Cyprus banks add security in preparation for reopening

posted at 11:21 am on March 27, 2013 by Ed Morrissey

Bank customers in Cyprus will finally get access to their money starting tomorrow, but they’ll see more than just cash when they drop in for a visit.  With concerns about bank runs and unrest running high, the branch offices will now have more security to control the crowds expected to show up at the teller windows across the island nation:

Cyprus will impose limits on money transfers and dispatch extra security guards to prepare for Thursday’s reopening of the banks, which have been shut for almost two weeks to avoid a run during the country’s financial drama.

A banking official said Wednesday that new controls will include restrictions on large-scale transfers from the country’s two largest and most troubled lenders, Bank of Cyprus and Laiki. Both are being restructured and big depositors face losses of as much as 40 percent. …

Meanwhile, private security firm G4S will install 180 of its staff at bank branches across the island to keep a lid on possible trouble, said John Argyrou, managing director of the firm’s Cypriot arm.

“Our presence there will be for the comfort of both bank staff and clients, but police will also be present,” he said.

The cash limits on withdrawals aren’t terribly onerous, and won’t last too long:

But authorities are looking to increase the daily withdrawal limit from 100 euros to 300 euros (from $130 to $386), while payroll payments will be allowed in order to help businesses, which saw a huge slump as people cut down on their spending amid the uncertainty swirling about the banks.

The restrictions will be kept for at least a week until the situation stabilizes, said the official, who spoke only on condition of anonymity because the measures have yet to be officially announced.

That’s about the same level as ATM limits on cash withdrawals and advances, but applied at the teller window.  The banks want to prevent customers from yanking out all of their cash at once, which would crash what’s left of the banking system — an impulse that the terms of the bailout stoked.  The money taken by Cyprus for the bailout will already be gone when the banks reopen, so a run won’t protect any assets.

At least that’s what Arghyrou hopes:

John Arghyrou, managing director of the Cyprus business for G4S, said its 750 employees have been working through the night, going out to replenish cash machines with police guard. Licensing rules prevented the firm from bringing in extra staff to handle the unprecedented workload.

“Demand is greater than we can provide… We haven’t closed since the crisis started,” he told Reuters. “I’ve never seen anything like it in terms of what is going on from a security perspective. I would say the workload has quadrupled because the whole system has changed.”

Arghyrou would not comment on whether more cash has been flown in to replenish the vaults so that banks are ready to open on Thursday, but said he did not expect a bank run.

“People have had time to digest the agreement so maybe there won’t be that scenario whereby people run to the banks to withdraw,” he said.

“I don’t see people panicking, I see people worrying about what the next day will hold for them, whether the next day they will have a job. I see people having a lot of questions and waiting for answers.”

World markets are also waiting to get some answers:

Sentiment in the world’s markets remained fragile Wednesday as investors awaited the details of the capital controls Cyprus is expected to introduce when its banks reopen.

The country’s banks, which have been closed for the best part of two weeks, are due to start doing business again on Thursday following an international bailout agreement that’s caused jitters around the world — but particularly in Europe — over the safety of deposits. Under the terms of the bailout, Cyprus is closing its second-largest bank Laiki and raiding big deposits in it, as well as in Bank of Cyprus.

“Markets are eagerly waiting to read the Cypriot government’s capital control measures,” said Alastair McCaig, market analyst at IG. “As capital control measures are still in place for Icelandic depositors following their banking collapse five years ago, it does call into question the Cypriot government’s insistence that these will only be ‘temporary’.”

In Europe, the FTSE 100 index of leading British shares was down 0.5 percent at 6,366 while Germany’s DAX fell 0.8 percent. The CAC-40 in France was 1.4 percent lower at 3,698.

Tomorrow should provide a lot of those answers.  If Cypriots have absorbed the deal and have any confidence in the banking sector, they’ll at least keep their cash at or below guarantee levels in their accounts.  If not, well … those banks are going to need a lot more security than what they’ve added.

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The Cypriots may not have guns, but they have matches and gasoline.

slickwillie2001 on March 27, 2013 at 11:24 AM

Ed, you might be interested to give this a look too: http://www.zerohedge.com/news/2013-03-27/furious-cyprus-begins-investigating-who-breached-capital-controls

It appears most of the Russian mob was able to get their money out with no problems. Wasn’t the whole point of this Cyprus farce so the EU could seize the Russians’ dirty money in the first place? It looks increasingly like the EU trashed Cyprus’ economy for no reason at all now.

Doomberg on March 27, 2013 at 11:25 AM

Excellent ! … Wouldn’t want a “bank robbery” on the first day of reopening, right?
Going the extra mile, for the patrons.

listens2glenn on March 27, 2013 at 11:28 AM

haha, yeah. Couldn’t happen here though.

/sarc … ?

Timin203 on March 27, 2013 at 11:32 AM

It looks increasingly like the EU trashed Cyprus’ economy for no reason at all now.

Doomberg on March 27, 2013 at 11:25 AM

.
I think it was a “trial balloon” to see what the public response would be, internationally.
Cyprus was “starting small”, and if the public international response is lethargic enough, they’ll go for something bigger.

listens2glenn on March 27, 2013 at 11:33 AM

The money taken by Cyprus for the bailout will already be gone when the banks reopen, so a run won’t protect any assets.

The fear shouldn’t be about those who have already had their assets stolen, it is about those fearful that the threshold for theft gets lowered next time.

My prediction is that it will be ugly.

Happy Nomad on March 27, 2013 at 11:33 AM

The Cypriots may not have guns, but they have matches and gasoline.

slickwillie2001 on March 27, 2013 at 11:24 AMThe Cypriots may not have guns, but they have matches and gasoline.

slickwillie2001 on March 27, 2013 at 11:24 AM

They should burn every bank and government building to the ground.

It would be a shame if every member of the EU Parliament’s home addresses were published, complete with directions and aerial photos.

tom daschle concerned on March 27, 2013 at 11:34 AM

“Our presence there will be for the comfort of both bank staff and clients, but police will also be present,” he said.

Comfort of the clients? Yeah, I’m always comforted when I see hired guns making sure I don’t launch myself at the SOBs that have denied me access to my money for two weeks.

Happy Nomad on March 27, 2013 at 11:35 AM

You know, I always rolled my eyes at my grandfather when he used to go on about not trusting the banks and always keeping cash and physical assets in your house. I figured things had changed since his parents lost everything during the great depression… Hmmm…

Timin203 on March 27, 2013 at 11:35 AM

I was in Argentina shortly after they devalued their peso to the dollar. All of the people in the know already had their money out.

The bank buildings in Buenos Aires were covered in heavy corrugated steel from the ground up 15 or 20 feet.

moo on March 27, 2013 at 11:37 AM

The fear shouldn’t be about those who have already had their assets stolen, it is about those fearful that the threshold for theft gets lowered next time.

My prediction is that it will be ugly.

Happy Nomad on March 27, 2013 at 11:33 AM

Yeah, I think people aren’t really grasping the whole idea of a bank run — with fractional reserve banking even the healthiest banks have only a small fraction of their deposits available in cash to redeem. It doesn’t take much to start a bank run, it could happen at any time. All it takes is a small per centage of people losing faith in the banking system and withdrawing their cash which has a cascade affect. If people see that the banks have no more cash on hand, they’ll try to withdraw their money, figure out they cant, and thats what leads to the panic. It only takes a few thousand people to set off a run (especially in a country as small as cyprus)

Timin203 on March 27, 2013 at 11:39 AM

Who would have thought that Butch and Sundance were disguised as a government.

Rovin on March 27, 2013 at 11:43 AM

Yeah, I think people aren’t really grasping the whole idea of a bank run — with fractional reserve banking even the healthiest banks have only a small fraction of their deposits available in cash to redeem. It doesn’t take much to start a bank run, it could happen at any time. All it takes is a small per centage of people losing faith in the banking system and withdrawing their cash which has a cascade affect. If people see that the banks have no more cash on hand, they’ll try to withdraw their money, figure out they cant, and thats what leads to the panic. It only takes a few thousand people to set off a run (especially in a country as small as cyprus)

Timin203 on March 27, 2013 at 11:39 AM

The real danger is a systemic run across the EU. I’m already reading articles describing what the writers have collectively coin a “bank jog” where the smarter investors in the know are quietly getting their money out. You don’t have a full stampede going on yet but the smarter small depositors and investors are getting out while the getting’s good.

Wonder how long we have before this hits the US. Will we last until the bank runs start in Germany? Longer?

Doomberg on March 27, 2013 at 11:44 AM

I think it was a “trial balloon” to see what the public response would be, internationally.
Cyprus was “starting small”, and if the public international response is lethargic enough, they’ll go for something bigger.

listens2glenn on March 27, 2013 at 11:33 AM

I think I agree with this as well. Given that there no real, major riots in Cyprus I would say the EU’s experiment was a success. Next up will probably be Spain or Italy. I would not be surprised to see continental capital controls across all of Western Europe by 2014.

Doomberg on March 27, 2013 at 11:46 AM

The real danger is a systemic run across the EU. I’m already reading articles describing what the writers have collectively coin a “bank jog” where the smarter investors in the know are quietly getting their money out. You don’t have a full stampede going on yet but the smarter small depositors and investors are getting out while the getting’s good.

Wonder how long we have before this hits the US. Will we last until the bank runs start in Germany? Longer?

Doomberg on March 27, 2013 at 11:44 AM

Yeah, I didn’t mean to imply it would be localized to Cyprus. The run will probably start there, but the panic of not being able to get your money will spread across Europe and probably eventually the US. The thing is that the EU does have the ability to whirl up the printing presses and recapitalize banks (with devalued currency, but clearly people don’t understand how that works), as does the US if need be. Could they keep up with a run? Doubtful, but they could possibly slow it down enough to allow us to limp along like this indefinitely.

Timin203 on March 27, 2013 at 11:47 AM

Has Barry approved loaning Cypress some of our armed drones targeting depositors should things get too far out of hand?

hawkeye54 on March 27, 2013 at 11:49 AM

They should burn every bank and government building to the ground.

The buildings aren’t the problem, and this would only give some short term satisfaction.

The REAL culprits are the ones who operate inside the banks and government buildings.

hawkeye54 on March 27, 2013 at 11:52 AM

Wonder how long we have before this hits the US. Will we last until the bank runs start in Germany? Longer?

Doomberg on March 27, 2013 at 11:44 AM

In this electronic information age? It could hit this country in seconds, NOT DAYS.

Rovin on March 27, 2013 at 11:53 AM

Ed – sometimes I wonder if the Hot Air headline for the sinking of the Titanic would have been:

“Ocean liner bumps into ice; some passengers reported to have wet feet”

I can understand your reluctance to directly link to ZeroHedge.com because of the wide variety of opinions presented.

They do, however, an excellent job of aggregating reporting from a host of reliable news sources with direct links:

http://www.spiegel.de/international/europe/cypriot-parliament-investigates-government-after-dubious-transactions-a-891168.html

And you might consider breaking out of the MSM hive mindset by including information the MSM wants to ignore (from the Spiegel article):

The central bank now stands accused of not doing enough to control the movement of capital. Transfers for humanitarian aid were permitted which, while certainly an acceptable exception, opened a loophole for abuse. Many are also furious that the bank allowed “special payments,” the definition of which was never adequately established.

The Cypriot central bank has defended itself by saying that it was impossible to completely prevent all transactions, despite the account freeze. Much of the money was withdrawn from overseas, where Cyprus had no authority. Branches of Cypriot banks in non-euro-zone countries such as Russia and Britain do not answer to the European Central Bank. Their liquidity is controlled by central banks in those countries.

Such a defense is nothing less than a voluntary admission of impotence. Holders of smaller savings accounts have been unable to access much of their money for almost two weeks, companies have been unable to pay their suppliers and across the country people are concerned that their salaries will not arrive on schedule on the first of the month. Meanwhile, rich businesspeople and those with connections overseas have been able to transfer their money into foreign accounts.

.
Or perhaps you don’t feel this information is germane to why the average citizen of Cyprus might feel they should also be able to get ALL of their money out of the banks in Cyprus?

PolAgnostic on March 27, 2013 at 11:55 AM

They might be successful in stopping people from taking their money out. But what moron would put any more IN? Sounds to me like they’ve merely created a slow-motion crash. Without depositors they’re going to find that Margaret Thatcher was right… “the problem with socialism is that eventually you run out of other people’s money”.

Murf76 on March 27, 2013 at 11:56 AM

The REAL culprits are the ones who operate inside the banks and government buildings.

hawkeye54 on March 27, 2013 at 11:52 AM

The real culprits are the ones who meet in Brussels.

Mark my words. The Euro isn’t going to last much longer. When things get worse, say Greece defaults, then it is every rat for himself off the sinking SS Euro.

Happy Nomad on March 27, 2013 at 11:57 AM

In this electronic information age? It could hit this country in seconds, NOT DAYS.

Rovin on March 27, 2013 at 11:53 AM

Yeah, I understand that. I’m more wondering when the US federal government will actually make the decision to actually do this. I would be surprised if they tried to wait until the EU completely collapses, as by then I would expect the panic to be hitting the US.

Doomberg on March 27, 2013 at 12:00 PM

The cash limits on withdrawals aren’t terribly onerous

You’re kidding with this, right? You’d be fine with going to your bank tomorrow and, regardless of your need, the bank would only let you have $400 of your own money? This is theft on a grand scale and should not be minimized by saying, “Hey, that’s not so bad. They could have taken all your money, so be grateful.”

Hucklebuck on March 27, 2013 at 12:03 PM

The Euro isn’t going to last much longer. When things get worse, say Greece defaults, then it is every rat for himself off the sinking SS Euro.

I never thought the Euro was a good idea in the first place. Too many differences and inequality for centuries which continue to linger on and can never be cured by a single European currency, in my opinion.

hawkeye54 on March 27, 2013 at 12:13 PM

Cyprus won’t recover now.

They just killed every bit of confidence that depositors have in the banking system. Without a robust banking system that depositors believe in – Western Civilization isn’t capable of sustaining itself.

My Grandfather went to the bank at the start of the Great Depression. They informed him that ALL of his life savings was “lost”.

That man never, ever put a dollar in a bank again until the day he died … in the 1990′s.

HondaV65 on March 27, 2013 at 12:14 PM

Yeah, I understand that. I’m more wondering when the US federal government will actually make the decision to actually do this. I would be surprised if they tried to wait until the EU completely collapses, as by then I would expect the panic to be hitting the US.

Dude, Barry’s a leader, not a follower. It’s on him to set the example for Europe when it comes to our nation’s financial panic and collapse.

hawkeye54 on March 27, 2013 at 12:16 PM

Doomberg on March 27, 2013 at 11:25 AM

And how could that happen without collusion? The banks were supposed to be SHUT.

Also I find any idea of capital controls onerous.

Your money is not safe in any bank. Unless you’re special friends with someone in high places or are willing to send a few friends over for a conversation. YouknowhatIMean?

dogsoldier on March 27, 2013 at 12:27 PM

Ed, you might be interested to give this a look too: http://www.zerohedge.com/news/2013-03-27/furious-cyprus-begins-investigating-who-breached-capital-controls

It appears most of the Russian mob was able to get their money out with no problems. Wasn’t the whole point of this Cyprus farce so the EU could seize the Russians’ dirty money in the first place? It looks increasingly like the EU trashed Cyprus’ economy for no reason at all now.

Doomberg on March 27, 2013 at 11:25 AM

The Russian Mafia would never have paid informants, or even made-members in the local government, would they? Naah.

slickwillie2001 on March 27, 2013 at 12:28 PM

That man never, ever put a dollar in a bank again until the day he died … in the 1990′s.

I was chatting with a Greek/Cypriot yesterday, she has family there and they are planning to pull out their money as soon as possible. There was much cussing about the EU and politicians.

flmom on March 27, 2013 at 12:30 PM

Anyone at this point who keeps their savings in a bank is a fool.

This is clearly a trial balloon. If this goes down without Cypriots burning down government buildings and displaying the heads of the Banksters on pikes, the EU is going to do this everywhere.

Don’t cry for any bank depositors in PIIGS banks, they should not only see this coming they should EXPECT it.

And you know that bank account and 401K/IRA seizures are what the American left have in mind for “solving” the debt crisis in America once it’s forced to a head on them.

Remember, people, the Looters outnumber you. See Election 2012. For better or for worse, we’re a “democracy” now, there are no restraints on government or what voters can vote for, even if it is outright THEFT of your assets.

wildcat72 on March 27, 2013 at 12:37 PM

The example the world should have followed was Iceland’s. Instead of bailing out banks, the Iceland government ARRESTED the Banksters and threw them into prison. Their economy is in far better shape now than ours or Europe’s.

wildcat72 on March 27, 2013 at 12:39 PM

Dude, Barry’s a leader, not a follower. It’s on him to set the example for Europe when it comes to our nation’s financial panic and collapse.

hawkeye54 on March 27, 2013 at 12:16 PM

Our illustrious god-king Hussein couldn’t lead a horse from a burning barn. It’d be too much work. And if he did make the attempt, he’d immediately need an expensive Vacay.

wildcat72 on March 27, 2013 at 12:40 PM

I never thought the Euro was a good idea in the first place. Too many differences and inequality for centuries which continue to linger on and can never be cured by a single European currency, in my opinion.

hawkeye54 on March 27, 2013 at 12:13 PM

The only way such a thing would work would be if it were a currency union between equals. IE: first world producer countries. Not corrupt socialist welfare ghettos. A currency union amongst the UK, Germany, and France might have worked. Including lazy, socialist Looter dominated nations like Spain, Italy, Greece, etc doomed this venture from the start.

The reason why they did it was not based on whether it would work or not but based on grabbing enormous power and forcing all those nations into a pan-European state.

wildcat72 on March 27, 2013 at 12:43 PM

I never thought the Euro was a good idea in the first place. Too many differences and inequality for centuries which continue to linger on and can never be cured by a single European currency, in my opinion.

hawkeye54 on March 27, 2013 at 12:13 PM

The idea of a common currency is fine on paper but if European unity were that easy, it would have been done centuries ago (with a footnote for German and Russian ideas about how to unify).

Where the Euro went wrong was that it was enacted in typical European fashion. They made up all sorts of rules to protect the Euro including stringent requirements for joining the Eurozone. After which they immediately ignored the rules and admited nations who did not meet the requirements. In financial terms they took on bad debt. When nations fell out of the Euro standards discrepancies were ignored until the whole house of cards began to fall.

Happy Nomad on March 27, 2013 at 12:46 PM

Yeah, I think people aren’t really grasping the whole idea of a bank run — with fractional reserve banking even the healthiest banks have only a small fraction of their deposits available in cash to redeem.

Timin203 on March 27, 2013 at 11:39 AM

Which is interesting, since It’s A Wonderful Life has a pretty simple explanation of that concept about halfway in.

GWB on March 27, 2013 at 12:47 PM

Our illustrious god-king Hussein couldn’t lead a horse

wildcat72 on March 27, 2013 at 12:40 PM

That’s not a very nice way of describing our First Lady. ;0 Besides, Mooch is her own horse.

Happy Nomad on March 27, 2013 at 12:50 PM

Which is interesting, since It’s A Wonderful Life has a pretty simple explanation of that concept about halfway in.

GWB on March 27, 2013 at 12:47 PM

Old Man Potter (aka greedy banker) caused it? ;0

Happy Nomad on March 27, 2013 at 12:51 PM

That’s not a very nice way of describing our First Lady. ;0 Besides, Mooch is her own horse.

Happy Nomad on March 27, 2013 at 12:50 PM

Mooch isn’t a horse. Those are animals that serve a purpose beyond being a zoo exhibit…

wildcat72 on March 27, 2013 at 12:54 PM

I will be amazed if there is 1/10 todays deposits in those ‘banks’ a month after the government lets them reopen. I figure banking on Cyprus is done for a decade or so if not forever.

JIMV on March 27, 2013 at 1:06 PM

Our illustrious god-king Hussein couldn’t lead a horse from a burning barn. It’d be too much work. And if he did make the attempt, he’d immediately need an expensive Vacay.

Ya got that right. Barry enjoys the power, pomp and circumstances of being president but not the actual work and leadership needed. For that he relies on his mentors and advisers on what to do, say and think, so he can have his mind free to dwell on the next round of golf, making his NCAA bracket choices, vacay, photo op and appearance on just about any TV show he can invite himself to be on.

hawkeye54 on March 27, 2013 at 1:20 PM

That man never, ever put a dollar in a bank again until the day he died … in the 1990′s.

HondaV65 on March 27, 2013 at 12:14 PM

My grandfather, who grew up during the depression era, is exactly the same way. I’ve been converting my assets elsewhere since 2009 or so.

Yeah, I think people aren’t really grasping the whole idea of a bank run — with fractional reserve banking even the healthiest banks have only a small fraction of their deposits available in cash to redeem.

Timin203 on March 27, 2013 at 11:39 AM

Normalcy bias. “It can’t happen here!” There’s also a political/psychological element as well as most average liberals won’t admit it for fear of being forced to admit their Messiah is a failure.

And how could that happen without collusion? The banks were supposed to be SHUT.

Also I find any idea of capital controls onerous.

Your money is not safe in any bank. Unless you’re special friends with someone in high places or are willing to send a few friends over for a conversation. YouknowhatIMean?

dogsoldier on March 27, 2013 at 12:27 PM

There is unquestionably collusion. There was at least involvement from the Cypriot government and probably also involvement from the EU itself.

And I agree about the safety of the banks. No bank, including US banks, should be considered safe after the Cyprus crisis because of the lack of riots. Western leaders will (correctly) conclude they can get away with it here.

Doomberg on March 27, 2013 at 1:23 PM

And I agree about the safety of the banks. No bank, including US banks, should be considered safe after the Cyprus crisis because of the lack of riots. Western leaders will (correctly) conclude they can get away with it here.

Doomberg on March 27, 2013 at 1:23 PM

They are not safe. Bear in mind that 100k Euro cutoff was arbitrary. They could just as easily set it to 50. Don’t get the idea they wont.

Like HondaV65 I had a grandfather who lived through the depression. He wouldn’t put money in bank either.

dogsoldier on March 27, 2013 at 1:38 PM

Didn’t Andrew Ross Sorkin tell us not to worry because Cyprus is small, and the situation there was unique?
///

Sir Napsalot on March 27, 2013 at 2:29 PM

From what I sent out to my email list today:

4) Just for giggles. Greece [remember Greece?] has had its stock market fall 20% in the last month and has 60% youth unemployment. Spain, which announced that its economic growth was officially predicted to be negative yesterday, announced today that its budget deficit was going to a lot bigger than admitted before. Slovenia’s bond yields have been skyrocketing. As has Spain, Italy, and Portugal. [Bonds are a fixed rate loan to the country or company that issues them. Higher bond yields mean that the bond is riskier to be paid back and they have to offer higher interest to convince people to take the risk of loaning them money.] It is being noted, however, that the next country to have its banks looted may be Luxembourg. It is a low-tax haven that really pisses off the rest of the EU, has a huge international banking sector, and a lot of depositor money to steal. As far as I know, they are not in any real financial trouble; but the fact that it can be mentioned as a target because it has money to steal says something about the mind set of the depositor class. The Luxembourg Foreign Minister today said, “Germany does not have the right to decide on the business model for other countries in the EU. It must not be the case that under the cover of financially technical issues other countries are choked.”. That is direct defiance of Merkel, and must be punished by the EU. [There is a certain amount of sarc in that last sentence, but not 100%.]

5) Apparently, a branch of the Bank of Cyprus will reopen in Athens. If I was a Cypriot business owner in Nicosia; I would be having my cousin Spiros in Athens pull my money out for me, and getting the Euros out of southern Europe as a start. Even if Spiros is a crook, the Cypriot business owner has lost nothing, because his money is worthless on Cyprus.

6) Credit Suisse is a really big, and really stable Swiss bank. As in it is one of the places Europeans are trying desperately to get their money into. As in they are, like the German bonds I talked about yesterday, CHARGING interest on money deposited. This is not good:

Credit Suisse:

…Capital controls are being imposed as part of the [Cyprus] deal. While this is legal according to the Treaty on the Functioning of the European Union (TFEU Art. 63, 65 and 66), it creates a situation in which a Cypriot euro is not equal to a euro of any other member country from an economic perspective. In fact, while euro bank notes in Cyprus are still worth the same amount as in other countries, in a market for euro deposits, a euro in a Cypriot bank account would now most likely would not be trading at par with other member states.

The Eurozone and the Euro are now functionally broken by the market. This is the first big crack, as a result of the EU bank account seizure. The whole concept of the Euro was to create a seamless market for the free flow of capital. Not possible now with the capital controls and a coming bank run.

I will also note that Italy was directly threatened by the EU with bank account seizures and it was noted that there is enough in Italian bank accounts to bail out the entire country. Italy has a caretaker PM, Monte, who was appointed by the EU and not elected. They have not formed a government after the recent election; but the leading party with a plurality is anti-EU and Euro led by a stand up comedian named Beppe Grillo. The next party is led by Bertuscloni [sp?] who is on trial for corruption. Monte has no loyalty to Italians over the EU and may make a move for them soon.

Subotai Bahadur on March 27, 2013 at 3:20 PM

They are not safe. Bear in mind that 100k Euro cutoff was arbitrary. They could just as easily set it to 50. Don’t get the idea they wont.

dogsoldier on March 27, 2013 at 1:38 PM

The 100K euro cutoff wasn’t arbitrary. That was the amount that the Gov’t of Cyprus had agreed to guarantee. This was the law prior to this current crisis, and apparently been the law in Cyprus for years. This is just how government deposit insurance works. The Gov’t of the host country guarantees depositors up to a certain amount of money. Anything past that amount, the host country Gov’t doesn’t guarantee.

For example, your deposits in U.S. banks are guaranteed up to $250K by the FDIC. That means that if your bank goes bust (i.e. bankrupt) you can turn to the FDIC for up to $250K of your funds in the busted bank. Any amounts above $250K you need to seek payment from the bankruptcy estate of your bank. (Likely result is getting $0.05-$0.10 for every dollar of deposit from an estate of a bankrupt bank)

These Cypriot depositors were getting 5-6% interest on their money for the last 5 years while most other banks were only paying out 0-1% interest. Higher Risk = Higher interest rate. The depositors should have stopped and wondered “Why is my bank paying 5-6X the going interest rate compared to other banks? I wonder if that means there is greater risk of losing my money?” Most of the depositors chose to put their money in a risky bank and now have lost any amount above 100K euro. They knew it was a risky bank becuase it paid interest so much higher than all other banks.

New_Jersey_Buckeye on March 27, 2013 at 3:37 PM

Cyprus Popular Bank’s richest clients with uninsured deposits over €100,000 could get only 20% of their money, as the government eyes to wind down its operations, says Finance Minister Michalis Sarris.

agmartin on March 27, 2013 at 11:45 AM

Wow… initially I heard 20%:
http://news.sky.com/story/1068912/cyprus-agrees-20-percent-tax-on-bank-deposits

Yesterday I heard 40%:
http://www.cbc.ca/news/world/story/2013/03/26/cyprus-financial-banking.html

Today we hear 80%…
http://rt.com/business/cyprus-bank-popular-80-cut-928/

At this rate or increase they’ll face a 160% cut tomorrow when it finally happens.

gekkobear on March 27, 2013 at 3:38 PM

I will also note that Italy was directly threatened by the EU with bank account seizures and it was noted that there is enough in Italian bank accounts to bail out the entire country.

Subotai Bahadur on March 27, 2013 at 3:20 PM

.
You should do better fact checking:

http://www.gfmag.com/tools/global-database/economic-data/11855-total-debt-to-gdp.html

A country’s “total debt” includes government debt as well as the debt of financial institutions, non-financial businesses and households. For the 10 largest mature economies (Australia, Canada, France, Germany, Italy, Japan, Spain, South Korea, UK and US), total debt stood at nearly 350% of GDP in 2011. If one considers the economies of the PIIGS countries (Portugal, Ireland, Italy, Spain and Greece,) those worst hit by the debt crisis in Europe, total debt was almost 400% of GDP.

* Asset-backed securities are not included in data from McKinsey since underlying mortgages and other loans are already included and therefore it would reflect a duplication within the data, according to McKinsey. Other data sources, including the FT, The Economist and Morgan Stanley, do include ABS in total debt figures.

Italy’s debt to GDP ratio is over 300%.

There are nowhere near ” … enough in Italian bank accounts to bail out the entire country.”

When Italy defaults, the EU/euro experiment is OVER.

PolAgnostic on March 27, 2013 at 4:23 PM

PolAgnostic on March 27, 2013 at 4:23 PM

You are making a common economics mistake. You are confusing stocks and flows. GDP is a flow number (meaning it is a measure of the economic output of a country in a year). Debt is a stock number (meaning it is a amount at a fixed point in time).

A nation’s wealth is different than its GDP. The “nation’s wealth” would be stock number. It is the value at a certain point of time of all items of value in a country. Commenter Subotai Bahadur suggested that the stock amount of just the amounts sitting in Italy’s deposit accounts to bail out the country. Don’t know if that is true or not. It is not outside the realm of possibility though.

However citing the Italian GDP (a flow amount) does not refute his hypothesis. What your statement indicates is that the amount of Debt in Italy is such that if Italy applied its entire economy to paying for it, it would take 3 years to pay off.

Citing an example closer to home. Your yearly income is similar GDP. Your savings + investments + personal property + real property would be your wealth. Your mortgage + student loans + credit card debt would be your debt. If you have income of $100K and a total debt $300K it probably isn’t a problem even though it is GDP/Debt ratio of 300%. It could be a problem if that $300K is credit card debt and not a mortgage.

New_Jersey_Buckeye on March 27, 2013 at 5:23 PM

Citing an example closer to home. Your yearly income is similar GDP. Your savings + investments + personal property + real property would be your wealth. Your mortgage + student loans + credit card debt would be your debt. If you have income of $100K and a total debt $300K it probably isn’t a problem even though it is GDP/Debt ratio of 300%. It could be a problem if that $300K is credit card debt and not a mortgage.

New_Jersey_Buckeye on March 27, 2013 at 5:23 PM

Governments typically do not have assets. Only debt. Too many governments are, right now, seeking to turn private property into a liquid government asset, not to pay off debt but to keep on spending.

This is known as stealing.

BobMbx on March 27, 2013 at 6:02 PM

For example, your deposits in U.S. banks are guaranteed up to $250K by the FDIC. That means that if your bank goes bust (i.e. bankrupt) you can turn to the FDIC for up to $250K of your funds in the busted bank

Which is true, as long as the FDIC has the cash. Which it doesn’t. Nor does the PBGC (Pension Benefit Guarantee Corporation).

The FDIC reserve is currently negative, and is mandated by the Dodd-Frank Act to maintain a reserve of 1.35% of insured deposits.

1.35%. That should cover just about everyone, eh?

BobMbx on March 27, 2013 at 6:12 PM

New_Jersey_Buckeye on March 27, 2013 at 5:23 PM

You
are making a common economics mistake.

The “net worth” of Italy is not positive – the government is NOT entitled to take the deposits of private citizens or corporations to settle ITS debts.

Including the assets of private citizens is the planned theft approach of the Socialists in the EU.

Regardless, there is a nice chart on the link I posted – click on it and look at the “Households” portion of ‘Debt to GDP ratio”.

Having a positive net worth is one of the reasons I try to get people on Hot Air to focus on economic issues being FAR MORE important than political distractions like ‘gay marriage’.

If the government steals all your money – what you think about gay marriage will be the LEAST of your troubles.

PolAgnostic on March 27, 2013 at 6:38 PM

PolAgnostic on March 27, 2013 at 6:38 PM

I didn’t say anything about the net worth of Italy. Nor did I endorse the idea of taking bank deposits in Italian banks by the Italian Gov’t. Your comment doesn’t clearly indicate what “common economics mistake” you accuse me of making.
You accused Subotai Bahadur of lack of fact checking for his assertion that there is enough in Italian Bank accounts to bail out the entire country. As proof you cited to Italy’s GDP to assert that this couldn’t be true. I pointed out that you were confusing a flow item (Italian GDP) for a stock item (Italian deposits).
Just to check on Subotai Bahadur’s point, the savings/checking deposits held by Italian banks as of 12/2012 was approx. 974 Billion Euros. (probably less now) However, the national debt of Italy is approximately 2 trillion euros. So you were right that Subotai Bahadur’s point was incorrect. However, the facts you provided did not actually prove he was incorrect.
For comparison, the total savings deposits held by U.S. banks is $6.9 Trillion.

New_Jersey_Buckeye on March 27, 2013 at 8:55 PM

For example, your deposits in U.S. banks are guaranteed up to $250K by the FDIC.
New_Jersey_Buckeye on March 27, 2013 at 3:37 PM

BWAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHA

ahem

AHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHAAHAHHAHAHAHHA

Check how many dollares are in the FDIC fund fazool.

tom daschle concerned on March 27, 2013 at 9:13 PM

Who would have thought that Butch and Sundance were disguised as a government.

Rovin on March 27, 2013 at 11:43 AM

… and we know what happened to them …

AesopFan on March 27, 2013 at 10:24 PM

For comparison, the total savings deposits held by U.S. banks is $6.9 Trillion.

New_Jersey_Buckeye on March 27, 2013 at 8:55 PM


And that would be nowhere near enough to cover the Total Household debt of roughly $ 11.4 trillion

http://www.npr.org/blogs/money/2012/11/21/165657931/household-debt-in-america-in-3-graphs

Unlike others, I am providing links to data.

I will not, however, spend time documenting EVERY piece of data refuting false statistics thrown out by people on the internet.

Trying to do so would be like trying to sweep back the tide.

PolAgnostic on March 27, 2013 at 10:40 PM

At least Cyprus is doing it right in front of the people’s faces. Our government is doing it behind our backs.

Instead of outright taking our money from our savings, they’re printing money out of thin air devaluing our savings.

Difference being Cyprus (hopefully) realizes how screwed up it is and is pulling this measure in hopes of righting itself long term.

The US on the other hand is simply doing it so they can keep spending more and more.

“We don’t have a spending/defecit problem. We don’t need a balanced budget.” – O

Oxymoron on March 28, 2013 at 12:15 AM