# Bank deposits get the "haircut" treatment in Cyprus. What happens next? **URL:** \ **Category:** Great Debates\ **Created:** [March 16, 2013, 1:51pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089 "2013-03-16T13:51:10Z")\ **Posts on this page:** 20\ **Page:** 6
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 18, 2013, 11:49pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/101 "2013-03-18T23:49:23Z")
> [@Steophan](#): > > No money is being extorted by foreigners, they are being given billions of euros by these foreigners, and being expected to contribute a small amount of their own money as well. Cyprus is another corrupt mediterraenean country who’s citizens refuse to pay tax, but expect northern Europe to subsidise them. It’s about time we told them they need to pay their share. Hopefully Greece will be next. The national debt of Cyprus is about 71% of GDP (from [here](http://countryeconomy.com/national-debt/cyprus)) versus 80% for Germany. Their deficit is 6% of GDP [Cite](http://countryeconomy.com/countries/cyprus) versus 8% for the UK. (And 9% for Spain.). Go to the country page there to compare. So this does not seem a government debt issue, but rather a bank issue. Of course if the government bailed out the banks it would be a government debt issue. I agree this is another TBTF problem. So, anyone know how the bankers that got them into this mess are doing? ---
**Author:** ![davidm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/davidm/32/225_2.png) [@davidm](https://boards.straightdope.com/u/davidm)\ **Post date:** [March 19, 2013, 12:41am UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/102 "2013-03-19T00:41:40Z")
> [@lisiate](#): > > It’s crazy moves like this that will lead to the total collapse of the Euro IMHO. > > Here’s the Guardian’s liveblog of the [first day’s reactions](http://www.guardian.co.uk/business/2013/mar/18/eurozone-crisis-cyprus-bailout-savers-markets) From **lisiate’s** link: > [@](#): > > 9.48pm GMT > Cyprus: savings tax could start at €20,000 > > Late news from Cyprus: State TV are reporting that the government is planning to spare savers with less than €20,000 in the bank from the deposit levy: > > ``` > #Cyprus state TV (RIK) reports revised deposit tax would exempt savers with deposits under €20,000 > — Nick Malkoutzis (@NickMalkoutzis) March 18, 2013 > > ``` I suppose this might help but even if I had less than €20,000, I might consider pulling it out for fear of what may come next week or next month. ---
**Author:** ![pancakes3](https://avatars.discourse-cdn.com/v4/letter/p/ba9def/32.png) [@pancakes3](https://boards.straightdope.com/u/pancakes3)\ **Post date:** [March 19, 2013, 3:30pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/103 "2013-03-19T15:30:33Z")
Well even if the sheer lunacy of an across-the-board haircut is avoided, there are still other issues at play, namely a) the faith of the irrational consumer b) what it does to the intricate crossweaving of ratings and models predicated on very specific assumptions. c) the added headache it imposes on the fragile EU. ---
**Author:** ![JRDelirious](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jrdelirious/32/9531_2.png) [@JRDelirious](https://boards.straightdope.com/u/JRDelirious)\ **Post date:** [March 19, 2013, 7:41pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/104 "2013-03-19T19:41:29Z")
News reports are the Cypriot Parliament voted down the proposal today by a nearly 2:1 margin ---
**Author:** ![Zakalwe](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/zakalwe/32/270_2.png) [@Zakalwe](https://boards.straightdope.com/u/Zakalwe)\ **Post date:** [March 19, 2013, 8:28pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/105 "2013-03-19T20:28:40Z")
And bye-bye Cyprus economy. It was nice knowing you. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 19, 2013, 8:36pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/106 "2013-03-19T20:36:51Z")
Video from [CNN](http://www.cnn.com/video/#/video/world/2013/03/19/idesk-quest-cyprus-parliament-rejects-bank-levy.cnn) on what JRDelirious mentioned. ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [March 19, 2013, 8:39pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/107 "2013-03-19T20:39:47Z")
> [@Zakalwe](#): > > And bye-bye Cyprus economy. It was nice knowing you. IMHO, their economy was as good as ruined the moment this proposal became public due to the inevitable bank runs, regardless of whether it passed or not. The only question at that point was the exact mechanics of its destruction. ---
**Author:** ![voltaire](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voltaire/32/313_2.png) [@voltaire](https://boards.straightdope.com/u/voltaire)\ **Post date:** [March 19, 2013, 8:57pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/108 "2013-03-19T20:57:22Z")
Maybe they should consider selling off naming rights and capitalizing on all the press they’re getting… \* AT&T’s Republic of Cyprus Exxon-Mobil’s Bank of Cyprus\* … and so forth. ---
**Author:** ![asterion](https://avatars.discourse-cdn.com/v4/letter/a/4da419/32.png) [@asterion](https://boards.straightdope.com/u/asterion)\ **Post date:** [March 19, 2013, 8:59pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/109 "2013-03-19T20:59:07Z")
> [@JRDelirious](#): > > News reports are the Cypriot Parliament voted down the proposal today by a nearly 2:1 margin More importantly, that wasn’t 2:1 nay to aye. That was 2:1 nay to abstain. Not a single aye vote was cast. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 19, 2013, 9:40pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/110 "2013-03-19T21:40:58Z")
> [@Der\_Trihs](#): > > IMHO, their economy was as good as ruined the moment this proposal became public due to the inevitable bank runs, regardless of whether it passed or not. The only question at that point was the exact mechanics of its destruction. At this point the question is whether there would be bank runs in Spain, Italy and Greece at a moment’s notice, or if this not passing will make depositors in those countries more secure. I read that someone from the EU said that it was important for investors, not just other countries, to feel the pain. I doubt many of those with relatively small deposits consider themselves as investors. Want to live dangerously? Put your money in a savings bank! ---
**Author:** ![Simplicio](https://avatars.discourse-cdn.com/v4/letter/s/c37758/32.png) [@Simplicio](https://boards.straightdope.com/u/Simplicio)\ **Post date:** [March 19, 2013, 9:47pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/111 "2013-03-19T21:47:51Z")
Never happen in a million years, but [this is by far](http://www.slate.com/blogs/moneybox/2013/03/19/sell_northern_cyprus_the_way_out_of_debt_for_cyprus.html) the most rational way to solve the crisis. Have Turkey buy the half of the island they seized in the 70’s for a couple billion. Greek Cypriots might not like it, but Turkey isn’t going to give back their half whether Cyprus recognizes it or not, so they mind as well get some money for it. And the military standoff between Greece and Turkey costs both countries billions they (especially Greece) can’t really afford right now. Turkey gets its defacto control of Cyprus recognized (and the largest barrier to its entry to the EU removed), Greece gets to save billions in defence spending, NATO gets rid of its biggest interior military rivalry, Cyprus gets the money they need and presumably opening the border would be beneficial to the island economy. Its win, win, win, win. The only cost Cyprus giving up a purely theoretical claim to land they never had a chance of reclaiming anyways. ---
**Author:** ![lisiate](https://avatars.discourse-cdn.com/v4/letter/l/f05b48/32.png) [@lisiate](https://boards.straightdope.com/u/lisiate)\ **Post date:** [March 19, 2013, 9:53pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/112 "2013-03-19T21:53:05Z")
The price would have to be more like $6 billion to cover Cyprus’ share of the cost of the bailout. Day two of the reaction [here.](http://www.guardian.co.uk/business/2013/mar/19/eurozone-crisis-cyprus-bailout-government-vote) my favourite moment - the UK sends a plane load of cash to pay it’s soldiers if the banks run out. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 19, 2013, 9:56pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/113 "2013-03-19T21:56:07Z")
> [@lisiate](#): > > The price would have to be more like $6 billion to cover Cyprus’ share of the cost of the bailout. > > Day two of the reaction [here.](http://www.guardian.co.uk/business/2013/mar/19/eurozone-crisis-cyprus-bailout-government-vote) my favourite moment - the UK sends a plane load of cash to pay it’s soldiers if the banks run out. Well, they could make up the difference by selling off their rights to the natural gas deposits that have recently been discovered. Fairly sure they could cover it all with both things, though it’s probably politically impossible on either point. The key though is they have to do something…and it looks like they still haven’t figured that part out. They are all patting themselves on the back for knocking down this proposal, but I haven’t heard anyone giving any sort of solid alternatives. As Der Trihs says, they are screwed, and the only real interesting question (in the Chinese sense of the word) is whether this will be contained locally or will spread out to other parts of Europe. ---
**Author:** ![voltaire](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voltaire/32/313_2.png) [@voltaire](https://boards.straightdope.com/u/voltaire)\ **Post date:** [March 19, 2013, 10:08pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/114 "2013-03-19T22:08:46Z")
> [@Simplicio](#): > > Never happen in a million years, but [this is by far](http://www.slate.com/blogs/moneybox/2013/03/19/sell_northern_cyprus_the_way_out_of_debt_for_cyprus.html) the most rational way to solve the crisis. Have Turkey buy the half of the island they seized in the 70’s for a couple billion. Greek Cypriots might not like it, but Turkey isn’t going to give back their half whether Cyprus recognizes it or not, so they mind as well get some money for it. And the military standoff between Greece and Turkey costs both countries billions they (especially Greece) can’t really afford right now. > > Turkey gets its defacto control of Cyprus recognized (and the largest barrier to its entry to the EU removed), Greece gets to save billions in defence spending, NATO gets rid of its biggest interior military rivalry, Cyprus gets the money they need and presumably opening the border would be beneficial to the island economy. Its win, win, win, win. The only cost Cyprus giving up a purely theoretical claim to land they never had a chance of reclaiming anyways. If you’re Turkey though, why not just wait until Cyprus really implodes and is really desperate for capital with no relief in sight, then make an offer to buy the recognition on the cheap? ---
**Author:** ![Tom\_Scud](https://avatars.discourse-cdn.com/v4/letter/t/f08c70/32.png) [@Tom\_Scud](https://boards.straightdope.com/u/Tom_Scud)\ **Post date:** [March 20, 2013, 2:40am UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/115 "2013-03-20T02:40:28Z")
Pretty far off the discussion of the moment, but one odd thing I’ve noticed about the coverage of Cyprus is people talking as if they’d only become a major offshore banking destination in the last decade or so; in fact, they’ve been in that business at least since the Lebanese civil war got into full swing; the Russian money mainly replaced Middle Eastern money that had gone back to Lebanon, to Dubai, and other points. ---
**Author:** ![Capt.Ridley\_s\_Shooting\_Party](https://avatars.discourse-cdn.com/v4/letter/c/cc9497/32.png) [@Capt.Ridley\_s\_Shooting\_Party](https://boards.straightdope.com/u/Capt.Ridley_s_Shooting_Party)\ **Post date:** [March 20, 2013, 11:24am UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/116 "2013-03-20T11:24:02Z")
> [@Simplicio](#): > > Never happen in a million years, but [this is by far](http://www.slate.com/blogs/moneybox/2013/03/19/sell_northern_cyprus_the_way_out_of_debt_for_cyprus.html) the most rational way to solve the crisis. Have Turkey buy the half of the island they seized in the 70’s for a couple billion. Greek Cypriots might not like it, but Turkey isn’t going to give back their half whether Cyprus recognizes it or not, so they mind as well get some money for it. And the military standoff between Greece and Turkey costs both countries billions they (especially Greece) can’t really afford right now. > > Turkey gets its defacto control of Cyprus recognized (and the largest barrier to its entry to the EU removed), Greece gets to save billions in defence spending, NATO gets rid of its biggest interior military rivalry, Cyprus gets the money they need and presumably opening the border would be beneficial to the island economy. Its win, win, win, win. The only cost Cyprus giving up a purely theoretical claim to land they never had a chance of reclaiming anyways. I’ve heard suggestions that the UK should take on Cypriot debt, the Cypriots switch to GBP for a few years and the UK get some deal regarding to gas and oil fields supposedly around Cyprus, and then when things stabilise the Cypriots start printing their own currency again in a few years. Seems a bit wacky at first but: Cyprus has only been independent of the UK for the last 50 years, the UK still has a very strong connection with the island even today (the British base on the island effectively keeps the peace between the two halves, or has done until very recently), many British and Cypriot families reside in both countries, etc. and a Cypriot MP was on British TV last night saying that unless the issue is resolved in two days the Cypriot government is starting to print Cypriot Pounds again. I wonder how feasible it is? In other news, the entire European continent has gone off the deep end, as now the Spanish are trying [to implement their own depositors tax](http://economia.elpais.com/economia/2013/03/19/actualidad/1363720713_602578.html). ---
**Author:** ![AK84](https://avatars.discourse-cdn.com/v4/letter/a/85e7bf/32.png) [@AK84](https://boards.straightdope.com/u/AK84)\ **Post date:** [March 20, 2013, 1:52pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/117 "2013-03-20T13:52:24Z")
At this rate I won’t even be able to buy the popcorn for watching this train wreck. ---
**Author:** ![davidm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/davidm/32/225_2.png) [@davidm](https://boards.straightdope.com/u/davidm)\ **Post date:** [March 20, 2013, 2:06pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/118 "2013-03-20T14:06:57Z")
Russia may come to the rescue. > **[Cyprus loan talks in Moscow constructive, says finance minister](https://www.theguardian.com/world/2013/mar/20/cyprus-loan-talks-constructive-minister)** > > Michael Sarris says there have been 'no offers, nothing concrete' and he will stay in Moscow until a deal is reached > [@](#): > > Russian banks and businesses are believed to have more than $30bn held in banks in Cyprus, the country’s favoured offshore tax haven. The proposed levy would have forced rich Russians as well as not-so-wealthy Cypriots to contribute to the EU bailout. > > Putin was one of the loudest critics of the plan, calling it “unfair, unprofessional and dangerous”. Russian officials expressed dismay that they were not informed of the proposal in advance. > > Now, in its role as potential saviour, the Kremlin is believed to be haggling for shares in Cypriot banks and gas fields in exchange for the requested loan, the Russian press reported. ---
**Author:** ![MOIDALIZE](https://avatars.discourse-cdn.com/v4/letter/m/e274bd/32.png) [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)\ **Post date:** [March 20, 2013, 2:37pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/119 "2013-03-20T14:37:20Z")
> [@Simplicio](#): > > Never happen in a million years, but [this is by far](http://www.slate.com/blogs/moneybox/2013/03/19/sell_northern_cyprus_the_way_out_of_debt_for_cyprus.html) the most rational way to solve the crisis. Have Turkey buy the half of the island they seized in the 70’s for a couple billion. Greek Cypriots might not like it, but Turkey isn’t going to give back their half whether Cyprus recognizes it or not, so they mind as well get some money for it. And the military standoff between Greece and Turkey costs both countries billions they (especially Greece) can’t really afford right now. > > Turkey gets its defacto control of Cyprus recognized (and the largest barrier to its entry to the EU removed), Greece gets to save billions in defence spending, NATO gets rid of its biggest interior military rivalry, Cyprus gets the money they need and presumably opening the border would be beneficial to the island economy. Its win, win, win, win. The only cost Cyprus giving up a purely theoretical claim to land they never had a chance of reclaiming anyways. It’s been pointed out elsewhere that even mentioning something like this in Nicosia would get you punched in the face, and any Cypriot government official who actually tried to move forward with such a plan would be liable to get assassinated. But Matt Yglesias doesn’t seem to understand that politics will stand in the way of his tidy and oh so clever solutions. ---
**Author:** ![Simplicio](https://avatars.discourse-cdn.com/v4/letter/s/c37758/32.png) [@Simplicio](https://boards.straightdope.com/u/Simplicio)\ **Post date:** [March 20, 2013, 2:54pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/120 "2013-03-20T14:54:20Z")
> [@MOIDALIZE](#): > > But Matt Yglesias doesn’t seem to understand that politics will stand in the way of his tidy and oh so clever solutions. Err…he stresses that he knows it won’t actually happen in his column (you have to be clever enough to read all the way to the second sentence of his post to get to that part), and the first sentence of my post is that it “won’t happen in a million years”. Everyone understands the politics involved. But its still worth pointing out that the politics are stupid. [Previous page](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089.md?page=5) [Next page](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089.md?page=7)