Cypriots Frantic As Bailout Hits Bank Accounts

Cypriots line up at ATM's that ran out of cash
Cypriots line up at ATM’s that ran out of cash fast

Angry Cypriots who weren’t notified that up to 9.9 percent of their bank deposits would be seized by the newly-elected Conservative government to help pay for bailing out the country’s economy were prevented from withdrawing their money on March 16 by limits set by the institutions and as ATM’s ran out of money.

It was also reported that the accounts would be frozen temporarily to prevent a run on the banks that could bring them down. Cyprus agreed to a 10 billion euros ($13 billion) rescue package from international lenders who insisted on depositors paying part of the cost for the mistakes the banks made by exposing themselves to large holdings of devalued Greek bonds.

The decision was unprecedented and led some analysts to speculate that it could undermine the banking system in weaker Eurozone countries if customers fear their savings could face a similar tax.

Cyprus said there will be a one-time levy of 6.75 percent on accounts up to 100,000 euros ($130,000) and 9.9 percent on amounts over that. Earning interest will also be taxed at  20-25 percent, further depleting the customer’s bank accounts. Cyprus’s creditors now will be able to step around the country’s sovereignty and seize money from not just the wealthy, but the bank accounts of  pensioners, workers and smaller  depositors to pay off the bailout tab, along with increased taxes they will have to come up with to pay for the banks mismanagement.

“What the deal reflects is that being an unsecured or even secured depositor in euro area banks is not as safe as it used to be,” Jacob Kirkegaard, an economist and European specialist at the Peterson Institute for International Economics in Washington told the New York Times. “We are in a new world.”

The decision was made late in the night in Brussels on Friday, March 15, at a meeting of Eurozone officials. It was the start of a three-day weekend in Greece and Cyprus, with services and banks closed on Clean Monday, March 18, a day of celebration marking the beginning of Lent.

There was no word on whether the timing was deliberate to prevent customers from accessing their accounts and cleaning out the banks.

As panicked customers fled to Cypriot banks on Saturday morning, March 16, they found some of them closed, ATM’s either blocking their accounts or limiting their amounts, and a limit on how much they could withdraw.

The General Manager of the Central Cooperative Bank, Erotokritos Chlorakiotis, told Cypriot national radio that, “In order to avoid the worst, the cooperatives will remain closed today.”

Some branches that had not been informed closed after they heard the news to prevent a run on the banks that could have brought them down. Chlorakiotis told customers not to attempt to take out their money because Cypriot officials are negotiating with the Eurozone, who had promised depositors their accounts were safe. The Cypriot government , Chlorakiotis said, kept him and bank officials in the dark and did not notify them of what had happened in Brussels.

“These measures taken will have painful consequences on deposits,” he said.

The news of the agreement was greeted with shock in Cyprus because new President Nikos Anastasiades, in office only a few weeks, had said he and his advisors were opposed to the so-called “haircut” on bank deposits but he quickly relented to demands by the Eurozone, which makes up part of the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that is putting up the bailout monies that will be leveraged by the tax on bank accounts.

Anastasiades was due to convene his cabinet and meet with rival political leaders later on March 16 and address the nation on March 17. Failed Presidential candidate Giorgos Lillikas called for a referendum to be held on whether Cypriots were willing to accept the tax on deposits. Failing that, he said that snap presidential elections should be called.

He said he was in talks with economists about creating a plan for Cyprus to leave the euro and return to the Cypriot pound. The General Secretary of Cyprus’s Communist Party (AKEL), Andros Kyprianou, said his party is considering advising Anastasiades to call a referendum or to pull Cyprus out of the Eurozone.

 


  • Cypriot

    Today is a historic day, where the people of Cyprus were robbed by their own government in broad daylight.

  • Greece is a farce

    I wonder if the newly elected President got his money frozen to help pay for the bailout? I’d hate to be the bank teller when the bank opens on Monday.

    All politicians & their supporters like Kostas Mehmedi from Athens should be hanged

  • Andrew

    Everyone should pull their money out of their virtually zero interest bearing accounts and crash this ponzi scheming banking cartel for good, we should all adopt a mutual policy, where share/bond holders make nothing, and the normal man and woman share in the profits instead, this will have so many benefits, such as the fair distribution of weath, an end to the pursuit of profit which is destroying the environment, and a happier people in charge of their own local issues rather than thosed imposed by bond holder corrupted politicians. If you truly want a better world then let’s cause a bank run now, and introduce debt free money while we are at it, as interest on money only enriches those who have too much of it already, it was designed that way, everything was designed to allow the rich to make money from money rather than actually have to work for it or use it productively.

  • Communist troll alert

    Those stinking rich people and politicians are all corrupt. They are to blame because I am are poor. I had nothing to do with it. I am a victim.

    Lets clean up the corruption like Pol Pot did in Cambodia. It ain’t stealing as long as it’s the government that’s taking money I didn’t earn myself. Please feel sorry for me as I argue to forcefully take money out of some other person’s wallet to put into my own.

  • MORE FRAUD & CRIMINAL ACTIVITY FROM THE EU COMMISSION & GERMANY!
    The whole rotten Eurozone will crumble soon.

  • Communist troll— We all know it’s you again Alex using a new handle… Get a life!

  • Agree fully…. Run on the corrupt Banks and bring this whole rotten thing down!

  • Worldarts High School Dropout

    Paul Johnston “PhD”. We all know its you again Worldarts using a new handle… Get a life!

  • Worldarts PhD

    More fraud from Worldarts posting as Paul Johnston PhD.

    Your beloved communism has already failed miserably comrade. No need to wait.

    Oh wait, thats right. You support XA under your Paul Johnston handle now. Rather facinating how your positions keep changing. Why don’t you explain to everyone whether you support Syriza or XA today?

  • Alex

    Its not really the Cypriot government. Its the troika handing out conditions for bailout I’m as disturbed by this as you though. I completely understand the need for spending cutbacks but I don’t understand why the troika would suggest something like this. It will only further undermine confidence in an already stressed banking system (as many people are likely to pull out their money in economically stressed states out of fear they’ll be next).

    Given this comes with input from the IMF, who must have considered this, there must be some additional rationale we’re missing. Maybe their experimenting small scale with Cyprus to try and gage how the same “tax collection” technique might work in bigger stressed states?

    Whatever the case though, this is playing with fire. It potentially undermines confidence in the banking sector. Seems like an huge gamble to take for such small stake return as tiny Cyprus. This dip into personal bank accounts, with the approval of the IMF no less, will be a shot heard round the world with very wide political and economic implications.

    http://www.huffingtonpost.com/2013/03/17/paul-krugman-cyprus-bailout_n_2896945.html?utm_hp_ref=business

  • Worldarts PhD

    Agree fully… expose Paul Johnston and bring this whole rotten thing down.

  • Cypriot

    Yes but the Cypriot government doesn’t have to accept the conditions. Anyway, we’ll see today whether parliament votes in favour of it.

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