Nervous depositors in Cyprus have rushed to ATM machines to drain their accounts following a bailout agreement with international creditors that includes a levy on all the country’s bank accounts.
Lines formed at many ATMs as people scrambled to pull their money out after word that the 10 billion euro (£8.6bn) rescue package Cyprus agreed with its euro area partners and the International Monetary Fund included one-off levy on deposit, an unprecedented step in the eurozone crisis.
The levy is expected to raise 5.8 billion euro.
European officials said people with less than 100,000 euro in their accounts will have to pay a one-time tax of 6.75%, those owning more money will lose 9.9%. Cypriot bank officials said that depositors can access all their money except the amount set by the levy.
But that hardly assuaged people who continued to withdraw cash from ATMs until the machines ran out, unsure what or how much would be taxed. Officials said that withdrawing funds on Saturday would not reduce anyone’s levy.
The country’s co-operative banks also shut their doors after depositors scurried in hopes of protecting their savings. Unlike commercial banks which remain closed on weekends, co-operative banks customarily open for business on Saturday.
“Politicians and senior bank bosses have covered each other’s backs for years, now it’s ordinary people who are paying the price and are being punished,” said Christos Demetriades, 58, milling outside a shut Nicosia co-operative bank branch.
Cyprus’ Finance Minister Michalis Sarris defended the decision to accept the levy, saying it was either that or a complete economic meltdown. “This was the least worst option,” he told state broadcaster CyBC. “We battled to prevent the country from completely going bankrupt.”***
“What’s just happened is the IMF has backed up, lauded, supported, and publicized, as if it were a victory, the taking of 10% of what really turns out to be 80% of Russian ‘black money.’ Russian ‘black money’ is KGB money, now in business. The leader of Russia (Putin) was a former KGB official. Whose money do you think they have taken? This is the biggest mistake the IMF could possibly have ever made.”
Eric King: “Jim, it’s unimaginable to me, but, incredibly, just ten days ago in a KWN interview you warned that you don’t want to anger Russian leader Putin because he and Russia will punish the West in the gold market. Can you talk about how this is going to impact the gold market beginning on Monday?”
Sinclair: “What would you rather have, an insured bank account by the BIS, FDIC, ECB, when any government can come in and take 10% of your account and treat that as if you are paying a tax for monies that were lost because of devious actions by the banks themselves, or gold?
Eric King: “Will the Russians take their revenge in the gold market? Is that one of the places they will seek revenge?”
Sinclair: “The answer is that this is one of the most important events in modern times for the popularity of holding gold rather than holding fiat money. This is the catalyst that will propel gold through the $1,600 level. To prevent a break above $1,600 in gold would take extraordinary efforts on the part of any manipulator in the marketplace.
It’s very dangerous in doing business with the Russians, to lose their money. Revenge will be very much a part of the motivation for what happens from this point forward. This type of event will take us out of the $1,500s and we may never see those prices again in our lifetimes.”***
What’s up in Cyprus?