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Originally Posted by danielf
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.
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Quote:
Originally Posted by Damien
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.
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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?
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Seems that you are both correct .After reading a few articles it is clear that the Cypriot banks have been in big trouble for a while ,allowing assets such as Greek debt to rise to more than 7 times the Cypriot GDP which of course meant that Cyprus could not afford to nationalise the banks as we did .This situation does beg the question of why did no one in the EU see this coming and why was it allowed to continue or why was it just brushed under the carpet .
As to the question of alternative action ,i think on reflection that there is none anymore ,however had the problem been addressed earlier by the EU and Cypriot government then this levy would not have been needed