This one is pretty ugly. Cyprus bailout has hit the avergae saver in Cyrpus hard in order to get at what they really want and that is the large money that is – shall we say “resting” in Cypriot banks.
Once again the little man gets hit, savers in Cypriot banks are being penalised for being prudent with a tax of 6.75% on deposits less than EU100k. Anything over that gets hit with 9.9%.
The money that is “resting” in Cyrpus (namely Russian) will probably be angry yes but will get over it fairly easily as they kick back on their yacht somewhere in Dubai, Monaco, London townhouse etc etc. A 10% tax on their money is I guess the “cost of doing business,” When you deal in figures like these guys do someone is always looking to eat into your margin and 10% is probably the least painful to lose.
To make it more politically appealing the average saver in Cyrpus has been thrown to the lions as sacrificial lambs in order to gain access to the rest of it.
No coincidence that it happened this weekend either. I believe it is a bank holiday in Cyrpus on Monday therefore it gives them one more day to make necessary steps to freeze bank accounts and prevent the inevitable outflow of money or “bank run.” No point in warning people first, when you do an operation like this the element of surprise is always taken to prevent the capital flight. It is how most assumed the grexit would happen towards the end of last year.
Again those with very large deposits probably got the heads up or at least had the inside information long time ago and made preparations for this and already moved some if not all all of their capital elsewhere and will always be one step ahead.
I find this bailout particularly distasteful. Almost experimenting with the smallest member of the EU. Would like to see more on it as I’m sure its not just a one off tax and then no austeriy policies and income tax hikes. If it were then maybe not so bad, but things very rarely work like that in austerity regimes.
If you are having a bad weekend just think it could be a lot worse, you could be the branch manager of a local Cypriot bank and come Tuesday morning not only will the locals be smashing your doors in but you may have one or two angry Russians on your doorstep.