the capital in Cyprus, but also because the particular bank he chose was paying high interest rates. It was paying high interest rates because everyone knew the risk was high. The risk materialised. Who is surprised?<p>EU helps a bit but is not prepared to compensate him for losses; this is not a fault of the European Commission.<p>I'm a bit short of sympathy because of this blaming of Merkel, Rehn et al. They're not perfect, but they are not culpable for this loss.<p>Cyprus has had tax as percentage of GDP at below 40 %. Northern Europe is closer to 50 %. If you had wanted buffers provided by the state, you should have collected taxes to do so. Alternatively, you could have stayed out of the euro, and then the government could just print money and rescue the banks. Of course, outside the euro you wouldn't have been such a great haven for grey and black Russian money.
What is the poster suggesting? EC should've stayed out and let the banks go bankrupt?<p>Oh I know, they should've just covered all the tax haven banks losses.
So, you deposit your money in a bank with very high interest rates - very high because they invest in risky Greek bonds. If everything goes well, you keep the interests. If the risky investment of the bank goes bust, we (EU citizens) should pay you the risk, even beyond the insured 100k. Is that correct?
This is just undermining the bank system. There is no reason big enough to do something like this and it appals me that some people are saying that he had it coming.<p>A part of it is 'dirty' and that argument is being used to validate the confiscation of working people's money and company's money which the EU's economy is based upon.<p>The fact that they announced this before taking a decision is just beyond stupid, any normal thinking human being knows that it's a bad approach given that they want to prevent a bank run. People in other countries are fearing that the same procedure will happen to them. This has a way bigger impact than just some companies and some rich people and some bad russians, they are just harming the image of banks in whole Europe.<p>Next to that fact, OP has a medium sized business, people work there, wages can't be paid, this has a major influence on companies all over Europe and everyone who works there. OP put his money in Cyprus because it was profitable, is that a bad thing? You have to choose paths that are most profitable for your company and he didn't put it in some obscure market, it was backed by a bank, we generally trust banks.<p>Now they want to prevent a bank run, this is just a ticking timebomb. Whenever the 300 euro/day rule doesn't apply anymore, there will be a bank run. No money will be going into the bank anytime soon. They are going to regret this.
While I would probably have the same reaction if I was living in Cyprus, important points are missing here.<p>The way I understand it: Cyprus failed to control their economy and required the help from the European Union. In order to lent them a crazy amount of money, they wanted some guarantee. They could not provide anything, so their government had to use the peoples money to pay for the governments previously bad judgement about not saving up for bad times.
It appears this is a current/chequing/checking account rather than the savings/deposit accounts that were originally reported to be subject to the special tax and which pay the ridiculous levels of interest (10%+).<p>The impact on local business is already being felt, both consumption & payment of supplies & salaries (and soon tax remittance), and imports will suffer significantly in the coming days and weeks too. Exports may well be paid for and the funds remain outside of Cyprus, further creating problems for the economy, as it goes almost all-cash and tax is evaded too. Credit card balances can not be paid off for now either.<p>It will be interesting to see how Russian mobsters (and various shades of business people) react to having millions/billions taken from them. I'd not want to be a Cypriot politician or banker having to say no to these guys.
Basically, someone deposited his money in a tax haven, with patently risky banks. Then the banks went into trouble. The European Union tries to help them avoid total loss, and now that same someone blames the EU for the partial loss.<p>Total loss was the alternative to the bailout...
This fellow is using Laiki bank, and the Cyprus Finance Minister said that they would be seeing an 80% haircut.<p>Relevant: <a href="https://twitter.com/finansakrobat/status/316813023639646208" rel="nofollow">https://twitter.com/finansakrobat/status/316813023639646208</a>
I'm not sure why people think investing above the insured deposit ceiling in a badly rated bank is risk free. If you have that much cash, you certainly can do (or pay someone to do) some due diligence and store your assets in a safer way.
It amazes me how many people mention tax evasion, and other excuses for apportioning of liability.<p>The liability should lie with the people who bought the Cypriot/Greek debt in the first place. They are the ones that in essence lent the money to these two tiny countries when it was obvious it was out of control and would blow up.<p>But where is the incentive not too when the liability is offloaded to people who had no part in the debt transaction; either the citizens or other third parties.<p>To me these risk balances are way out of whack and are just asking for the irresponsible fiscal activities we are seeing.
Looks to me more like 700k was blocked as part of the capital controls to prevent a bank run. The actual amount to be seized will be much smaller. Cold comfort, I know.
In one sense, this submission really is politics and I feel bad about
up-voting it, since politics are against the HN site guidelines.<p>In another sense, this is also about tech, specifically, bitcoin. The
desperate people in Cypress may turn towards alternative currencies as a
way to escape their situation.<p>I know there are a lot of folks around here who vocally support bitcoin
or other alternative currencies. For me the <i>idea</i> is very interesting,
but the <i>reality</i> makes me nervous. There are one of two possibilities;
either (1) I know bitcoin well enough to never trust it, or (2) I don't
know bitcoin well enough to make an informed decision.<p>I'm still betting on the latter. ;-)<p>None the less, there's a lot of negative bitcoin news that never makes
the front page of HN, and I wonder why. The most recent was:<p><a href="https://news.ycombinator.com/item?id=5459304" rel="nofollow">https://news.ycombinator.com/item?id=5459304</a><p><a href="http://www.youtube.com/watch?v=7fvSYT7vhQY" rel="nofollow">http://www.youtube.com/watch?v=7fvSYT7vhQY</a><p>The <i>worst</i> part of the above could the sensationalism, but in my
opinion, it's my inability to verify the veracity of the claims. Are
they just muckraking to (successfully) cause "Fear, Uncertainty, and
Doubt" (FUD)? --Sadly, stuff like this makes us already skeptical and
squeamish folks even more nervous about it.<p>Market manipulation is a very real problem in all markets, so even if
the above is entirely true, it's merely one instance of graft against
bitcoin, when there are countless instances of corruption in all the
other markets.
The EU has nothing to do with it it's cyprus that can't keep it's economy afloat.<p>If i got to decide the EU should have let your contry go bankrupt fall in to civil war, but hey we decided to lend you money to stop that.<p>But yes blame the very people that helped you from loosing all your money. That seems like a good idea....
One possible upshot of this is that maybe people will actually start paying attention to how their home banks are capitalized. What's their reserve ratio? What are their major investments? Have those investments been rated by <i>independent</i> agencies?<p>Schemes like the FDIC (which, as mentioned in a previous comment, can change the rules at any time) only serve to dumb us down and encourage bad behavior; firstly by lulling depositors into a false sense of security, and secondly by eliminating the incentive to be prudent and appropriately risk-averse.
So, the system worked and he gets to keep €100K? Because his bank is insolvent and that is the amount of money that was insured?<p>I'm not saying this doesn't suck for him and his company, but €100K is better than €0.
I don't really see how the EC is robbing when it's actually lending Eur 10bln. Without the loan, <i>all</i> banks would have collapsed and you'd have lost the first 100K as well.<p>The initial proposal was to only tax a percentage of the saved amount. That was rejected by the cypriotic people/govt.
By the by, doesn't that bank logo look kind of familiar? Engadget's logo was inspired by the RSS logo, but this one doesn't even try to be original.<p><a href="http://i.imgur.com/WKZEMiQ.png" rel="nofollow">http://i.imgur.com/WKZEMiQ.png</a>