Sneaky barstewards - Cypriot banking crisis

[adrian99]

Re: Cyprus government steals from bank accounts

Me too - why should the Germans have to bail everyone out all the time? If our economy was performing well and we were constantly bailing other nations out who had mismanged their economies I would be hacked off as well

It has not been all one way traffic though, these mismanaged and poorer economies have kept the value of the Euro lower which has benefited German exports. Had the Euro not included the PIIGS selling BMW's, Porsche's, Audi's and Kärchers to wash them with would have been much more difficult.

If the Europeans are serious about sorting out the Euro the best way to achieve it is for Germany to leave and return to the Deutschmark, it is successful Germany that is the odd one out in the Euro club.

Anybody would think they planned it that way.

Looks like they did and it has worked out very well for them.

<a class="postlink" href="http://www.omfif.org/downloads/The%20OMFIF%20Commentary%2021-1-12.pdf" onclick="window.open(this.href);return false;">http://www.omfif.org/downloads/The%20OM ... 1-1-12.pdf</a>

The euro was conceived, at least in part, to bolster German prosperity by protecting the country’s foreign trade from the danger of continual D-Mark appreciation. Germany’s prosperity has indeed been buttressed by export growth – but this has been in the direction of non-euro countries. According to latest Bundesbank statistics on visible trade, in the first nine months of last year, Germany carried out only 37% of its imports and exports with the other euro member states, compared with shares of 45 to 46% when the euro started in 1999.

The fastest-growing partners for German foreign trade are the US, non-European emerging economies like China, India, Korea, Indonesia and Brazil, and also European states outside EMU.

Britain is frequently reprimanded by Germans for its questioning stance on Europe. But surprise, surprise – in January-September last year the Brits became Germany’s No. 1 trading partner for goods and services taken together. Taking into account overall exports and imports, Germany’s foreign trade turnover with the UK totalled €153bn in the first three quarters, followed by France and the US with €150bn, the Netherlands with €146bn and China with €115bn.

We see a similar picture with other European countries. Germany’s foreign trade with non euro Switzerland is 20% higher than with core EMU member Italy. Similarly, Germany carries out in each case 20 to 40% more trade with the Czech Republic, Poland and Russia, none of which is in EMU, than with Spain, the euro area’s third biggest economy. Non members Denmark and Turkey each account for roughly the same volume of German foreign trade as the combined total of Greece, Portugal and Ireland.

EMU remains politically important for the Germans. It is the ultimate symbolic confirmation that Europe has changed its ways since the Second World War. But this political symbolism requires a progressively higher price – and is achieved at the expense of purely economic interests that now, for Germany, have clearly moved well beyond the euro area.

Official Monetary and Financial Institutions Forum <a class="postlink" href="http://www.omfif.org" onclick="window.open(this.href);return false;">http://www.omfif.org</a>

 

[RandomJ]

The Germans new plan of conquering Europe - Economics.

 

[metalblue]

Re: Cyprus government steals from bank accounts

As the pound falls inflation will rise as imports cost more. The bond market is a real danger point as any increase in the cost of borrowing will add to our borrowing requirements already another £120 billion this year, this is where I see the real crash starting. No country in history had ever recovered from the debts we are in, I read a piece the other day that stated our debts at 900% of GDP a similar level to that of Wiemar. It also stated the US post the crash debt was around 250% of GDP if I remember correctly.

This is worth a look <a class="postlink" href="http://www.moneyweek.com/news-and-charts/economics/uk/the-end-of-britain-sources" onclick="window.open(this.href);return false;">http://www.moneyweek.com/news-and-chart ... in-sources</a>

This guy isn't convinced all is well <a class="postlink" href="http://www.bbc.co.uk/news/uk-politics-21199252" onclick="window.open(this.href);return false;">http://www.bbc.co.uk/news/uk-politics-21199252</a>

To see government income and spending see pages 7 & 8 <a class="postlink" href="http://cdn.hm-treasury.gov.uk/budget2012_complete.pdf" onclick="window.open(this.href);return false;">http://cdn.hm-treasury.gov.uk/budget2012_complete.pdf</a>

You will see the tax raised on all petrol, booze and fags only pays for the cost of our current national debt.

Alright, before cats start sleeping with dogs lets get a few facts together:

The UK budget deficit is running at around £120-130 billion, around 7.5% of the national GDP. The low interest rates will help keep servicing costs low, currently around 3% of GDP (£45 billion).

Uk GDP is around £1.5 trillion, and our indebtedness will reach about £1.1 trillion this year, around 75% of GDP.

We have ran very high levels of debt to GDP in both world wars, over 200% of GDP following the last one. So not the end of the world.

The sources you mentioned are good (i subscribe to moneyweek and there's often good info, but sometimes its contradictory, depending on the politics involved and who's selling what!) but to be honest nobody really knows what will happen, I suspect things may well get worse before they get better.. one thing is for sure, if we go down we are taking the global financial system with us.

Edit:

For more info on UK debt
http://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/

I find it interesting that GDP is used against the cost of debt and that doing so makes the cost look smaller and so less threatening. Using the Budget 2012 UK government income was stated at £592bn and the cost of debt at £46bn so the cost of our current national debt is just over 9% of actual government income which makes sense given the £1.5tn GDP you stated. This £46bn figure is all but £2bn of every penny collected from petrol, fags and alcohol so it's a significant figure, greater than the £29bn defence budget and more than a third of the £130bn NHS budget.

“The UK budget deficit is running at around £120-130 billion, around 7.5% of the national GDP. The low interest rates will help keep servicing costs low, currently around 3% of GDP (£45 billion). “ This for me is the point, the government is over reliant on historically low costs in the bond market and this is the very reason they are currently “manageable”. As they are at historical lows lets imagine they double and for simplicities sake that adds £46bn to our borrowing costs where does this money come from? We could borrow more but that would place greater upwards pressure on borrowing costs or we could QE more but that would at the very least weaken the pound and affect inflation, it's not a pleasant prospect either way.

We are at the whim of the markets, sure most UK debt is owned by UK institutions but a third is owned outside the UK. I understand the cost of government borrowing was 18% under Thatcher, today the figure is nearer 3%, so government debt looks cheap today, well it does for the moment, should the markets lose confidence in UK plc this could change very rapidly.

I realise we are discussing the countries finances but as individuals we are also over reliant on historically low interest rates, base rates are 0.5% they were 16% in 1980, 10% in 82, 10% in 1991, 6% in 2000, 5% in 2008 and then were reduced to 2% by year end then reduced to 0.5% during 2009. Who could afford an increase of 2% to their monthly mortgage fee, how many homes would be repossessed? What about a 5% increase?

Re WWI and II both these conflicts had us heading to the US looking for a bail out as our economy was bust, saying we got through them OK is only true because we secured lending to prop up our busted country, had we not things would have turned out very differently.

What else would you use other than a relationship to GDP fella? Inflation erodes debt over time by increasing income and real GDP per capita is (in part) a reliable indication of how that inflation (both prices and people in this instance) is being absorbed by the economy, the difference between our nominal GDP and real GDP is ~£100bn so not skeletons in that cupboard.

I had a quick look at them links. A few comments on the money week one;

1. Financial intervention debt takes highest point of guarantees only somebody wishing to paint a bearish picture would include them today...I'm not even sure to what extent they still exist.

2. Financial institution debt...they don't really say what the measurement is, perhaps a measurement of notional value of all trades novated in UK or all trades excuted through UK? we are home to vibrant currency, commodities and stock markets...I'm surprised its only £3.6tr. Nonetheless it isn't debt we are liable for per-se although exchanges are treasury guaranteed to an extent (and not everything that london trades is listed business) it would take a global collapse to trigger systematic failure to settle and we will all have much bigger problems than worrying about £3.6tr. In summary this "debt" looks like posturing on behalf of the authors

3. Unfunded public sector debt, its due over time, but ok to mention it

4. Not really sure what to say about private and corporation debt, I'm sure the authors have some relevant reason for including it but it isn't clear to me.

In overall summary imo like for like our debt isn't too bad (our problem remains the deficit), if the debt the authors allude to became due (which isn't possible given some remains due over time) we would all be looking at a much larger abyss than the UK economic collapse. Makes for attention grabbing headlines thou, as I've said before on these hallowed pages, want to get your name in lights in financial circles? Say something outrageous.

The public sector pensions is our gift to our children, as I also said before regarding austerity we need to be a little less precious about it and get our deficit under control, otherwise our kids will pay for it or their kids or...somebody will.<br /><br />-- Tue Mar 19, 2013 9:00 am --<br /><br />

From the papers:

Angela Merkel has insisted it was right that all depositors in Cypriot banks should share the responsibility of bailing out the state. At an election rally, in Germany, the Chancellor said: “Anyone having their money in Cypriot banks must contribute in the Cypriot bailout. That way those responsible will contribute in it, not only the taxpayers of other countries, and that is what’s right.”

I don't see anything wrong with that. If you have savings you cannot be classed as poor, so should contribute something. This 'solidarity levy' seems fair.

Me too - why should the Germans have to bail everyone out all the time? If our economy was performing well and we were constantly bailing other nations out who had mismanged their economies I would be hacked off as well

It has not been all one way traffic though, these mismanaged and poorer economies have kept the value of the Euro lower which has benefited German exports. Had the Euro not included the PIIGS selling BMW's, Porsche's, Audi's and Kärchers to wash them with would have been much more difficult.

If the Europeans are serious about sorting out the Euro the best way to achieve it is for Germany to leave and return to the Deutschmark, it is successful Germany that is the odd one out in the Euro club.

So the best solution to make the euro work is to remove the one thing that currently works? I'm not convinced. The germans are too involved to leave and the bill for withdrawing from the euro is put at €1tr, this is the reason the euro hasn't been fed to the wolves (despite the nutjobs that are in charge and hence this thread). The euro needs to be centralised with counties governments performing the role of local councils...only then will it work.

 

[scotty123]

Cypriot government backtracking slightly, they have just announced anybody with 20,000 euros or less will not be taxed, over 20,000 up to 100,000 its still 6.7pc, over that 9.7pc bit of relief then

 

[paphos-mcfc]

 

[scotty123]

Nice one Paphos

 

[Manc in London]

Cypriot government backtracking slightly, they have just announced anybody with 20,000 euros or less will not be taxed, over 20,000 up to 100,000 its still 6.7pc, over that 9.7pc bit of relief then

In my experience, based on the missus' family, the older Greek Cypriots are very carfeul with their cash. They tend not to blow it on nice cars and luxury holidays. They are more concerned about passing their money down to the children. This often takes the form of buying land or property, or putting it into an account. Thus, the raid on accounts will hurt the ordinary Cypriots, not just the wealthy.

The missus' gran will lose about £10k. She's not wealthy. She has simply lived a simple life for 30-40 years, in order to save money for her children. It's quite sad really. She worked until she was 70 and the only treat she indulges in is getting her hair done once every few months. Thankfully, most of her money is in accounts under the names of her children, and some of it is in the UK.

 

[M18CTID]

While I agree that Germany can't go on bailing other countries out, I can't believe I'm reading people on this thread agreeing with this course of action. Seriously, this is wrong on so many different levels and punishing ordinary citizens for the incompetence of others is an utter disgrace. To raid people's savings without any warning and to not give those people a chance to move their money elsewhere is literally the equivalent to being robbed. I'd be shocked if it was happening in a so-called third world country under a blatantly corrupt government. For it to be taking place in a civilised European country, in the 21st century, beggars belief.

 

[scotty123]

Just had a phone conversation with the bloke who lived next door to us in Paphos, hes going to get hammered with this tax, and i feel for him.
Like me he has taken early retirement and moved out there 4 years ago, he sold his house in Preston and moved lock stock to Cyprus and put half his cash in Bank of Cyprus and other half in Alpha bank, hes at his wits end same as all the other ex pats 45 years working and saving like mad to fulfill his dream now hes being robbed blind.
Once all this is sorted and he knows where he stands hes leaving Cyprus and trying for Canada with his daughter who lives there
Thank god for we had a lucky escape and came home in October, to lose that amount of money would have pushed my wife over the edge

 

[adrian99]

While I agree that Germany can't go on bailing other countries out, I can't believe I'm reading people on this thread agreeing with this course of action. Seriously, this is wrong on so many different levels and punishing ordinary citizens for the incompetence of others is an utter disgrace. To raid people's savings without any warning and to not give those people a chance to move their money elsewhere is literally the equivalent to being robbed. I'd be shocked if it was happening in a so-called third world country under a blatantly corrupt government. For it to be taking place in a civilised European country, in the 21st century, beggars belief.

Germany has benefited massively from these countries it is now "bailing out". I agree it is outrageous to steal from ordinary savers but it shows the desperation that exists out there. But there are some crazy things going on, the ECB handed out over £1 trillion Euro's of free money to bail out Europe's banks 14 months ago, who ever heard of a central bank handing out free money to support failed businesses before? In a post earlier it was suggested inflation may be a route out of our debt problems, in my youth inflation was the great evil, now it's suggested as a cure! What next devaluation? Nationalisation of private pensions? Nothing is safe when governments run out of cash.

It is also outrageous that Osborne immediately stated that the military and UK government workers would be compensated, what he failed to spell out was that this would be funded by ordinary tax payers in the UK. The reality is that it will be funded by more borrowed money as the UK finances are nothing but a giant ponzi scheme. Whilst the figure won't be huge it tells you something loud and clear, we are not all in this together, government workers are protected whilst UK retirees and UK citizens in private business in Cyprus are not.

I have no problem with protecting the average squaddie who was ordered out there but well paid officers and government workers who when you look at the big picture don't really pay tax at all.