Early Monday morning Cyprus’ leaders reached a deal with the EU, the European Central Bank and the International Monetary Fund. Cypriot bank accounts exceeding €100,000 will be taxed (at around or less than 30 percent). In exchange for the move, Cyprus will receive €10 billion from the EU. And the island’s second largest bank, Cyprus Popular Bank (also known as Laiki Bank), will be shut down. Investors with less than €100,000 are safe at this time.
The funds skimmed off depositors’ accounts (approximately €4.2 billion) will be used to pay Laiki’s debts and recapitalize the bank. Russian Prime Minister Dmitry Medvedev reacted strongly over the measure which largely affects high-dollar Russian investors: “The stealing of what has already been stolen continues.”
Tyler Cowen at Marginal Revolution makes a few sobering observations:
Tyler offers some more analysis, here.
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