Cyprus imposes 9.9% tax on bank deposits

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#11
the Europeans will wake up and realize that keeping cash under the pillow is safer than putting it in their banks
especially when interest rates are near zero for depositors

US futures down 1%
japan opened down 2%
on cyprus news

gg man

later europe open, confirm see bloody red
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#12
This is really eye opening step to take. Not sure the ramification.

Just my Diary
corylogics.blogspot.com/


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#13
There are always two sides to a coin. Euro problems are good and any solution should be taken positively no matter how controversial it can be.

Remember last year - did any analysts called a strong buy on Euro Land equities when everyone was talking about how blood will spill when Euro breakup?

As long as Euroland problems linger, ECB will have to keep liquidity tap on and that can only translate into asset friendly policies.

Even long term patient Japan has seen the impact on Abenomics - nothing new but certainly lifted a lot of asset related prices.

Its an excuse for mid cycle correction that will pave way for a totally unexpected penultimate bull by 2016/17.

STI 6000 by then.
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#14
I also hope STI 6000
if hit that level, I can retire early liao hehehe
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#15
(18-03-2013, 09:28 AM)felixleong Wrote: I also hope STI 6000
if hit that level, I can retire early liao hehehe

heehee 6000 is too hard to visualise.. it would mean capland trading at $8, wilmar trading at $6, SIA at $20, SPH at $8 ... these are superhigh valuations leh!
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#16
(18-03-2013, 09:28 AM)felixleong Wrote: I also hope STI 6000
if hit that level, I can retire early liao hehehe

If STI hit 6000, inflation will go up by the same scale as well. It just mean that our singdollar is depreciating. So all will be back to square one.Sad
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#17
The discussion on STI 6,000 is getting off-topic. Just a reminder.

On a separate note, best not to get too exuberant, unless you plan to be a net seller of equities in the next few years.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#18
As I always put it, policy makers globally do not have the guts to do the right thing since their jobs are at stake. As such, economic theory will remain theory that is being taught in schools and uni. The reality is painful and hence human beings will always try to lessen the pain and kick the can down the road.

The other way of looking at the latest remedy - it is certainly a positive step. Cyprus must be one of those irresponsible Euro countries that over spent and currently faces bailout. So given its objective of staying within the zone, it has to put things right by taking the drastic step - never heard of in textbook but certainly logical as rightly pointed by several buddies.

The point to note is that most of the smart and big money in these troubled nations would have long flee the country given the ease of money flow (lack of restrictions as a result of the union). The beneficiaries of such money are none are than the stronger EU countries such as Germany, Holland and UK. Note that these safer countries have already experienced massive asset inflation. Hence, the residual funds that will flee will no longer be significant but really belong to that of mum and dads. Unfortunately, the innocent guys are always the ones that are punished and hence the latest twist.

Don't worry be happy. The latest development is nothing new IMO. What is new is the antidote. Rest be assured that the bigger brother is constantly on guard to put out the small fires.

Its still a mid term correction and hence will be good opportunities to accumulate stocks that have previously ran away.

http://www.cnbc.com/id/100562007

Cyprus to Put Forward New Bailout Plan: Reports
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Published: Monday, 18 Mar 2013 | 6:16 AM ET



Maurice Smith | Photononstop | Getty Images
Cyprus, Episkopi Bay
Cyprus will put forward a new proposal on Monday under which a tax-free threshold or a lower tax rate for smaller depositors could be introduced, media reports said on Monday, in a move aimed at easing the pain of a bailout agreement which will impose an unprecedented tax on savers.

Reuters cited a government source in Cyprus as saying that the country is mulling a tax-free threshold on the bank deposit levy for smaller deposits. The level was still under discussion, it said. Earlier Dow Jones cited two unnamed European officials as saying savers with 100,000 to 500,000 euros would face a 10 percent tax, while those with savings over 500,000 euros would be taxed at 15 percent. Those with savings up to 100,000 euros would be taxed at 3 percent, according the report.
Under the original plan, every depositor under 100,000 euros would be taxed at 6.75 percent and those over that amount would face a 9.9 percent tax. The Cypriot Parliament has delayed a voted on the plan to Tuesday, an EU official told Reuters, "to allow time for more negotiations".
European Central Bank board member Joerg Asmussen told reporters on the sidelines of a conference on Monday that it was for the Cypriot government to decide the structure of a levy on depositors, Reuters reported, but the overall volume of its contribution to the bailout had to amount to 5.8 billion euros.

The German government was also open to changing the bailout deal for Cyprus, Reuters said.

In order to achieve debt sustainability, a contribution from Cyprus is necessary, a contribution from the banking sector, from depositors and owners," Steffen Seibert, a spokesman for Chancellor Angela Merkels told the agency.

"How the country arrives at this contribution, how it divides it up, was and is up to the Cypriot government," he added. "As I believe the finance minister said last night on television, Germany could have imagined a different solution, a different staggering. But it was not our decision."
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#19
http://money.cnn.com/2013/03/18/news/eco...l?iid=Lead

THE NEW EUROPE
153 comments
Cyprus bailout threatens to backfire
By Mark Thompson @CNNMoney March 18, 2013: 9:54 AM ET


Cypriots protested the proposed EU bailout, which would require Cyprus to impose a one-time tax on bank deposits.
LONDON (CNNMoney)
The latest European bailout is blowing up.
Cyprus delayed by 24 hours a vote in parliament on a controversial plan to rescue the tiny island nation, and eurozone finance ministers were reported to be preparing emergency talks Monday to prevent the plan from backfiring.

An unprecedented tax on bank deposits as part of the €10 billion rescue announced Saturday led to a run on cash machines in Cyprus. It also spooked investors, who feared that other weak eurozone states may be forced down the same path, despite EU statements to the contrary.
Shares across the region fell in morning trading, and banks were hit particularly hard. The prices of government bonds across southern Europe also fell, pushing up yields. Early on Monday, however, there were no signs of bank runs in other European countries, including Italy and Spain.
"The contagion from Cyprus is fairly limited but there is a tail risk that this measure could backfire," wrote Berenberg Bank analysts in a note.
As part of the plan to rescue Cyprus' outsized banking sector and head off national default, the EU said deposits of more than €100,000 would be subject to a one-off levy of 9.9%, starting Tuesday. Smaller depositors would be subject to a levy of 6.75%.
It was the first time that the EU has insisted on such terms for bank depositors as part of a bailout. The EU's bailouts of other nations, such as Greece, have been accompanied by strict budget restrictions and led to losses for bond holders and shareholders.
Cyprus state TV said eurozone finance ministers would hold an emergency teleconference later Monday. A spokesman for the group was not immediately available for comment.
Analysts said the levy set a dangerous precedent and could undermine depositors' belief that their savings are safe.
"The Cyprus deal may prompt Europeans to question that," wrote financial markets analyst and blogger Louise Cooper. "A fundamental safeguard to Europe's banking industry has been compromised for a tiny country costing 10-20 billion euros to bailout -- not a good trade."
The parliament in Cyprus was due to vote on the plan Monday. Cyprus was working on last-minute changes to the proposals to force richer savers to bear a bigger share of the cost, reducing the burden on those with less than €100,000 in deposits, according to reports.

As Cypriots heard the news of the tax, they lined up outside to withdraw money from ATMs. Banks placed withdrawal limits of €400 and many ATMs were running out of cash over the weekend. A bank holiday Monday could be extended into Tuesday to give officials more time to nail down the details, according to some reports.
Cyprus' President Nicos Anastasiades tried to calm his nation on Sunday, and convince lawmakers to vote for the bailout plan.
"A disorderly bankruptcy would have forced us to leave the euro and forced a devaluation," he said in a speech.
The bailout, while small compared to the emergency loans supporting other troubled European nations like Greece, represents more than half the size of the €18 billion Cyprus economy. Cyprus is the EU's smallest state, accounting for just 0.2% of output.
The problem in Cyprus is the banking sector, which is several times the size of its economy. The country made a formal request for help last June after its banks were decimated by losses on Greek debt -- losses that caused lending to stall and sent the economy into a deep recession.
Negotiations on a bailout stalled last year after a previous government objected to the conditions that international lenders were looking to attach. They restarted following the election of Anastasiades last month.
Related: Europe financial sector is fragile, says IMF
EU concerns about money laundering also hampered progress on a bailout. Cypriot banks have large volumes of international deposits, with Russian businesses believed to hold about $19 billion, according to ratings agency Moody's. As part of the bailout deal, Cyprus has agreed to an international anti-money laundering audit.
Russia has come to Cyprus' aid in the past, providing a €2.5 billion loan in 2011 to shore up government finances, but its participation in the new rescue was looking uncertain Monday after President Vladimir Putin attacked the tax on bank deposits.
'If such a decision was made, it would be unfair, unprofessional and dangerous," his spokesman Dmity Peskov was quoted as saying.
A finance ministry spokesman said Russia was reviewing its position after not being consulted on the decision to impose the levy.
The International Monetary Fund was expected to contribute to the deal as it has in others. Christine Lagarde, the fund's managing director, supports the terms and has recommended that the IMF help provide financing for it.
In addition to the tax on bank deposits, other conditions for the bailout loans include an overhaul of the financial sector and an increase in corporate taxes.
Cyprus is the fourth of 17 eurozone states to be granted a bailout by its EU partners and the IMF, after Greece, Ireland and Portugal. Spain has been given EU assistance to rescue its banks, but has so far avoided asking for a full sovereign bailout.
-- CNN's Elinda Labropoulou contributed to this article.
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#20
(18-03-2013, 07:36 PM)greengiraffe Wrote: The point to note is that most of the smart and big money in these troubled nations would have long flee the country given the ease of money flow (lack of restrictions as a result of the union). The beneficiaries of such money are none are than the stronger EU countries such as Germany, Holland and UK. Note that these safer countries have already experienced massive asset inflation. Hence, the residual funds that will flee will no longer be significant but really belong to that of mum and dads. Unfortunately, the innocent guys are always the ones that are punished and hence the latest twist.

Actually 37% of the deposits in Cyprus come from overseas. You can safely assume these are not mom-and-pop depositors. In fact Cyprus is widely viewed as a major money laundering centre for Russian money of dubious origin. So the tax is another way to hit the dirty money.

The Cypriot government is now proposing 3 tiers, where the lowest tier pays nothing or at most 3%, and the highest tier pays 15%. So they are really after the dirty money, not your average Cypriot citizen. The dirty money can't easily move to Paris, London, Zurich or Frankfurt because of KYC requirements. Anyway with the capital controls they are stuck - the only practical way to move $10m is to wire it, gold weighs too much and diamonds incur too high a transaction cost. So it looks like Cyprus will be able to part-fund its bailout. The big losers are the owners of the dirty money, but nobody likes them anyway so it's all good.
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