Skip to comments.Cyprus to shape future euro bank rescues: Eurogroup head
Posted on 03/26/2013 1:01:30 PM PDT by EBH
A rescue program agreed for Cyprus will serve as a model for dealing with future euro zone banking crises and other countries will have to restructure their banking sectors, the head of the region's finance ministers said.
The approach would mark a radical departure for euro zone policy after three years of crisis in which taxpayers across the region have effectively been on the hook for resolving problem banks and indebted governments via multiple rescue programs.
"What we've done last night is what I call pushing back the risks," Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times on Monday, hours after the deal was struck.
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?'. If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders," he said.
(Excerpt) Read more at reuters.com ...
Bank Run in Europe now or lose it all. They just put the handwriting on the wall for all to see!
Obama is salivating.
If people have enough money to deposit part of it in a bank, they don’t really need it. My neighborhood Wells Fargo Bank will heartily endorse that. We can fully fund our entitlements and create new ones by taking 40% of the rich bank depositor’s money.
This is really pretty incredible to watch come to full fruition. I am reading this stuff and wondering when the riots start and why it seems like NO ONE is doing anything! Is the apathy really this thick in the world?
And these idiots are going to be shocked when more institutions start failing due to the bank run they created...
These finance ministers are legends in their own minds. No amount of financial gimmickery can compensate for three generations of deficit spending, consuming more than is produced and non sustainable debt. This latest gimmick of confiscating private wealth is not exactly new. Wherever it has been done for economic or political reasons, the results have been catostrophic. Ask the Russians or Chinese. Capital flees, people become less productive and economies eventually contract and collapse. An orderly bankruptcy, political and economic reform is the only effective course for the West or it will collapse.
Just wait until the economy collapses...then they will riot.
That is just it. They will just come and take it.
They are calling this as taking from the “rich” and talk of Russia money laundering, but really how much is 100,000 eu? $128,000 dollars?
That is the small business man,...that is a retirement account for a middleclass person...
Maybe because this "bailout" actually wiped out bank shareholders for once. That is a GOOD thing. It also went after uninsured accounts over 100k Euro, that is also preferable to forcing taxpayers to bailout the banks. Now investors will just have to be more careful where they put their money. The Russian mob, for example, will have to find greener pastures for their investments and deposits.
Not all bank runs are quick (some are artificially slowed)...but confiscating free capital for the state is an assured way to make it (capital) evaporate.
What what is left in the banks after the confiscation will be transferred elsewhere, causing the banks to collapse.
Matthew 25: 14-30
Of course the difference here being the depositors are owners and not servants.
That is not much ...screw all this talk about the Russian mob money, it is a distraction to what is really happening to the average person on the street.
They're not going to follow this pattern because the larger bailouts have already been done in the larger countries.
This was a signal from the EU (mostly Germany) that it's had just about enough of bailing everyone out.
Only a Free Trader Communist Globalist thinks it’s OK for taxpayers to bail out banks when Free Trade organizations (which is what the EU is) order citizens to do so....because its Free Trade Communist policies failed
Americans actually dealt with such almost two decades ago when we bailed out Mexican financial institutions with $40-45 billion right after NAFTA passed. You can be sure a Cyprus style bailout will be tried here by the Free Trade Communists
The people who will riot and create violence are typically not rich.
How much is 100k Eu?
Maybe in the future the "average person on the street" will start voting for more responsible governments that don't massively overspend and allow their nations banking system to implode?
I think about $130,000
I know that’s not “rich”, but they still have something to lose.
You or I wouldn’t have been voting for them...but we’d be paying....
so much for it being a “one off”
I am sure the Dems are taking copious notes
That is only the first tranche, there will be more bailouts required in Portugal, Spain, Italy, and even France.
And so what is this quibbling we here from 0bama about $250,00? So it is OK for the Cypriot businessman to lose? I don't get what appears to me to by your nonchalance about it?
Exactly! Why would anyone in the EU keep money in the banking system now that the handwriting is on the wall?
Socialism on the march
My guess is that those tranches are less likely to asked for now that the precedent has been set in Cyprus ... bailouts are no longer free.
And now that there is precedent for confiscation of bank capital...the EU is aglow with excitement over this new opportunity.
Perhaps German taxpayers are aglow with the prospect of getting something back after bailing out so many freeloaders.
Wait - why’s this the “opposite of a bailout,” therefore good?
This is theft of deposits and shareholder worth, pure and simple.
Theft by whom? The bank(s) have failed. The only people that actually deserve their money are the insured depositors. And that is exactly who is NOT getting wiped out or taking a huge haircut - the insured depositors. There is no good solution here. This one is just better than going directly to the taxpayers to bail out yet more banks. In this case the shareholders in the “bad” banks lose everything - just like shareholders in other bankrupt company lose their shirt. That’s how it should work. Uninsured depositors (deposit amounts over 100k Euro) are going a lot of money, but that’s better than losing ALL their money. Everyone knew these banks were in serious trouble, and they knew it for a long time now. Shareholders and big depositors just bet on the resolution being another typical tax payer financed bailout, the were wrong.
What you did last night is what I call theft.
“Uninsured deposits” are presumably at risk from common theft — not govts. and policies supposedly in place to ENFORCE these very agreements (rule of law).
You seem like a ‘Rat visitor, from your “comments.”
Have a nice day (get lost.)
You're the one that posted to me first you dimwit. Now I see you are clearly a real jerk too.
Uninsured deposits are presumably at risk from common theft not govts. and policies supposedly in place to ENFORCE these very agreements (rule of law).
The banks failed you idiot. Do you get that? FAILED. That's why deposit insurance exists, to protect people in the event of bank failure. People were either going to lose some of their money or ALL of their money. The other option was for another taxpayer funded bailout of banks - which was thankfully rejected.
There was no good solution here. The government and the banks were negligent and have been for years. The voters are ultimately responsible for the corruption they allowed to take root through the politicians they've been voting for over and over again.
You seem like a Rat visitor, from your comments.
You obviously have zero idea what you are talking about. Maybe you should take the time to learn something, which you clearly need to do, instead of just hurling insults. The reason this bailout is better than what we've seen in the past is because it held bank shareholders responsible, rather than immediately ask taxpayers to bail them out. Uninsured deposits are just that, uninsured. Everyone in the entire world knew Cyprus' banks were in deep trouble. There is no good outcome here, but this is better than what we've seen in Greece and elsewhere. For once "bad" banks will be allowed to fail, shareholders will get wiped out and uninsured depositors (over 100k Euro) will only lose some of their money instead of all of it.
You don’t know what you’re talking about. Thanks for siding with govt seizures of wealth to “solve” public-sector deficits. Why are you defending this overt state interventionism?
“Whether in Cyprus or in other countries, politicians tend to think in short run terms, if only because elections are held in the short run. Therefore, there is always a temptation to do reckless and short-sighted things to get over some current problem, even if that creates far worse problems in the long run.
Seizing money that people put in the bank would be a classic example of such short-sighted policies.
“After going back and forth, the government of Cyprus ultimately decided, under international pressure, to go ahead with its plan to raid people’s bank accounts.
“But could similar policies be imposed in other countries, including the United States? One of the big differences between the United States and Cyprus is that the U.S. government can simply print more money to get out of a financial crisis. But Cyprus cannot print more euros, which are controlled by international institutions.”
- Tom Sowell, “Can It happen Here?”
FYI, the depositors are “Taxpayers” too. Why are you siding with taxpayers on the supply (filers) side, yet not siding with asset holders who are now “defacto” taxpayers preyed upon BY THE STATE?
Why not have the politicians do the perp walk, plus, cut down on all the state spending to unions, corporate welfare seekers, rent seekers, etc. to solve this problem?
Are we really arguing about this????????
Actually I know exactly what I am talking about. I didn't say this this was a wonderful solution, I said it was better than the alternative. I explained to people like yourself, who obviously have no clue what they are talking about, why this resolution got some things right.
Thanks for siding with govt seizures of wealth to solve public-sector deficits. Why are you defending this overt state interventionism?
As opposed to what? You do realize the other solution was seizing money from the taxpayers to bailout the banks, right? You do understand that the banks had failed and without some extraordinary action they would simply fold and everyone would lose everything. So are you for a taxpayer funded bank bailout instead? Do you even understand that doing nothing wasn't an option? Cypriots may not like this solution, but the government would have immediately collapsed if it had done nothing and the banks were allowed to simply implode. You do understand that the vast bulk of depositors (100K Euro and less) will not lose anything with this resolution. And no, Cypriots are not willing to default and leave the EU - and that wouldn't have helped them with the immediate problem of collapsed banks.
No one is saying this is a terrific outcome, only that is has some better features than past bailouts. This solution finally holds bank share and bondholders responsible. If you are invested in the "bad" banks (Marfin-Laiki), you are probably completely wiped out. That is how it should be. If bank share and bondholders (aka "banksters" as they've come to be called) know they could lose everything, they may start demanding the their banks adhere to more rigorous standards. This solution also treats different banks differently, which is something that should have been done all along. Uninsured depositors in the worst, most irresponsible banks will lose the most money.
How does that solve the immediate bank problem? The banks were imploding, do you not get that? Arresting all the past irresponsible politicians that Cypriots had voted for over the years is a great idea, but it isn't going to solve the immediate issue. Do you even know that this current government was just elected in February and is from the conservative party? What good would arresting him do?
Apparently you have not read my past comments that blast the irresponsibility of the Cypriot voters for electing corrupt governments again and again that overspent, ran up huge debt, built an unaffordable public sector, allowed the banks to become shot through with corruption, etc. I am one of the few people that directly blame the voters instead of conjuring up nefarious conspiracy theories involving neo-cons, the Bilderberg Group, etc, to explain how Europeans arrived at this sad point in their history. Everything that is happening here is ultimately the result of voters that put spendthrift politicians in power who tried to maintain an unaffordable social welfare state (we're not so far behind Cyprus ourselves). Pointing fingers now won't fix the banks though. This wasn't a wonderful solution, but it was better than past bailouts - which has been my point all along.
When banks fail, the shareholders, bondholders and uninsured depositors of that bank are SUPPOSED to be the ones to take the biggest hit. What are you not getting about that? If you invest in a company and it goes belly-up, you lose your shirt - not other people who weren't invested in it. We shouldn't be bailing out bank bond/shareholders. And uninsured depositors should count themselves lucky they are only taking a haircut instead of losing everything.