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Cyprus bailout

#1 User is offline   Bam 

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Posted 19 March 2013 - 05:54 PM

The terms for the bailout in Cyprus are rather controversial, including the imposition of one-off levies on bank deposits.

This is a bad idea. It will prompt a run on Cypriot banks, which is something to be avoided at all costs. It is better to raise taxes and cut costs; although that causes some pain as well, it does not cause instability.
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#2 User is offline   Roderick 

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Posted 19 March 2013 - 07:58 PM

View PostBam, on 19 March 2013 - 05:54 PM, said:

The terms for the bailout in Cyprus are rather controversial, including the imposition of one-off levies on bank deposits.

This is a bad idea. It will prompt a run on Cypriot banks, which is something to be avoided at all costs. It is better to raise taxes and cut costs; although that causes some pain as well, it does not cause instability.


Levies on Bank deposits might work once but people are going to be very wary of banking their money in future.
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#3 User is offline   Bam 

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Posted 19 March 2013 - 09:54 PM

I don't agree with these levies at all, they cause far too much harm. A run on the banks is a real possibility. And what if this is done elsewhere? Would this spark more widespread bank runs? Bank runs are one of the events of the Great Depression.

Cyprus needs to bite the bullet, raise taxes and cut spending. The corporate tax rate is only about 8% there, and if other taxes are of a comparable level it's no wonder the government doesn't have enough money. No idea what spending the government does, but some savings could probably be found there too.
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#4 User is offline   Roderick 

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Posted 20 March 2013 - 07:26 AM

A Cyprian side effect:

Quote

UK troops hit by Cyprus bailout 'will be compensated'

George Osborne has said that troops and civil servants serving in Cyprus whose savings are threatened by the island's £8.7bn bailout will be compensated.

By Rachel Cooper11:30AM GMT 17 Mar 2013811 Comments

The Chancellor described the Cypriot bail-out as an "extraordinary" situation, but he pledged that British armed forces personnel and Government staff serving on the island will be protected from the bank levy.
"It’s a difficult situation for people who live in Cyprus," Mr Osborne told the BBC's Andrew Marr Show. "For people serving in our military and our government out in Cyprus, we are going to compensate anyone affected by this bank tax - people who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax."
He added that Britain was "not part of the bail-out" because David Cameron "got us out of these euro bail-outs" when he became prime minister and he added that Cyprus is an example of "what happens if you don't show the world you can pay your way".
"That’s why in Britain we’ve got to retain the confidence of world markets," said the Chancellor.

Dough
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