The bailout deal in Cyprus seems to be finalized and it’s worse than any of the previous reports indicated. Last week, when I first posted this story, 10% of bank accounts were on the table. Then the number moved up to 25%.
In the finalized deal, 40% of all bank deposits over €100,000 (about $130,000) will be stolen by the Cyprus government to pay for the bailout.
from Bloomberg (emphasis mine):
The breakthrough came after Anastasiades bartered with officials including EU President Herman Van Rompuy, European Central Bank President Mario Draghi and IMF Managing Director Christine Lagarde. It was then sealed by the finance ministers, some of whom went out to dinner while the talks were ongoing.
With the ECB threatening to cut off emergency financing for tottering banks as soon as today, Cyprus’s leaders engineered another way of shrinking the island’s financial system.
The revised accord spares bank accounts below the insured limit of 100,000 euros. It imposes losses that two EU officials said would be no more than 40 percent on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl (CPB), the second biggest.
Cyprus Popular Bank, 84 percent owned by the government, will be wound down. Those who will be largely wiped out include uninsured depositors and bondholders, including senior creditors. Senior bondholders will also contribute to the recapitalization of Bank of Cyprus.
This is America’s future unless we turn the ship around. Out of control spending and debt has consequences. Phony "sequester" bills that don’t actually cut spending won’t do us any good. Budgets like the one Senate Democrats just passed will only accelerate us over the cliff.
If there were ever a story that might convince you to consider buying gold, it’s probably this one.