Cyprus parliament delays vote on deposit levy to Monday

The banks, not the govt. But the bailout as structured tends to conflate the two, which is part of the problem. Also it directly hurts retirees in country while protecting rich foreigners (eg, holders of Cypriot bank bonds). It's WTF from start to finish, a pretty shocking abuse of power by the rich northern EU countries. Fairness and good governance have nothing to do with it.

part of the loss was due to Greece's bail out last year. Cyprus had huge investments in Greece and when Greek debts were written off Cyprus debt automatically went up overnight. add to that bad management from the government and banksters and you have an unmanageable debt.

The government didn't mismanage its finances, the banks did. The levy would be to cover the banks' debt.

Either way it is probably too late, there will be a bank run. If I had any money in there you'd bet I would in line at the bank first thing in the morning to get it out.

The banks, highly leveraged and competing for offshore deposits with interest rates double the EU average, mismanaged their finances. Consistent with being an offshore financial centre, the banks' assets are about 5x GDP.

When the banks started to fail, the bailout team had three options. It could refuse aid and let the Cypriot economy crater - Iceland, in a similar position in 2007, crashed 60% and is still 1/3 below pre-crash levels. It could also extend loans in exchange for austerity, similar to what was done elsewhere. This would mean the 1/2 of Cypriot deposits from Russia, Britain, and Greece would run for the doors, leaving the islanders to deal with the banks themselves. Or they could do something fast.

Europe has no euro-wide deposit insurance. When you leave the weak to completely fend for themselves they sometimes fall, and they often break. This exacerbates the differences between the strong and weak in a way that is often damaging for everyone.

P.S. When any government mismanages its finances, someone takes losses. Sometimes it's as a one-off tax, sometimes as a permanent tax increase, sometimes as a reduction in benefits, and often times as inflation or default.

It is way more complicated that that but basically it's the various eurozone government (just like many other governments) who did mismanages since decades and now the house of cards is starting to fall.

Here's an oversimplification: basically by running always on deficit the various eurozone countries have reached closed to an unsustainable point: at one point where the country has too much public debt the country is trapped in the "debt trap". At that point there simply is no way that you can get out because the interest of the debt alone is impossible to be paid without contracting more and more debt.

That is what happened to Greece, for example, where a state default took place.

Now people know that states are going to default so nobody wants to buy government bonds anymore: so the states are basically forcing the banks to buy govt bonds (with a last resort using the BCE as a "bad bank").

So when a country defaults, lots of banks are suddenly virtually bankrupt: they either need a bail-out or go bankrupt. Should they go bankrupt that would deal a huge blow to the economy. Nobody wants Deutsche Bank or BNP Paribas going down: that would probably mean civil war and the end of the western world as we know it.

So states are basically forced to bail out these banks. But, guess what, states are already way too indebted. So they're contracting even more debt, making it even more likely that they'll default.

Cyprus' banks happened to hold lots of govt bonds from Greece. Hence they got fuxx0red when Greece defaulted on part of its state debt.

Now of course if Cyprus defaults, more banks are going to be bankrupt and need a bailout or trigger massive civil unrest... etc.

Because after Cyprus it's going to be Spain, Italy, Portugal... In 2014 it's very likely that France won't be able to finance itself on the market at reasonable rates.

Nigel Farage explained this quite well in a talk in front of the european parliament: this cycle / state default / bank bailout / more state default is endless.

So the eurocrisis is first and foremost a crisis due to the various governments being ruled by clueless monkeys who can't count ("It's all lawyers, lawyers, lawyers" as Neil deGrasse Tyson wrote) and who've been hiding state debt behind growth.

Add to that a gang of banksters sharks always willing to try to create more money out of thin air with crazy leveraging and you get the crazy situation we're in.

It's now gonna end well because if you try to "analyze the curves" you realize we're going into a wall.

There is no way out.

Now of course the various politicians, most notably the socialist ones, are trying to tell us it's all the fault of liberalism and banksters but the cold hard truth is that when you run a country always on deficit at one point it becomes unsustainable.

Sweden got this in 1993 and in 20 years they went from a public sector representing 67% of the GDP to 49% today, meanwhile lowering they public debt from 70% of the GDP to 30%.

And that's a socialist country. And that's something socialists in the eurozone simply do not understand: the public sector is way too important, the private sector is way too taxed and we're going into a wall.

The solution is less state.

Who do you think threw Greece under the bus?

If the Cyprus government, EU, FMI and ECB were to do nothing it is almost certain that the depositors would see much less than 90 cents on the euro.

The depositors are being rescued here. They trusted their money to banks that went on to make loans to the Greek government. The Greek government defaulted. A significant portion of the depositors money is gone. Nobody is confiscating anything. International institutions are helping Cyprus, by covering part of the losses. Unfortunately there is nobody willing to pay the amount necessary to make the depositors full again.

One might argue that this is bad, and that the EU/IMF/ECB should make the depositors full, without an haircut, but that is another story.

What's the other option?

In the USA, taking 7+% of everyone's savings on short notice would initiate a civil war. Can't imagine how another alternative would be worse.

The Cypriot government during the loan negotiations at Eurogroup on Friday was essentially blackmailed. They were presented with the deposits haircut and increase in corporate tax. Our president threatened to leave the negotiations cause stealing depositor's money is unacceptable and was threatened that if not accepted the European Central Bank on Tuesday will stop providing liquidity to one of the main Cypriot banks which would lead into: the bank shutting down immediately, taking down the 2nd largest bank with it; 8000 people would instantly lose their jobs (Cyprus population is just 700k) and by the end of the week all small and medium sized companies will cease operations. The country would then default and be kicked out of the eurozone with all the consequences that it would bring.

No, dude. Let's call it pure coincidence. Once in a billions.

Same happened with the Icelandic banks: in mid-2000, I knew several Americans who rather ill-advisedly created accounts with forex brokers just to get ~8% interest on ISK, a currency and economy they otherwise knew nothing about. Seems to have been common, because the Icelandic banks had large deposit inflows up until the crisis hit.

There's no reason it couldn't be. Within the US there are public figures available stating which banks have been the best and which have been the worst in the last few years.

There is nothing to stop customers banking on this basis. They still don't, perhaps largely because the government insures up to $1xx,xxx in deposits (I forget the number) so a lot of people are covered no matter what happens to their bank.

sold out politicians

eurozone - cyprus cannot devalue its currency.