Bailout Agreements Getting Worse

The Cyprus bailout deal seems to have changed from when I posted yesterday. Now what's being reported by James Kanter and Liz Alderman is that the uninsured deposits above 100,000 euros to be hit with a levy are at the Bank of Cyprus not Laiki Bank, and the tax will be 20% not 22% to 25%. There will a 4% tax on all uninsured deposits at all banks; also, gone is the nationalization of pension funds from state-run companies. According to Kanter and Alderman,

The revised terms under discussion would assess a one-time tax of 20 percent on deposits above 100,000 euros at the Bank of Cyprus, which has the largest number of savings accounts on the island. Because the Bank of Cyprus suffered huge losses on reckless bets that it took on Greek bonds, the government appears to be taking depositors’ money to help plug the hole. 

A separate tax of 4 percent would be assessed on uninsured deposits at all other banks, including the 26 foreign banks that operate in Cyprus. 

Under the plan, savings under 100,000 euros would not be touched — a significant difference from the original plan, which not only enraged Cypriot citizens but ignited fear that precedent had been set for euro zone governments to tap insured bank savings in times of a national emergency. 

Cypriot officials have also backed off a proposal that would have sought to raise billions of additional euros by nationalizing state-owned pension funds. Germany, whose political and financial clout dominates euro zone policy, had indicated it opposes the move.

Naked capitalism is keeping it real per usual with a cross post from Professor Yanis Varoufakis, who blogs regularly on the euro crisis, "While waiting for Cyprus' Godot....":

Every bailout agreement, beginning with Greece’s in May 2010, seems less logical and more toxic than the previous one. The culmination was of course Cyprus this past week. Think about it: In one short week, Europe has managed:

• To put in jeopardy the hitherto sacrosanct concept of state guaranteed deposit insurance
• The monetary integrity of the Eurozone
• The European Union’s single market principle according to which capital controls are a no-no.