# Lessons from Cyprus



## Duke of Marmalade (17 Mar 2013)

We all knew that it wasn't impossible that depositors might be hit some day. We had various theories as to how it might happen and how to mitigate it. We don't know all the details yet but there are some interesting pointers from what is happening in Cyprus.

1) Will we really get sufficient notice? I suppose this was fairly well flagged, so why are there people still left?

2) We see that it appears to be possible to freeze the system immediately, so this is a lesson to get out on time if we see the same thing threatening here.

3) The deposit guarantee is absolutely useless. This is a tax which avoids the guarantee.

4) Being picky about your banks doesn't seem to matter as I think this tax applies to all bank deposits and not just stricken banks.

5) Spreading your deposits around doesn't seem to help. I am not sure yet but I think the tax is 6.6% on 100K per person and 9.9% of over 100k per person. 

We will have to wait and see but if (4) and (5) are true it shows that the popular approach of spreading your deposits around or going for foreign banks based in Ireland doesn't help.

On the slightly positive side, we sort of get a sense of how bad the confiscation might be. 10% is bad but not the end of the world. I think 30% would have completely cleaned the Cyprus government's debt slate.

PS Of course, different considerations are at play for a "conventional" failure of a bank in which case the deposit guarantee will come into play, however a systemic bail out Cyprus style seems a more likely threat than letting a major bank go bust.


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## dub_nerd (17 Mar 2013)

So the moral of the story is take the best interest rate going, because if the government wants your money there's nothing you can do to stop them.


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## Leper (18 Mar 2013)

I am a little at sea here. What's happening in Cyprus is blatant daylight robbery. Because it is happening on another island hundreds of miles away does not make this any better. The European Union is behind all this (we are the European Union, believe it or not) and no doubt is chasing the Cypriot government for its pound of flesh. 

People work hard to save money for that rainy day (like we were all advised by our governments). Suddenly, 10% of our savings will be stolen from us and legally. The only difference between the Cypriot government and the Provisional IRA is that the IRA took chances that they would be shot or imprisoned. The Cypriot government is taking no chances.

I remember a radio interview a couple of years ago when Gerry Adams was asked:- "When are you going to stop robbing the banks?" To which he replied:- "More importantly, you should be asking when are the banks going to stop robbing us?" 

 . . .  and could this blatant daylight robbery take place in Ireland? - You can bet your rootin' tootin' bottom dollar, it can.


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## dewdrop (18 Mar 2013)

I think i heard on radio that Irish Government felt the Cyprus deal was a good one.  How could this be apart from the loss to the depositors it has the prospect of creating uncertaintly in the Euro countries and in a worse scenario a flight once again of deposits from Irish banks.


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## Dr.Debt (18 Mar 2013)

The problems in Cyprus are quite a bit different from anywhere else. 

The banking sector which is huge in comparison to its GDP collapsed due to the Greek Government defaulting on Cypriot bank bonds. Otherwise the fiscal budget is quite well balanced and once the banking sector is sorted out,Cyprus should bounce back very quickly

The banking sector in Cyprus is bloated due to the large amounts of foreign deposits in its banks. This is due to, what used to be known as the "offshore sector" as well as the very controversial Russian controlled money, of dubious origin which is holed up there. Some of the European partners are unwilling to proceed with a bailout unless the Russians also take their medicine. The bank tax is a way at getting at the Russian money. The typical Cypriot citizen is not that well off and locals money accounts for well under 50% of the total.

Once the heat dies down, I think this will be a very good outcome for Cyprus. The banks will be restored to health with a new capital injection of c.5 billion and the economy should recover very quickly. Its appropriate that the Russian money should take a hit. The Russian money was deposited in Cypriot banks. The Cypriot banks loaned it to the Greek Government who then defaulted. So essentially the Russian money is the root of the Cypriot bank crisis in the 1st place and for this reason the feeling is that the owners of this money should play their part in the solution.

As part of this deal the Cypriot Government is required to downsize the size of the Cypriot banking sector to European norms by 2018. The banking sector is currently 8 X GDP and European average is currently 3.5 X GDP. It seems that nobody will be too concerned if the foreign money takes flight after the tax has been levied. The downsizing has to happen in any event. This is quite different to Ireland and other bail out countries.


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## eltorro (18 Mar 2013)

with all countries being in debt where do you think the money will come from to pay for them? and it doesn't really matter anymore where you live since globalization.


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## serotoninsid (18 Mar 2013)

Dr.Debt said:


> The typical Cypriot citizen is not that well off and locals money accounts for well under 50% of the total....Its appropriate that the Russian money should take a hit.


That being the case, isn't Legarde's suggestion that those in the 100K+ category should take the hit @30% - and nobody below 100K should have their life savings stolen!


On another forum, someone working in fx has suggested that there was noticeable activity (buying) in the swiss franc on Friday - that couldn't otherwise be explained.  Sounds like Cyprus suffers from the same cronyism & corruption that is pervasive here in IE...


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## gearoid (18 Mar 2013)

*Cyprus*

I cant see too much difference theoretically between this and our pension levy to be honest. It isn't a new departure but it sets a very worrying precedent for the larger economies. The ECB must ring-fence this deal and say never again.

The Russian angle is interesting as Putin is saying different things to his finance ministry today. The Russian finance ministry think it is a fair deal but Putin is unhappy with the lack of consultation and is considering revoking some of the Russian part of the financial rescue. Maybe this is because he is the real No. 1 on the World Rich List, and he is going to be one of the biggest losers (tongue only slightly in cheek here). 

The other interesting angle is geopolitics. With Syria in turmoil and France/UK considering arming the opposition in Syria, Russia might lose out on direct port access to the Med. Cyprus is being offered another deal by Gazprom in exchange for exploration rights. Gazprom is in many ways a proxy for the Russian state so the EU and Russia are vying for control. Cyprus needs to decide whether to leave the EU and become a Russian satellite or move towards a more transparent and honest banking system.


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## Leper (19 Mar 2013)

I cant believe that some on here are saying that ultimately the blatant robbery of peoples' life savings is a good outcome.  Furthermore, our government saying that this is a fair and equitable deal for the people of Cyprus. 

There is something wrong somewhere when people who squandered their money or kept in under mattresses are in effect being rewarded for their efforts.  Meanwhile, the good living people who saved, scrimped and put their trust in banks (where did we hear this before?) are being screwed.

"Fair and Equitable" were words used by members of the Labour partyregarding talks in Croke Park 2.  Can anybody trust any government now? My advice is to get your savings to Switzerland and do it fast.


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## Jim2007 (19 Mar 2013)

Leper said:


> I cant believe that some on here are saying that ultimately the blatant robbery of peoples' life savings is a good outcome.



As I understand it we're talking about an amount equivalent to 2 years interest on deposits and the alternative would be to see most of their savings wiped out if the bail out does not happen.  That is the reality of their situation.  



Leper said:


> Can anybody trust any government now? My advice is to get your savings to Switzerland and do it fast.



Before you go advising people on where to put their money, it might be an idea to make sure you understand the risks involved!!!  Just for starters our guarantee system is capped at CHF 9B, in reality that means that if things go pear shaped the payout would be a couple of cents in the Franc for the first 50K and nothing there after, so maybe you'd get 2K or 3K back!  Then there is the fact that the Swiss government has a long history of letting banks go to the wall - since I came here 20 years ago, three major banks have gone to the wall without any support for the depositors....


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## theoneill (19 Mar 2013)

When I first heard this news I was in shock, outraged that savers money had been stolen by government. But then after some thought I don't think it's such a bad idea - especially if the deal is modified to mitigate the loss on those under 100k. Given the increase in taxes / USC / cuts that we are endureing, I think I would have gladly handed over 10% of my savings


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## Bronte (19 Mar 2013)

The Irish bailout is looking better and better.


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## dub_nerd (19 Mar 2013)

theoneill said:


> When I first heard this news I was in shock, outraged that savers money had been stolen by government. But then after some thought I don't think it's such a bad idea - especially if the deal is modified to mitigate the loss on those under 100k. Given the increase in taxes / USC / cuts that we are endureing, I think I would have gladly handed over 10% of my savings


 
I think you're confusing two things. The cuts we are experiencing are primarily because we have been, and continue to be, living beyond our means. 

The depositor haircut occurring in Cyprus is purely political because of the amount of Russian money there. Frau Merkel can't tell German taxpayers that they will be bailing out Russian depositors in Cypriot banks. Bondholders are being protected once again -- which presumably mean other European institutions. Little old Cypriot ladies are just collateral damage.


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## theoneill (19 Mar 2013)

I thought the whole problem in Cyprus was the lack of bond holders to take the hit?


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## dub_nerd (19 Mar 2013)

theoneill said:


> I thought the whole problem in Cyprus was the lack of bond holders to take the hit?


 
Sorry, I think you're right. It's still all about haircutting Russians though.  I don't think they'd have hung the little old Cypriot ladies out to dry otherwise.


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## Jim2007 (19 Mar 2013)

dub_nerd said:


> I think you're confusing two things. The cuts we are experiencing are primarily because we have been, and continue to be, living beyond our means.
> 
> The depositor haircut occurring in Cyprus is purely political because of the amount of Russian money there. Frau Merkel can't tell German taxpayers that they will be bailing out Russian depositors in Cypriot banks. Bondholders are being protected once again -- which presumably mean other European institutions. Little old Cypriot ladies are just collateral damage.



From everything I have read the decision was that of the Cypriot government as to how they were going to finance their part of the bail out and they choose this method because there are very few bond holders to burn!!!!


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## ajapale (19 Mar 2013)

*Do Cypriot's pay DIRT tax?*

Do Cypriots pay DIRT tax?


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## dub_nerd (19 Mar 2013)

Jim2007 said:


> From everything I have read the decision was that of the Cypriot government as to how they were going to finance their part of the bail out and they choose this method because there are very few bond holders to burn!!!!


 
Yes, but presumably their options were limited by the size of the bailout offered. I gather they had two options -- the one they chose, and a much more radical restructuring and downsizing of the country's banks which would have seen smaller savers protected by guarantee, but deposits above 100k cut by 30-40%.


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## theresa1 (19 Mar 2013)

ajapale said:


> Do Cypriots pay DIRT tax?




They have a Cyprus Defence Levy of between 10% and 15% from what I can gather.


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## dewdrop (19 Mar 2013)

Is it clear that it was the Cypriot government came up with the idea of taxing deposits rather than the Troika etc.  If this is correct then it is the Cypriot government is to blame for all the unease and if a future bail out is needed in the Eurozone it seems unlikely to me that the EU would suggest such a course in view of the current reaction


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## Jim2007 (19 Mar 2013)

dub_nerd said:


> Yes, but presumably their options were limited by the size of the bailout offered. I gather they had two options -- the one they chose, and a much more radical restructuring and downsizing of the country's banks which would have seen smaller savers protected by guarantee, but deposits above 100k cut by 30-40%.



Yes but at the end of the day they will have to pay for it one way or another.  I guess the government thought they could stick it to the Russian depositors but the follow through let them down...


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## Leper (19 Mar 2013)

Looking at the RTE news tonight, I feel the people of Cyprus are going to fight for their situation unlike like us who seem to accept every unsavoury broadside.


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## Firefly (20 Mar 2013)

Had it not being for the pension reserve fund I'm thinking something similar might have happened here. With this cash gone, we're pretty vulnerable now should we need another bailout..


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## Duke of Marmalade (20 Mar 2013)

firefly said:


> had it not being for the pension reserve fund i'm thinking something similar might have happened here. With this cash gone, we're pretty vulnerable now should we need another bailout..


+1


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## Jim2007 (20 Mar 2013)

Leper said:


> Looking at the RTE news tonight, I feel the people of Cyprus are going to fight for their situation unlike like us who seem to accept every unsavoury broadside.



From what I read this evening, they need to come up with 5.8b of which about 3b would have come from the Russian deposits.  This now will not happen so they are left to fund their entire contribution themselves.  In the mean time the banks remain closed and it is estimated that people probably have enough cash to see them through the weekend, but come Monday...

Only time will tell if it was a smart move or not


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## Dermot (20 Mar 2013)

Originally posted by Jim2007.  "From what I read this evening, they need to come up with 5.8b of which about 3b would have come from the Russian deposits. This now will not happen so they are left to fund their entire contribution themselves." "Only time will tell if it was a smart move or not"

I have a gut feeling that it was not a smart move. The Government in Cyprus could possibly have  upped the tax on the Russian deposits by another 500m and no one would care much. The possibility now is that the natives will bear the brunt of the alternative austerity package with little or no contribution from the absentee Russians.


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## 3CC (20 Mar 2013)

Can someone explain why the Russians are off the hook? Is this based on the assumption that Cyprus will borrow from Russia instead of Europe?

I presume the option to impose a levy only on deposits over €100k is still open to Cyprus (if their parliament agrees to it)?


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## Dermot (20 Mar 2013)

There are too many if's butts and and's to say what will happen.  
Yes the parliament can impose the levy but if they don't it may not turn out to be the best option for the general Cypriot population. 
It is only my opinion and I am not an expert on matters financial. I do not agree with the principle of taxing the deposits under 100k where  the normal guy thought that they were not at risk from anything like levies etc.


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## SeamusCoffey (21 Mar 2013)

Leper said:


> Looking at the RTE news tonight, I feel the people of Cyprus are going to fight for their situation unlike like us who seem to accept every unsavoury broadside.



Plan A involved taxing past earnings (by cutting money on existing deposits)
Plan B involves taxing future earnings (to pay interest on additional loans)

Both are unsavory, but someone has to pay.


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## Importer (21 Mar 2013)

It looks like there will be a new deal shortly

Depositors over 100K will be taxed
The shortfall to be made up by the Russians in a manner yet to be determined and most likely involving some or all of the following, Real Estate, Gas Rights, Bank ownership.


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## dub_nerd (22 Mar 2013)

Bronte said:


> The Irish bailout is looking better and better.


 
Looking at Cyprus today, I think I have to agree with this. Cyprus is really looking into the abyss. Ironically, after taking a stand against the troika bailout proposals, they may now have to go back to plan A and beg for it back. The alternative is increasingly looking like closing their banks with total loss for all depositors, and figuring out some way to print a new currency.


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## Jim2007 (22 Mar 2013)

dub_nerd said:


> The alternative is increasingly looking like closing their banks with total loss for all depositors, and figuring out some way to print a new currency.



Printing a new currency is not a possibility - no one would be willing to accept it.  Event it were issued people in Cyprus would continue to use the Euro, the dollar or perhaps Sterling.


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## dub_nerd (23 Mar 2013)

Jim2007 said:


> Printing a new currency is not a possibility - no one would be willing to accept it. Event it were issued people in Cyprus would continue to use the Euro, the dollar or perhaps Sterling.


 
When you print a new currency you make it illegal not to accept it, impose exchange controls on others (i.e. the euro) and make all government payments (public service pay, state payments) in the new currency to get it into circulation. And, of course, any money held in back accounts turns into the new currency overnight. You'll have a currency black market too, but that's life.


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## Jim2007 (23 Mar 2013)

dub_nerd said:


> When you print a new currency you make it illegal not to accept it, impose exchange controls on others (i.e. the euro) and make all government payments (public service pay, state payments) in the new currency to get it into circulation. And, of course, any money held in back accounts turns into the new currency overnight. You'll have a currency black market too, but that's life.



First of all under EU rules covering the free movement of capital, Cyprus has very limited authority to do any of what you are suggesting...  secondly they can't even get a levy through parliament, let alone try and go for a currency change.  It's a non started.


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## mickyha (23 Mar 2013)

Hi, 
Yes there is a 5% dirt rate in Cyprus agreed to by the ECB/IMF Years ago,which rich Russians take a huge advantage of.
Now the ECB wants something back for allowing these rich Russian Bond Holders away with such a low dirt for so long.
What's wrong with that???
I only feel sorry for the ordinary worker like myself getting caught up in the billions making millions scenario over in Cyprus. 
Just like exactly what's happening to all of us in Europe??


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## Duke of Marmalade (25 Mar 2013)

What a week!

The Lessons form Cyprus are really quite different than they appeared when I opened this thread.

1. The 100k deposits are safer than ever.

2. Over 100k on the other hand is fair game.

3. The policy of spreading your deposits around bekow 100k is totally sound.

4. Deposits over 100k should seek out best security, though the possibility that all banks, even good ones, could have been targetted is still scary. Personally, the Post Office is best for deposits in excess of 100k.

5. Nobody is ever going to leave or be pushed out of the Euro.

6.  The Euro will survive.

7. Kenny is an idiot. He welcomed the original announcement Ok, he is EU president and he has to support the cause, but couldn't he have used his Paddy's Day jamborees to conveniently forget to comment.


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## The Ghoul (25 Mar 2013)

Duke of Marmalade said:


> 1. The 100k deposits are safer than ever.
> 
> 2. Over 100k on the other hand is fair game.
> 
> 3. The policy of spreading your deposits around below 100k is totally sound.


In no.3 above did you mean to say above instead of below? If deposits below 100k are safer than ever then there is no need to spread them around? 

If someone has, say, 199k split equally between two Cypriot banks affected by this deal are they ok or are they hit?


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## dub_nerd (25 Mar 2013)

Jim2007 said:


> First of all under EU rules covering the free movement of capital, Cyprus has very limited authority to do any of what you are suggesting... secondly they can't even get a levy through parliament, let alone try and go for a currency change. It's a non started.


 
Sure. The obvious corollary is that if Cyprus were to leave the eurozone it would also leave the EU. I think most people speculating about the undefined process for leaving the euro over the last couple of years assume that it probably means leaving the EU also. We're talking about an Armageddon scenario for Cyprus. Fortunately it looks like it's not going to come to that. At the same time, Cyprus has found (as has Ireland) that you cannot dictate terms to the big boys in the EU.


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## Pottynut (26 Mar 2013)

Duke of M
You mention An Post as a better bet than than the banks maybe, but aren't hard earned(and pretaxed) savings there just as vulnerable to any Government (but especially this one) who might be excited at the new-found prospect of mugging ("a la Cypress") of ordinary people to pay off Govt. debt?


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## Duke of Marmalade (26 Mar 2013)

Pottynut said:


> Duke of M
> You mention An Post as a better bet than than the banks maybe, but aren't hard earned(and pretaxed) savings there just as vulnerable to any Government (but especially this one) who might be excited at the new-found prospect of mugging ("a la Cypress") of ordinary people to pay off Govt. debt?


Nothing is certain in this life or this crisis other than death and taxes. But try to envisage the situation where AP savings are raided. My judgement is that this is the absolutely last target from a political perspective. It doesn't amount to a whole lot of dosh so if the Government are being forced to that well, the game is real and truly up. IMHO AP savings are even safer than German deposits, for example. I think a scenario where Ireland defaults on its ECB commitments and Germany retaliates by hitting Irish residents' deposits, whilst extremely unlikely, is more likely than the Governement being forced to raid AP savings.

But I could be wrong


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## jman0war (26 Mar 2013)

Pottynut said:


> the new-found prospect of mugging ("a la Cypress") of ordinary people to pay off Govt. debt?


 Is that really what is going on here?
I got the feeling that what's happening in Cypress is closer to what _should_ occur when a bank goes bust.
Deposit protection insurance pays out to the level of protection, the rest loose out.

I didn't read anything about it being to pay off government deficit ??


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## Pottynut (26 Mar 2013)

Well perhaps that's not what's happening here....... yet! The Troika's green strongarm heavies (a.ka. "The Government) have found plenty of other ways to mug ordinary citizens without recourse to their hard earned savings. 

But Cypress sets the precedent for the next time the proverbial hits the proverbial (as it surely will) and with nothing left on the lower branches An Post and ordinary Bank deposits are starting to look more and more like the next low-hanging fruit, insurance or no insurance.


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## itsallwrong (26 Mar 2013)

Will the forced at gunpoint robbing of deposit accounts trigger fear of all depositors in Cyprus?
Would that lead to a possible run on the banks?


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## jman0war (27 Mar 2013)

Thank god for the Troika.
Keeping ATMS's filled with cash here, Greece and now Cypress.
What were the alternatives?
Cypress tried to do a deal with Russia but got turned down.

I suppose we should have just let their banks collapse and bring their entire economy with it.


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## Pottynut (27 Mar 2013)

Well true... thank God for them.. such lovely people aren't they... the Troika I mean; how in the name of God could we keep paying them back for the money they keep lending us if they didn't keep lending it to us... hell, we wouldn't have been able to pay back those lovely bankers and bondholders the money they gambled with way back when! Thank God we didn't do that because if we did they wouldn't lend us anymore money would they. How much would we have saved though I wonder?

Of course, they've all been telling us as well that Cypress was different....although I seem to remember that we were suppose to be a "special" case, not like the rest and we should be treated in a special way. 

From what I read this morning (irishtimes.com/news/politics/german-finance-minister-warns-against-radical-change-to-irish-bailout-terms-1.1339966)  someone with what looks more and more like an old agenda doesn't think we're too different.....and he seems to be getting his own way a lot! 

I reckon we're not grovelling hard enough yet!


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## jman0war (27 Mar 2013)

Pottynut said:


> Well true... thank God for them.. such lovely people aren't they... the Troika I mean; how in the name of God could we keep paying them back for the money they keep lending us if they didn't keep lending it to us... hell, we wouldn't have been able to pay back those lovely bankers and bondholders the money they gambled with way back when! Thank God we didn't do that because if we did they wouldn't lend us anymore money would they. How much would we have saved though I wonder


Right, so Eurozone banks should have automatically _presumed_ irish banks were reckless and not creditworthy.

Never you mind what the _Irish Regulator_, (you know the one charged with overseeing those banks), had to say.

And i'm sure the Irish public for their part, would have been just grand with Eurozone banks refusing them access to credit based upon... what exactly?


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## Pottynut (27 Mar 2013)

What have the Irish public ("us" I mean), ever had to do with anything in this country? We're "grand" with whatever we're told is "grand" aren't we? And we generally think what we're told to think don't we? Aren't we the best and the brightest in the class after all....we must be , cos they keep telling us that anyway?God, we can do tricks as well!

Things are shaping us as we speak -  irishtimes.com/news/politics/germany-s-rethink-on-just-where-the-blame-lies-for-the-irish-bank-bailout-1.1339854


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## jman0war (27 Mar 2013)

An article written from an irish perspective for an irish audience. Quelle surprise.
But how can you blame Germany when they aren't even our biggest creditor?



> Central Bank statistics show that euro zone investment to pre-crisis Ireland came in fourth place, behind the UK, the US and other offshore sources. Was there any way to throttle the flow of foreign capital into boom-time Ireland, to stop foreign banks lending so much into the bubble?
> 
> “I think it’s fair to say that if anyone in the treasury suggested intervening to limit capital flows to Irish banks in the boom, they would have been taken out and shot,” says Michael Somers.


 
Plus it was German taxpayers that picked up the tab (500 million) on the losses of an irish subsidary operating on our shores - Depfa / Hypo Real Estate.


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## Pottynut (27 Mar 2013)

jman0war said:


> An article written from an irish perspective for an irish audience.



Thats what I said! 

All we need now is for Wolfgang to tell Michael what his next circus trick has to be and we're off again! But we should be "grand" with that I think! 

When does Arthur's day come round again?


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## jman0war (27 Mar 2013)

Yeah well, we've pretty well proved we can't be trusted to manage our own affairs.


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## Pottynut (27 Mar 2013)

jman0war said:


> Yeah well, we've pretty well proved we can't be trusted to manage our own affairs.



Could we ever? Easter was a right waste of time wasn't it? Still, we'll feel much better kissing German leather for another hundred years  

I've had enough now !


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## Purple (7 Apr 2013)

Pottynut said:


> Well true... thank God for them.. such lovely people aren't they... the Troika I mean; how in the name of God could we keep paying them back for the money they keep lending us if they didn't keep lending it to us... hell, we wouldn't have been able to pay back those lovely bankers and bondholders the money they gambled with way back when! Thank God we didn't do that because if we did they wouldn't lend us anymore money would they. How much would we have saved though I wonder?



Do you know who the bond holders are?
Do you know what would happen to Irish banks, pensions, credit unions, sports clubs, charities, businesses, households etc if we didn't get a bail out?
Do you know what would have happened to public services and state employees?

The People against Logic crowd, former senator TD apologists for certain rogue bankers, bankrupt builders in pink and former terrorists with economic policies that don't even fly in Cuba any more think we should have given the two fingers to the EU/IMF guys but most people who share the other (real) view of reality know that this is the best option available to us.


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## burmo (7 Apr 2013)

Question, was there a levy put on current accounts over 100k or just savings accounts?


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## Firefly (8 Apr 2013)

At a personal level, I think one of the lessons learned from Cyrpus is to make sure there is some cash held at home (which brings its own problems).


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## Duke of Marmalade (15 Apr 2013)

This article gives the views of two of Germany's five "wise men". These guys seem important as they appear to directly advise the German government on economic matters. 

They conclude that the deposit raid in Cyprus was wrong but they have come up with a proposal which to me seems difficult to argue against. The following quote is particularly on the button:





> Prof Bofinger told Spiegel Magazine that it was a mistake to target deposit holders in banks, the formula used in the EU-IMF Troika bail-out for Cyprus where those with savings above €100,000 at Laiki and Bank of Cyprus face huge losses. “The canny rich in southern Europe just shift their money to banks in Northern Europe to escape seizure,”


 
Faced with evidence that Club Med (and presumably Irish) citizens are in fact wealthier than their German counterparts they propose that the template for future bail outs should include a wealth tax/confiscation in the affected country.

This seems to make an awful lot of sense in an Irish context anyway. A simple narrative is as follows. We borrowed from German banks and transferred great wealth into a minority of our citizens' coffers based on totally false evaluations of the value of their land and property. The key point is that all that borrowed dosh is by and large still here making some people windfall tycoons. Their wealth was created from bogus claims (not blaming them of course) and should be fair game in contributing to paying back those loans.

Ideally, any wealth tax/confiscation should be targeted at the bogus windfalls, though this may prove constitutionally difficult.

Another interesting quote from the article:


> Critics have long argued that North Europe is equally to “blame” for the crisis since it flooded the South with cheap credit


This rather smacks of blaming the barman for his customers' loutish behaviour.


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