Originally Posted by Sirius (Post 35552419)

So Germany does not get any of the interest that will be charged on the loan. ?

Originally Posted by danielf (Post 35552408)

Hmm, fair point on the cash. However, the point of the levy (as I understand it) was to stop the deficit exceeding 100% of GDP. With a full bailout it would have topped 140%. I'm not sure if Europe insisted on the levy per se. Europe did require Cyprus to find 5 billion Euros.

Originally Posted by Damien (Post 35552409)

I am pretty sure they need the bailout to save the two banks. The banks are certainly not awash with money and are only still going because they've been getting "emergency liquidity", i.e cash for day to day operations, from the European Central Bank.

They were liable for a lot of Russian money. The Eurozone didn't want to be seen to be bailout out rich Russians so said that some of the bailout, which would have amounted to more than the entire GDP of Cyprus, would have to come from Cyprus itself. However if the bailout is being used to save the banks then you could just as easily they say that the EU is only bailing them out to a point. That point as been changed to protect those savings under €100,000 and 80% of those over €100,000.

---------- Post added at 19:37 ---------- Previous post was at 19:36 ----------

The thing is, if the bailout didn't happen and the ECB stopped the emergency liquidity then the banks would have collapsed and people under €100,000 would have been refunded but everything over €100,000 would have been lost.

So again. What was the alternative?

Originally Posted by Sirius (Post 35552419)

So Germany does not get any of the interest that will be charged on the loan. ?

Originally Posted by Damien (Post 35552418)

Germany isn't getting any of the levy money, the levy money is still going to Cyprus.

Originally Posted by martyh (Post 35552424)

I still don't understand how a levy can be placed on accounts held in banks with no money .

Originally Posted by Damien (Post 35552425)

Well I presume it basically reduces the amount needed to bailout the banks, i.e it's more of a write-off. I don't understand it either tbh. That's the only way I think it can work in practise however.

Originally Posted by martyh (Post 35552428)

The only way my head can get round it is to liken it to getting a bank loan for a car and paying the first repayment using money from the original loan

Originally Posted by Damien (Post 35552386)

It's only over €100,000 Euros this isn't it? Thus avoiding breaking the ECB's deposit protection. It was either that or people lose their entire savings as the banks collapse.

Originally Posted by Chris (Post 35552453)

My understanding is that the Cypriot parliament has also approved a 1% levy on everyone else, which as it is so much smaller than what was previously mooted, everyone seems to either be ignoring entirely, or else accepting with relief as it could have been far worse.

This is of course standard operating procedure for the EU. Its will is democratically refused, so it invites the voters to think again and produce the 'right' result second time out. In the background it makes cosmetic changes to its proposals designed to make it look as if they have backed off, when they haven't. (cf. dropping the constitution and reintroducing it as the "Treaty of Lisbon, thereby circumventing both the French and Dutch electorates).

Originally Posted by Chris (Post 35552453)

My understanding is that the Cypriot parliament has also approved a 1% levy on everyone else, which as it is so much smaller than what was previously mooted, everyone seems to either be ignoring entirely, or else accepting with relief as it could have been far worse.

Originally Posted by danielf (Post 35552457)

Do you have a link or anything else to back up your understanding, or are we taking your word for it?

Originally Posted by Chris (Post 35552453)

My understanding is that the Cypriot parliament has also approved a 1% levy on everyone else, which as it is so much smaller than what was previously mooted, everyone seems to either be ignoring entirely, or else accepting with relief as it could have been far worse.

Originally Posted by danielf (Post 35552421)

I suspect the loan will not be paid off. Not completely anyway. Just like the Greek loan...

Originally Posted by Osem (Post 35552739)

What you mean like a sort of national student loan? :)