Cyprus crisis seems to have brought some sort of a nightmare for all of those who placed their investments into banks right there. And as we know, many investors were those who thought to have invested in banking heaven…
There are many posts and blogs on this topic, as this news are on top of billboards last few days and will be for next few…
Cyprus decided to close down their banks from Monday till Thursday, however, latest reports say that they will not reopen until Thursday, this is something to follow! The close down is in a hope to renegotiate terms before savers empty their accounts, what according to facts is a total of £ 5 billion. One fact is that Cypriot and other EU member savings up to EUR 100,000 should be protected by the EU, however the bank levy and austerity measure have led to concerns about this. Media reports that accounts with less than EUR 20,000 may be spared for sure.
Following these events stock market has fallen, the FTSE 100 lost more than 100 points in early trading, and on the currency market EURO went down. Also Spain and Italy seems to be on unnecessary alert after these events.
Now the main focus is on how to fix the problems. International Monetary Fund (IMF) explanation looking at all facts and events that happened since the crisis in 2008 can be found here - http://www.imf.org/external/pubs/ft/scr/2011/cr11331.pdf. There are two principles, that could have worked towards fixing this situation, which have been broken, first the fact that banking system should be more careful in assessing to whom and when and what they lend, and the second that there should be a hope that not everything would have been withdrawn. Here these two principles, as confirmed and seen by the rest of EU and International Monetary Fund (IMF) are broken. And what seems to be the biggest belief is that reason for this Russian money launders deposits in Cyprus (aka tax heaven)... This is top criticism, obviously, for Cyprus at the moment!
Some reports say that it seems that Cyprus is still focused on holding on to offshore investors and this way giving them better deal on taxation obviously, while giving worth deal for locals.
Question lies in will Russia extend their loan and lower interest! Obviously there are some mutual accusations over the aid package offered by the finance ministers particularly from Moscow, as spokesman for Vladimir Putin stated that the plan is "unfair, unprofessional and dangerous". As we know Russians have accounts in Cyprus, according to the facts those constitute 8 times the size of Cyprus economy, now the loan from Russia is in doubt.
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