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[olemars]

Cyprus has the same problem as Iceland had. Banking sector is 7 times larger than GDP, not a lot of government income to secure assets. They're struggling now in part because of Greece actually. Cypriot banks had a lot of Greek debt that they suddenly had to chalk up as total loss. Hence begging for bailout now.

[Sheb]

Shouldn't they do as the Icelandish did? Bail out their citizens, let the banks sink, send the Russians packing and re-write the constitution?

[10ebbor10]

I'm sure Greece is doing pretty well, not being bankrupt and all that... they even got enough to pick up mercenaries as their secret service.

Greece is rather bankrupt actually. Their politicians just don't want to admit it.

Public sector accounts for 40% of the economy. They had a deficit of 15%, now down to 8%. Public debt is about 161 %, and they have to pay more than 7% interest on that.

[Zangi]

I'm sure Greece is doing pretty well, not being bankrupt and all that... they even got enough to pick up mercenaries as their secret service.

Greece is rather bankrupt actually. Their politicians just don't want to admit it.

Public sector accounts for 40% of the economy. They had a deficit of 15%, now down to 8%. Public debt is about 161 %, and they have to pay more than 7% interest on that.

Ah, my apologies... was trying to be sarcastic there.

[olemars]

Shouldn't they do as the Icelandish did? Bail out their citizens, let the banks sink, send the Russians packing and re-write the constitution?

I can't quite remember how the Iceland crisis was dealt with, but I can think of a few differences.
* Iceland has a fairly citizen-friendly government (if prudish and somewhat bad at shady financial wrangling). No government around the Mediterranean has ever cared about its citizens.
* Iceland has fairly friendly neighbors (if you can say Scandinavia is actually neighboring Iceland), who helped them out with cheap loans and financial aid. No country around the Mediterranean has friendly neighbors.
* Iceland has a population a third of the size of Cyprus (300k vs 900k), plus most of the personal deposits made in Iceland (Icesave) were actually by british and dutch, so those were technically bailed out by their own countries who in turn forced Iceland to repay those deposits. Deposits in Cyprus are mostly corporate and/or mafia, while the poor Cypriots' savings are pretty meager to begin with. Which does make the plan to cut even personal savings accounts seem even more cruel.

EDIT: That said, the Cyprus parliament just rejected the deal.

[10ebbor10]

Actually, several mediterrean governements care about their citicens. Or at least about their votes. The reason Greece got in the aforementioned debt is that they used that governement sector to artificially increase wages and employement.

Oh, Iceland has some economic benefits. It's excempt from Kyoto, for example. Also, geothermal means cheap energy.

[ChairmanPoo]

The Cyprus parliament unanimously told the BCE to stuff their "special tax" where the sun does not shine. Kudos for this show of chutzpah in the face of the CEB highwaymen

[Scoops Novel]

So, what were they trying to achieve? It seems a pretty obvious outcome.

[PanH]

I'm not sure it's a very good thing that they refused the tax. It'll come back as another tax, which may not target as much the rich and the russian funds. A 10 billion debt is unmanageable for Cyprus, and they live of the BCE funds. They have to find a bailout, be it european, or russian.
Though, they may be trying to modify the levy to affect only over 100k (but with higher rates), which may be better, but Cyprus may refuse to protect his reputation of financial haven.

[Zangi]

I'm not sure it's a very good thing that they refused the tax. It'll come back as another tax, which may not target as much the rich and the russian funds. A 10 billion debt is unmanageable for Cyprus, and they live of the BCE funds. They have to find a bailout, be it european, or russian.
Though, they may be trying to modify the levy to affect only over 100k (but with higher rates), which may be better, but Cyprus may refuse to protect his reputation of financial haven.

ConfiscatingTaxing Bank deposits really does set a poor precedence in the EU...  If this had gone through smoothly in Cyprus, other EU nations... and ones outside it will look back at this and say it is ok to do it when they have financial problems.  Cause the gov't continuing operations is way more important then people's trust in the banks/financial system/government.

Plus, isn't there some sort of EU law or mode of operation that says taxing banked money is a bad thing, no matter what?  Double taxation?

[Sheb]

No, some countries like France have a wealth tax for exemple.

And I4m pretty sure Iceland sent the UK and Netherlands packing.

[Zangi]

No, some countries like France have a wealth tax for exemple.

And I4m pretty sure Iceland sent the UK and Netherlands packing.

Eh, I don't know...  Isn't a wealth tax based on your total assets in the country?  For citizens?

Emergency/Surprise 'Tax' on Money sitting in the Bank and nothing else... well, I can't say it is dissimilar... there just seems to be a fundamental difference between the two of them that makes it wrong, in my opinion... 
Oh yea, the surprise 'tax' part.  "Gotcha, thanks for the money.  Please continue using our federally insured banking system anyways..."

[andrea]

By the way, there already is a precedent. This already happened in italy in 1992, although it was a mere 6/1000.
So, this is nothing new. Just 10 times bigger.

[Sheb]

Yeah, but taxing bank deposits per se ain't a problem, only the surprise part is bad.

[GlyphGryph]

I'd be pretty hard pressed to call this a tax.