DSenette wrote:the government should have a methodology in place for, at the very least, the emigrants and such to be able to survive. if the only money you have is in a bank in Cyprus, and you cannot get to any of it, how much leeway do you think your landlord and the grocer are going to give you in Germany?
Why would you think they wouldn't have that?
The current restrictions are:
- Daily withdrawals limited to 300 euros
- Cashing of cheques banned
- Those travelling abroad can take no more than 1,000 euros out of the country
- Payments and/or transfers outside Cyprus via debit and or credit cards permitted up to 5,000 euros per month
- Businesses able to carry out transactions up to 5,000 euros per day
- Special committee to review commercial transactions between 5,000 and 200,000 euros and approve all those over 200,000 euros on a case-by-case basis
- No termination of fixed-term deposit accounts before maturity
So restrictive, yes, but noone with cash in the bank is going to be unable to pay their rent or buy groceries or whatever; and people that emigrated prior to the crisis kicking off will probably be given special dispensation to withdraw all their money quickly if they're buying a house or whatnot.
Here's the beginning of an article why restrictions are necessary:
"Neither a borrower, nor a lender be."
That was the recommendation given by the rather creepy Polonius to his son Laertes, who was about to head off to the temptations of Paris in the play Hamlet.
Sage advice as it may appear, the truth is that each and every one of us is a lender - often without even realising it - and our economy would not function nearly so well if that were not the case. That's because your bank account is a loan, from you to your bank. You may think of it as money - akin to cash, one cash-machine trip away from banknotes - but it is nonetheless a loan.
And, as most of us are well aware by now, the bank takes this borrowed money and re-lends it to businesses and homebuyers. But while you have the right to withdraw your money from the bank at a moment's notice, the bank, of course, does not have the right to demand that mortgage borrowers and companies repay the loans it has made at the drop of a hat. And this makes all banks vulnerable to a sudden collapse. Because if everyone turned up one day and tried to empty their bank account - in other words, asks for their loans to be repaid - the money would not be there to repay them.
It is an inherent vulnerability.
Even a solvent bank - one that has made sensible loans and investments that will eventually be repaid in full - does not have the cash readily available to pay out even a fraction of its deposits.
Fortunately, people don't normally do that. Indeed, a bank's very business is predicated on the fact that only a fairly predictable minority of its many depositors ask to withdraw their money from one day to the next. But occasionally, people do queue up outside the bank - or empty their accounts electronically - if they suddenly become afraid that the money in their bank account is no longer safe. It is what is known as a bank run.
If the bank is solvent - which, during a crisis, can be near-impossible to judge - then in most countries, the central bank will throw it a lifeline - an emergency loan that will provide the requisite cash until the depositor panic subsides. That way the cash machines of a healthy bank are guaranteed never to run empty. Precisely such fears over Cyprus' banks have already led them to borrow some 9bn euros of so-called Emergency Liquidity Assistance from their central bank, to replace money withdrawn by more savvy depositors in recent months.
But what if the bank is not solvent? What, for instance, if it has lent a bunch of money to the Greek government that will never be repaid in full?
In that case - as the European Central Bank made clear last week - the bank could no longer rely on largesse from the central bank to keep its doors open. The central bank has no interest in making a loss on its emergency lending, or in propping up banks that have no future. And that is where capital controls come in.
A capital control is when the government tells you that you are no longer allowed to move your money around freely.
In 2011, Cyprus bank assets (ie. their loans) totaled over 800% of GDP. ie. It became beyond the ability of even the Cypriot government to underwrite, say, even a fifth of savers withdrawing their money at once. Noone is deliberately 'f*cking over' savers it's just a harsh reality.
Here's a few articles to read about it if you're interested:http://www.bbc.co.uk/news/business-21937615http://www.bbc.co.uk/news/business-21922110http://www.bbc.co.uk/news/business-21963462