The folks in Cypress were assured their deposits were safe. They found out differently when they tried to make a withdrawal.
Obama says we don’t have a debt problem, other Dems say we don’t have a spending problem, we just have a paying for it problem…
- British Government will reimburse military victims of EU's Cyprus cash grab
- But 60,000 other Britons still face losing money after bail out
- Chaos as banks empty cashpoints and ban online transfers
- Bank tax could have repercussions across Eurozone and beyond
By James Chapman and Keith Gladdis
UK taxpayers will have to compensate thousands of Britons hit by a shock raid on bank accounts in Cyprus.
The debt-stricken island, which is home to around 3,000 British military personnel and civil servants, is being given an £8.7billion EU rescue package.
But – in a move condemned as ‘robbery’ – Germany says it will not fund the emergency deal unless every saver with a deposit account contributes via a bank tax.
Account holders will lose 9.9 per cent of all deposits over 100,000 euros (£85,000), with a 6.75 per cent levy on smaller amounts.
Exposure: German Chancellor Angela Merkel says Cypriot banks must help pay for the bail out, but Britons have an estimated £1.7billion in Cyprus's banks, exposing them to a potential levy of at least £115million
George Osborne said last night the Treasury will help out military staff and officials. But it is thought 60,000 other Britons, including holiday homeowners and expats, will lose out.
They are thought to have about £1.7billion in Cyprus’s banks – exposing them to a potential levy of at least £115million – or an average of £1,900 each. In yet another eurozone crisis:
- Cypriot banks banned online transfers and emptied cashpoints to stop withdrawals;
- The levy could be automatically taken from accounts as early as Wednesday;
- British tourists were told to ensure they had multiple sources of money;
- The chief minister of the euro area refused to rule out similar levies elsewhere;
- Analysts said the raid could fall foul of the European Convention on Human Rights;
- Traders are braced for turbulence on international stock markets today.
In response to cries of outrage, Cypriot president Nicos Anastasiades was last night trying to amend the bailout tax to limit the pain for small depositors.
But Angela Merkel insisted it was right that all depositors in Cypriot banks should share the responsibility of bailing out the state.
- Osborne vows to protect Britain's armed forces in Cyprus as cash machines are EMPTIED and 60,000 British savers face losing millions in 10% bank account tax
- SIMON WATKINS: Taking money from ordinary Cyprus savers is madness - euro chiefs will rue this outrage
- Savers to take a hit on their deposits as Cypus becomes fifth country to receive eurozone bailout
Addressing an election rally, the German chancellor insisted: ‘Anyone having their money in Cypriot banks must contribute in the Cypriot bailout. That way those responsible will contribute in it, not only the taxpayers of other countries, and that is what’s right.’
Pressure: Cypriot President Nicos Anastasiades is trying to rally support, but if he can't the country may crash out of the single currency
But economists warned the move would fatally undermine confidence in the safety of money being held in banks in other countries, risking bank runs across the eurozone.
And there was uproar in Cyprus, where furious residents attempted to smash into banks closed for a long bank holiday weekend using JCBs.
Fiona Mullen, a British economist living on Cyprus, said: ‘We knew there was a possibility they would take the deposits above the insured threshold – so above 100,000 euros – but nobody thought they would take it down to someone with five euros in the bank.
'TAKE MULTIPLE MONEY SOURCES'
Tourists travelling to Cyprus have been told to ensure they have access to multiple sources of money.
The Foreign Office last night changed the travel advice section on its website in light of the financial chaos.
Britons are advised not to rely on credit or debit cards alone, as locals queue at cashpoints to empty their accounts, but also to take cash in combinations of euros and sterling.
One million British tourists visited Cyprus last year – half of all foreign visitors.
Tourist spending from Britons alone makes up 5 per cent of the Cypriot gross domestic product.
‘I was trying to take money out of the ATM but I couldn’t.’
David Symonds, another expat, predicted violence when banks reopened: ‘Tempers could get frayed. Those frayed tempers could well lead to violence.’
Amid mounting chaos, the Cypriot parliament postponed a vote approving the deal and was reported to have announced a further bank holiday on Tuesday – and possibly another on Wednesday – to keep banks closed.
Mr Anastasiades needs to get the legislation ratifying the deal through parliament before banks reopen or face a run on accounts.
But the scale of revolt against among MPs has thrown his efforts into disarray. If the government cannot win support for the package, the country is expected to crash out of the single currency.
Archbishop Chrysostomos, the country’s religious leader and a former government supporter, was reported to have called for calm, but insisted Cypriots would never forget Europe’s behaviour. In his Sunday sermon, he thundered: ‘This is a villainy of Europeans. Cyprus must as soon as possible leave the eurozone.’
Mr Osborne said that because David Cameron had extracted Britain from an EU fund agreed by Labour, British taxpayers would be spared a huge bill.
But the Chancellor said the UK Treasury would reimburse military and government personnel with money in Cyprus banks.
Britain has military bases on the island with a sizeable presence, and the bill to taxpayers will run into hundreds of thousands of pounds.
‘Anyone doing their duty for our country in Cyprus will be protected from this bank tax,’ Mr Osborne said.
But the rest of the 60,000 British citizens with money there will lose out.
A gathering storm: Banker Sebastien Galy said the move could be the 'trigger' for a new eurozone crisis
‘That is an example in Cyprus of what happens if you don’t show the world that you can pay your way.
'That is why in Britain we’ve got to retain the confidence of world markets,’ the Chancellor said.
‘It is an extraordinary situation, but frankly – and I remember talking about Greece – and since then we had Ireland and Portugal, problems in Spain, problems in Italy, now in Cyprus.
‘Anyone who thinks that Britain is alone in having these challenges should look on their TV screens, look at tonight’s news, realise that it’s a very tough economic situation out there.
‘And unless we in Britain front up to our own problems – the problems in our banking system, the problems that we’re borrowing so much money, the problems that actually our businesses need more help to create jobs - if we don’t do those things then the difficult economic situation in Britain will get very much worse.’
UKIP leader Nigel Farage said British taxpayers were being asked to pay for a ‘disgraceful euro-larceny’. ‘Outrage is a word overused in political debate, but hardly covers this,’ he added.
THIS COULD CAUSE A MONETARY TSUNAMI... WILL ITALY OR SPAIN BE NEXT?
Alex Brummer's ANALYSIS
Until now it was felt that however bad the crisis in the euro area became, governments would move heaven and earth to protect ordinary bank depositors.
Over the weekend that Rubicon was crossed, as policymakers imposed an immediate tax on all deposits held in Cyprus, as part of a rescue package for the island’s failing economy.
This brutal decision by euroland finance ministers and the International Monetary Fund threatened a run on the whole financial system as depositors rushed to try to get their money out.
And the reverberations could reach beyond further Cyprus to hard-pressed euroland countries including Italy and Spain.
People queue to use an ATM machine outside of a Laiki Bank branch in Larnaca, Cyprus on Saturday
Terrified savers, who until now felt protected by the 100,000 euros guarantee for deposits, must now be wondering if they are next.
As a result of the decision by euroland leaders to transfer supervision of the banking system from national governments to the European Central Bank in Frankfurt they will claim they now have all the legal authority they need to interfere directly in the banks of the 17 countries that are part of the eurozone.
As Britain remains outside the club, Brussels and the IMF could not seek to impose such penalties on savers in British banks. It will be argued that Cyprus is a special case. Nevertheless, the blanket levy on deposits, designed to raise 6billion euros will hurt the innocents such as British expatriates and ordinary Cypriot families.
There will be suspicions that once the principle of a tax on savers has been established, it could be repeated elsewhere.
The real target of the measures are the Russians, Greeks and other foreign nationals who have regarded Cyprus as a lightly regulated banking destination where they could safely stow away cash without scrutiny.
Switzerland used to be regarded as the best place to hide cash from regulators and tax authorities. But it has fallen out of favour since it started to co-operate with foreign governments – including the United States – on disclosure of the identities of people with offshore accounts.
Panic: The Cyprus government postponed a planned emergency session of parliament on Sunday to debate the controversial EU bailout
So Cyprus, along with other destinations such as the Caymans, has become a popular bolthole for Russia’s new rich to stash their wealth away from the mercurial Kremlin authorities.
It is no accident that, for the first time, Putin’s Russia has been persuaded to be part of a eurozone-IMF rescue package. Moscow is thought to have agreed to contribute up to 2.5billion euros to the overall rescue package which could hit 13billion euros.
It is protecting its strategic interests as well as those of Russian citizens.
The deal is enormous compared with the tiny island’s 17billion euro economy. That, and the bloated scale of the Cypriot banking sector, may be why officials there and in Brussels decided that they had no alternative but to penalise savers.
But could the chaos in Cyprus, where hole-in-the-all ATMs have been shut down, lead depositors across Europe to start switching funds into apparently safer jurisdictions?
At the start of the financial crisis in 2007-8, the collapse of the banking sector in tiny Iceland led Western governments including Britain to extend deposit insurance. Little Cyprus could have the capacity to cause its own monetary tsunami across euroland.
Read more: http://www.dailymail.co.uk/news/article-2294971/The-great-EU-bank-robbery-British-taxpayers-bail-victims-outrageous-raid.html#ixzz2Nqo46TLS
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