Bad news for investors and business owners in Cyprus

Posted by Progress in ,


It's bad news all around for investors and businesses in the Island of Cyprus and we hope that not too many PT's got caught out!

It appears the Government as of Saturday 16th of March will trade the rights of depositors' (both resident and overseas) hard earned savings, to resolve the Banking mess and the excesses of Government expenditure. 

Having just been elected, the new right wing Government wasted no time in striking a deal with the EU and international lenders, which amounts to a Cyprus bailout worth 10 billion euros. To make it happen all depositors have been severely penalized for trusting the banks of Cyprus with their money and the Government to protect their private financial rights. The problem in Cyprus was not caused by the depositors, however this draconian rule will in reality mean the following:
  • Depositors with over 100,000 euro in the bank will as of next Tuesday be 10% worse off.
  • Depositors with less than 100,000 euro in the bank will as of next Tuesday be 6.7% worse off.
What rights do the people have in Cyprus to their private money - seemingly none! Even the money of the poor, sick, old, frail and vulnerable will be taken. The Cypriot Finance minister that sold out depositors said "I wish I was not the minister to do this". We are certain that most depositors wished that he did not also and one wonders if he took his own money out first!

Cyprus is the 5th country following Greece, Ireland, Portugal and Spain to seek financial help from the EU. The Cyprus bailout is the worst yet for the people and stands in stark contrast from previous aid packages, as unelected (meaning by the people) EU ministers target savers to fix the problems caused by the banks and Government, which the new administration agreed to at the start of their term, giving them 5 years to explain the action. 

This will not doubt put shivers up the spine of all EU residents, as everyone wonders who is next? Cyprus already has a liquidity problem, and one wonders who will ever invest their money in a Cypriot bank again! Trust is so hard to gain and so easy to lose! It will likely take a generation to turn this around. We understand that about half of all depositors are non-resident Russians, so no doubt its a strategical move from the EU, America, Russia and the IMF to stop Russians from depositing in Cyprus, as Cyprus until now held what we believe to be the third largest Russian deposits in the world.  

What appears to be and feels like the daylight robbery of depositors over a bank holiday weekend will raise around 6 billion euros for the Government. This allowed the Government to request a smaller bailout than initially indicated (over 17 billion) and the Government claim its needed to re-capitalize the banks (hit by the debt of restructuring in Greece).

The Dutch Finance Minister, namely Jeroen Dijsselbloem who was deeply involved in the negotiations, actually had the audacity to say "We are not penalizing Cyprus... we are dealing with the problems in Cyprus". In the cold light of day, it is more accurate to say that the EU is both targeting and penalizing the people of Cyprus and all depositors within it banks. Not even an articulate EU Minister can fool the people otherwise. 

Without due notice or civil rights, the Banks will take immediate action to prevent electronic money transfers over the weekend, so if you have money in a Cypriot bank, you can consider up to 10% of it lost! Don't think for a minute you have any rights to recover it either!

What is worse, the Government caved-in by agreeing to increase the corporate tax rate with the promise that the island's debt would fall to 100% of economic output by 2020. This will of course destroy the Islands international business sector. 

Whatever will happen to the economy of Cyprus now? People will leave the Island in the thousands, withdraw all of their assets, overseas businesses and investors alike will steer clear of Cyprus too unless they desire to tap into the country's oil and gas riches in the future, which is an elite few. 

We welcome your comments.

Progress

This information box about the author only appears if the author has biographical information. Otherwise there is not author box shown. Follow SORA on Twitter or read the blog.

0 comments: