Welcome, 77 artists, 40 different points of Attica welcomes you by singing Erotokritos an epic romance written at 1713 by Vitsentzos Kornaros

Saturday, March 16, 2013

A look at Cyprus' decision to tax depositors

PARIS (AP) — Cyprus' eurozone partners and the IMF agreed early Saturday to bail out Cyprus to the tune of €10 billion ($13 billion) — largely to prop up its flailing banking industry.

[...] it's meant to hold off a bank collapse.

Just ask the residents of Greece, Portugal and Ireland — all bailout recipients — who saw their tax bills skyrocket as those countries tried to reduce their debts.

Bank customers still can draw on the rest of their funds via ATM machines this weekend, and nervous depositors did that on Saturday to drain their accounts.

When the crisis hit there in 2008, Iceland protected its domestic deposits but reneged on deposit insurance for overseas, Internet-based accounts held by British and Dutch.

Cyprus could have only gone after non-EU depositors, but it may have been hard to distinguish between Cypriot and Russian savers, Jacob Kirkegaard said, since many Russians have dual citizenship and many Russian businesses are registered on the island.

Kirkegaard, who is a senior fellow at the Peterson Institute for International Economics in Washington, said Cypriots may paradoxically welcome this measure since the government just managed to widen its tax base to include a lot of Russians; the taxes levied in Greece, Portugal and Ireland were for residents alone to shoulder.

Bank stocks will probably fall and they'll see their borrowing costs rise since this deal is a signal that other eurozone countries may call on bondholders, if their banks run into trouble.

[...] Heather Conley, director of Europe program for the Center for Strategic and International Studies, says it's hard to know the far-reaching implications of this one-off deal.