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pampango

(24,692 posts) Fri Mar 22, 2013, 05:13 PM Mar 2013

Krugman: Big depositors in Cyprus stand to lose 40%; under $100,000 protected

Last edited Fri Mar 22, 2013, 06:27 PM - Edit history (1)

Well, it looks as if the Icelandization of Cyprus — at least in the sense of making offshore depositors take a big hit — is happening faster and more decisively than I feared. Great summary by Paul Murphy at FT Alphaville, ending thusly:

Big depositors in Cypriot banks stand to lose circa 40 per cent of their money here, which has drawn plenty of fury and veiled threats from Russia.

But what exactly can the Russians do about this? Sell euros? Tear up double taxation agreements? Murder Cypriot bankers? Medvedev and co could not have played a worse hand during this crisis — and it’s not immediately clear why.

Cyprus now has a binary choice: become a gimp state for Russian gangsta finance, or turn fully towards Europe, close down much of its shady banking sector and rebuild its economy on something more sustainable.

The choice is obvious.

http://krugman.blogs.nytimes.com/2013/03/22/cyprus-update/

The parliament is still meeting in Cyprus but Krugman thinks they will do what Iceland did - making offshore depositors take a big hit - while protecting relatively small-scale depositors.

8 replies

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Krugman: Big depositors in Cyprus stand to lose 40%; under $100,000 protected (Original Post) pampango Mar 2013 OP

They should do exactly what iceland did. Warren Stupidity Mar 2013 #1

Looks like that's the deal Benton D Struckcheon Mar 2013 #2

One of those deposit accounts is a €600 million Cypriot pension fund dipsydoodle Mar 2013 #3

My guess is that Iceland exempted pension funds. I certainly hope that Cyprus does. n/t pampango Mar 2013 #4

All nine bills have been passed dipsydoodle Mar 2013 #6

Just as the good doctor and all those always right and always ignored people have warned Egalitarian Thug Mar 2013 #5

That is strange phrasing from Krugman. bluedigger Mar 2013 #7

I find this whole way of saving an economy disturbing. Curmudgeoness Mar 2013 #8

Warren Stupidity

(48,181 posts)

1. They should do exactly what iceland did.

Reply to pampango (Original post)

Fri Mar 22, 2013, 05:14 PM

Mar 2013

Benton D Struckcheon

(2,347 posts)

2. Looks like that's the deal

Reply to pampango (Original post)

Fri Mar 22, 2013, 05:18 PM

Mar 2013

Watching Bloomberg, they're very close to a deal where the less than 100k are safe, the ones larger than that are put in a "bad bank", and those folks can expect a recovery of 60% optimistically, 40% realistically.
Then the Cypriot PM and the heads of the parties there all go to Brussels to sell it.

dipsydoodle

(42,239 posts)

3. One of those deposit accounts is a €600 million Cypriot pension fund

Reply to pampango (Original post)

Fri Mar 22, 2013, 05:35 PM

Mar 2013

so I hope that 40% figure is wrong. Doubtless there are other pension funds too which will be affected. They're not in a position to differentiate between resident and non resident accounts.

The last figure mentioned earlier to day was in fact 15% on a/cs over €100k.

pampango

(24,692 posts)

4. My guess is that Iceland exempted pension funds. I certainly hope that Cyprus does. n/t

Reply to dipsydoodle (Reply #3)

Fri Mar 22, 2013, 06:06 PM

Mar 2013

dipsydoodle

(42,239 posts)

6. All nine bills have been passed

Reply to pampango (Reply #4)

Fri Mar 22, 2013, 06:20 PM

Mar 2013

allowing the way for the Laiki Popular to be split. They already said the split would be based on account size. That's where that pension fund is.

There has been no mention of how big the haircut will be.

Egalitarian Thug

(12,448 posts)

5. Just as the good doctor and all those always right and always ignored people have warned

Reply to pampango (Original post)

Fri Mar 22, 2013, 06:10 PM

Mar 2013

and warned and warned. The obsessive priority that the global banking community has placed on protecting the richest and most guilty from the consequences of their actions is inevitably going to cripple everything else.

bluedigger

(17,086 posts)

7. That is strange phrasing from Krugman.

Reply to pampango (Original post)

Fri Mar 22, 2013, 07:54 PM

Mar 2013

"faster and more decisively than I feared"

I thought he favored the Icelandic approach. Did he have a different solution in mind for Cyprus, or is it just a case of no good solution at all?

Curmudgeoness

(18,219 posts)

8. I find this whole way of saving an economy disturbing.

Reply to pampango (Original post)

Fri Mar 22, 2013, 08:17 PM

Mar 2013

I no longer have any faith (if I ever did) in the stock market for saving for retirement. I am uncomfortable with bonds lately, with so many municipalities and companies filing or on the verge of bankruptcy. In the US, there are people (GOP) talking about not honoring the bonds issued to the Social Security fund, so who knows how much further that could go.

The only safe haven for my retirement funds (I have no pension from any jobs) is in bank deposits, where I don't really gain, but at least my principle is safe......until the day that it is decided that this country is not financially stable. And to hear too many of our own politicians, that day is close at hand. So is it now conceivable that even bank deposits would be devastated? This is scary. I get it, there is a lot wrong with bad banking and money laundering (is that happening here too?). But I will say that $100,000 in savings for an individual with no pension is not a large amount of money to get them through retirement, especially with the interest earned anymore.

So it has to be the mattress, or the flower garden.

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