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Russia Unhappy About Cyprus Bailout, But Damage Already Done

ByMetalMiner
Published 03/21/2013, 03:32 AM
Updated 07/09/2023, 06:31 AM

Under the EU-ECB-IMF deal with Cyprus’ president, obviously with an eye on the previous limit, a levy of 6.75 percent would be imposed on bank savings of up to €100,000, while deposits over this level would be hit with a 9.9 percent tax.

In true EU form, everyone disappeared into a room, locked the doors and came up with a new plan. The hastily revised proposal is now to protect savers below the limit from any tax, but EU finance ministers are proposing Cyprus impose a levy of 15.6 percent on those over €100,000.

Moscow has been among the most vocal opposers to that idea, as they hold the largest depositor block among the island’s banks, notably in the greater-than-€100,000-area. The Cypriot finance minister promptly hopped on a plane to Moscow to try to placate his Russian paymasters.

On the markets, the damage, in part, is already done.

Bank shares across Europe led the drop, as it was realized (regardless of protestations otherwise by the EU and ECB) that if it is ok to impose such a levy today on Cyprus, who could it be tomorrow? Spain? Italy?

With bond auctions coming up this week, it will be interesting to see if the other Club Med countries manage to sell their debt at levels they have enjoyed over recent months; the markets are understandably rattled.

Did anyone honestly think the European debt crisis was settled?

by Stuart Burns

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