Despite the success of the country's bailout, non-performing loans NPLs remain a thorn in the side of the Cypriot banking system with the latest data from the country's central bank showing the total number of bad loans is around 27 billion euros. Read More Bad loans a 'challenge' as Cyprus exits bailout. Cyprus can now demonstrate an enviable growth with its economy expanding 0. However, euro zone watchers have learnt to that guarded optimism is the best course of action in a region with low inflation, essentially low growth as a whole and sticky unemployment in many countries which is often a truer test of business confidence and recovery — in Cyprus, for example, Likewise, the Eurogroup held no illusions that Cyprus could now take its eye off the ball.
While Cyprus' banking system had gone through what it called a "deep transformation," it said work must continue with determination to secure the reduction of the non-performing loan ratio "to healthier levels. The Eurogroup also said that Cyprus should complete the privatization of the Cypriot Telecommunications Authority, what it said would be "another growth-enhancing step.
Think the Cayman Islands but in the Mediterranean. Those lax taxes have made it a popular place for rich Russians — oligarchs, businesses, and a few shady characters — to put their cash. Q: That sounds lovely. Spring Break! But seriously, it sounds like they've got plenty of cash. So, what went wrong? A: Well, the big Cypriot banks made a really bad investment. They lent money to Greece. When the Greek economy took a dive, the Cypriot banks took a bigger gamble, buying up Greek government bonds in the hopes of a bailout.
Now they're broke. The banks owe more money than they have. In fact they owe more money than the country's GDP. Q: Good thing they belong to the EU, right? Those Germans are pretty rich. Sounds like somebody could use a bailout. A: Cyprus asked for a bailout. But the Europeans were not exactly excited about bailing out another country, plus a bunch of billionaire Russian oligarchs and criminals.
So, they told the Cypriots they had better come up with money on their own. The only place Cyprus could find large amounts of cash were in people's personal savings accounts.
Q: You've got to be kidding me! Banks in Cyprus will remain shut until Thursday to give political leaders time to hash out a deal. Cyprus can raise or lower taxes whenever it wants. Residents of Greece, Portugal and Ireland — all bailout recipients — have seen their tax bills skyrocket in recent years as those countries tried to reduce their debts.
But Cyprus is charting new ground here. Banks have already acted to seal off a 6. Banks will remain closed until Thursday to avoid a rush of withdrawals. Lawmakers will vote on Tuesday, but some are opposed to the plan or seeking modifications. So far in the euro crisis, depositors have been protected.
But European countries have taxed bank deposits before. In the s, Italy taxed every bank account to stave off the collapse of its lire currency. The rate, however, was miniscule — 0. Iceland — another island with an outsized financial sector, although worse weather — also relied on depositors to prop up its banks. When the crisis hit there in , Iceland protected its domestic deposits but reneged on deposit insurance for overseas, Internet-based accounts held by British and Dutch.
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