how long do they think they can stop people withdrawing their money? they cant hang on to it forever
Quoting: Anonymous Coward 34765812 Sure they can. Capital controls can stay on place for a long time if another bailout in needed in the interim and those funds are hit with yet another tax while still being held, most will never see their money again.
"How long could capital controls last?
If you believe Mr Barnier, only a few days.
But as JP Morgan highlighted in a note on Monday, Iceland's unlimited guarantee on domestic deposits managed to stem deposit outflows in late-2008 because the government guaranteed deposits in its own currency, and foreign exchange controls prevented money moving abroad.
"On the other hand, Cyprus is slated to impose losses on deposits based in Cyprus, but not in Cypriot banks' branches abroad, in essence reflecting the fact that its deposit haircut is set to be implemented as a domestic wealth tax," said Nikolaos Panigirtzoglou.
"The IMF forecasts the Iceland's capital controls will not be removed until 2015, suggesting that any Cypriot capital controls could turn out to be quite extended."
[
link to www.telegraph.co.uk]
not really gonna help poor old cyprus is it
Nope. Or the EU for that matter.
"
The Cypriot bank-restructuring plan may not raise sufficient funds. It will encourage deposit flight, compounding the problems. As with Greece, there is a risk that Cyprus will need additional assistance, entailing further write-offs of depositors’ funds. And, as with Greece, privatization proceeds and the revenue from increased taxes may not reach targeted levels.
In 147 banking crises since 1970 tracked by the IMF, no depositors, irrespective of the amounts held and the banks with whom the deposits were placed, suffered losses.
The proposed restructuring also destroys the Cypriot banking industry.
The transfer of losses to depositors and imposition of capital controls make it highly likely that activity will shift to other locations. Given that banking is a major economic activity, this reduces Cyprus’s capacity to pay back its creditors.
Russian businesses are unlikely to continue to patronize Cyrus. Press reports quoted one Russian businessman’s wry observation that the EU had killed Cyprus in one day: “When the Russians leave, who is going to stay at the Four Seasons for $500 a night? Angela Merkel?”
Greater risk to euro zone
Irrespective of the fate of Cyprus, the solution adopted for the country will exacerbate the European debt crisis.
First, the transfer of losses to depositors creates a dangerous precedent. In 147 banking crises since 1970 tracked by the IMF, no depositors, irrespective of the amounts held and the banks with whom the deposits were placed, suffered losses.
Depositors in weak banks in weak countries now may consider the risk of loss or confiscation. This may trigger capital flight from banks in Greece, Portugal, Ireland, Italy and Spain."
[
link to www.marketwatch.com]
