Cyprus - The high price for a rescue

[Edi]

That Torygraph article is mostly full of shit on its most salient points (or what the author thinks are the most salient points). It seems that he would have preferred for the EU to bail Cyprus out on the back of tax payers in order to protect the gambling casino financial sector. The solution applied to Cyprus is basically the one of last resort, because it's the third or fourth tier of escalation in the normal course of things after everything else has been exhausted. The Greek bailout earlier showed that just giving money for promises is useless and those lessons were applied here, with the restrictions on Cyprus asset usage being the price for getting any help at all.

Basically The Cyprus banks have had the gun put to their head and told "These are the restrictions you work under, suck it". The 5000 euro limit is nothing to fret about. I have a credit card (Visa) issued by my own bank and my credit limit is a whopping 1000 euro per month or something like that. You don't actually get credit limits like 5000 unless you are really bloody well off in this country. Because the our banks actually have some notion that they are supposed to manage risks responsibly. None of the things that Prickhard cretin whines about are nearly as onerous as he complains.

Cyprus has certainly seen its end as a tax cheat haven and financial center and the knock-on effects for them are going to be bad. Less so than the entire country going bankrupt and being ejected from the Eurozone.

[Welf]

It doesn't, but case law says it would have to be market value. The market value of 1000 EUR is...1000 EUR.

No it's not. 1.000 EUR in Cyprus are worth less than 1.000 EUR somewhere else. The current capital controls in Cyprus in effect severed the monetary union and we have two currencies with the same name and coins.

Even more, Art. 14 of the constitution explicitly prohibits seizure except when there is a) compensation and b) the legal process has been exhausted. So any such measure would have to pass years of legal challenges and then also repay the people involved.

Nah. The way the German courts have ruled on this in the past is really quite consistent.

Maybe, but those was stuff on a different scale. And Art. 14 was never really on a larger used thanks to 60 years of stability. The last time there was a expropriation on similar level was after WWII to help the refugees from the lost territories. And back than an easy 50% of the value of real estate was set as tax. The terms of payment were very easy with only 1,67% per year on 20 years. But the "50%" were established once, and in a situation where the whole state may break down the legislation has some leeway.
Of course there are also more subtle ways like forced loans below inflation target or re-introduction of a property tax. Wasn't the latter what they tried first in Cyprus? The parliament can legally introduce a property tax of 5-8% at any time.

[Thanas]

It doesn't, but case law says it would have to be market value. The market value of 1000 EUR is...1000 EUR.

No it's not. 1.000 EUR in Cyprus are worth less than 1.000 EUR somewhere else. The current capital controls in Cyprus in effect severed the monetary union and we have two currencies with the same name and coins.

That doesn't matter at all, considering the market value remains the same outside Cyprus and the devaluation is only caused by the expropriation itself. The state cannot devalue stuff to the market value by measures and then declare that to be the market value.

[Irbis]

So does Cyprus - 100% of the first 100,000 Euro. Fat lot of good that did them.

No. This is not comparable to Cyprus. Not at all.

German constitution was amended 55 times already, including several amendments of first 20 articles. Assuming Germany was similarly threatened as Cyprus is, what stops German parliament from slapping 'all compensation in times of crisis shall be paid in Monopoly game token banknotes' amendment on Art. 14 five minutes before voting on cutting whatever % is needed from German saving accounts?

Plus, you say Cypriots should have put money in non-gambling banks; seeing all of banks on Cyprus will be cut I don't see what difference picking good bank would make, you'll take hit either way even if your account was in most Germanly bank ever on Cyprus.

[UnderAGreySky]

I would like to add a further question to that. How is an ordinary saver supposed to no whether BoC is/was better or Laiki (sp?) is/was? Take for instance... me. Out here in the UK, how do I know whether HSBC or RBS or Halifax are backing bad bets?

Second, I hope this blows open the prevalent thinking amongst ordinary people that public debt = government profilgacy. But this is probably wishful thinking.

[K. A. Pital]

That Torygraph article is mostly full of shit on its most salient points (or what the author thinks are the most salient points). It seems that he would have preferred for the EU to bail Cyprus out on the back of tax payers in order to protect the gambling casino financial sector.

That's the core point. If Cyprus was a normal EU nation and not a criminal offshore for the Russian oligarchs, sure, the ECB could find the pitiful sum of however many billions - that's a drop in the ocean which flows towards Greece. However, precisely because of the fact Cyprus is not like Greece, this is not applicable.

[Welf]

That doesn't matter at all, considering the market value remains the same outside Cyprus and the devaluation is only caused by the expropriation itself. The state cannot devalue stuff to the market value by measures and then declare that to be the market value.

It does matter. The market value is the value has right now, not in some other situation. A Cyprus-Euro can't leave the country, that's the point. So right now a Cyprus-Euro is worth less than a Germany-Euro.
Yes, the government can't just devalue something by random and then claim new value to be foundation for compensation. But if outer elements force the government, then yes. For example could capital-controls devalue money and money equivalents by 10 bn, but at the same time prevent capital flight causing real estate and shares from losing 20 bn, then the state doesn't have a choice and has to choose the lesser evil. And this is the baseline from which judges have to work from.

[fgalkin]

That Torygraph article is mostly full of shit on its most salient points (or what the author thinks are the most salient points). It seems that he would have preferred for the EU to bail Cyprus out on the back of tax payers in order to protect the gambling casino financial sector.

That's the core point. If Cyprus was a normal EU nation and not a criminal offshore for the Russian oligarchs, sure, the ECB could find the pitiful sum of however many billions - that's a drop in the ocean which flows towards Greece. However, precisely because of the fact Cyprus is not like Greece, this is not applicable.

Criminal Russian oligarchs like this and this both of which are my company's business partners and now cannot send or receive funds at all?

Sure, there are plenty of actual criminal oligarchs with accounts in Cyprus, but there are also legitimate companies that are based in Cyprus for the same reason that Facebook is now based in Ireland.

Have a very nice day.
-fgalkin

[K. A. Pital]

It is obvious that a lot of ordinary businesses will suffer, and as with any offshore, many companies would use it; I guess I've grown too cold-hearted to care.

[fgalkin]

It is obvious that a lot of ordinary businesses will suffer, and as with any offshore, many companies would use it; I guess I've grown too cold-hearted to care.

So, the destruction of a country's primary source of livelihood (tourism is a DISTANT second) and likely total economic collapse is okay if it makes Abramovich unable to afford another billion-dollar yacht?

Have a very nice day.
-fgalkin

[Thanas]

So does Cyprus - 100% of the first 100,000 Euro. Fat lot of good that did them.

No. This is not comparable to Cyprus. Not at all.

German constitution was amended 55 times already, including several amendments of first 20 articles.

Yet amendments into the first 20 are virtually unheard of. If you know any, please point them out.

Assuming Germany was similarly threatened as Cyprus is, what stops German parliament from slapping 'all compensation in times of crisis shall be paid in Monopoly game token banknotes' amendment on Art. 14 five minutes before voting on cutting whatever % is needed from German saving accounts?

Because that would violate the trust principle built into the constitution as well as violate parliamentary process.

It does matter. The market value is the value has right now, not in some other situation. A Cyprus-Euro can't leave the country, that's the point. So right now a Cyprus-Euro is worth less than a Germany-Euro.
Yes, the government can't just devalue something by random and then claim new value to be foundation for compensation. But if outer elements force the government, then yes. For example could capital-controls devalue money and money equivalents by 10 bn, but at the same time prevent capital flight causing real estate and shares from losing 20 bn, then the state doesn't have a choice and has to choose the lesser evil. And this is the baseline from which judges have to work from.

Ok, present some BVerfG case law supporting this assertion, because I am pretty sure you are just talking out of your ass now.

[Dominus Atheos]

That Torygraph article is mostly full of shit on its most salient points (or what the author thinks are the most salient points). It seems that he would have preferred for the EU to bail Cyprus out on the back of tax payers in order to protect the gambling casino financial sector.

That's the core point. If Cyprus was a normal EU nation and not a criminal offshore for the Russian oligarchs, sure, the ECB could find the pitiful sum of however many billions - that's a drop in the ocean which flows towards Greece. However, precisely because of the fact Cyprus is not like Greece, this is not applicable.

Criminal Russian oligarchs like this and this both of which are my company's business partners and now cannot send or receive funds at all?

Sure, there are plenty of actual criminal oligarchs with accounts in Cyprus, but there are also legitimate companies that are based in Cyprus for the same reason that Facebook is now based in Ireland.

Have a very nice day.
-fgalkin

If Ireland collapsed tomorrow, I would not shed even one single goddamn tear for Facebook. That the companies who did this are legitimate has nothing to do with it, the biggest reason they did it was to dodge taxes, an illegitimate (although still legal) thing to do.

In short, if the people and companies who cannot access their deposits in Cyprus had done everything above-board, they wouldn't be in this mess.

[fgalkin]

How is doing things like avoiding double taxation illegitimate? You do realize how the so-called "tax havens" actually work, right?

Have a very nice day.
-fgalkin

[aerius]

I would like to add a further question to that. How is an ordinary saver supposed to no whether BoC is/was better or Laiki (sp?) is/was? Take for instance... me. Out here in the UK, how do I know whether HSBC or RBS or Halifax are backing bad bets?

The average saver? Honestly, you can't. Unless you spend a ton of time digging through quarterly reports, balance sheets, and various central bank transaction records there's no way to figure out where a bank stands. And even then it's still an incomplete picture since most major banks have large "off the books" assets, debts, and transactions which you have no hope of digging into.

[Darth Tanner]

In short, if the people and companies who cannot access their deposits in Cyprus had done everything above-board, they wouldn't be in this mess.

So the entire population and every single business in the country were all in on it and deserve it. Got ya.

[D.Turtle]

They definitely benefited from it.

Oh, and since several people got this point wrong: Germany (or the EU) never demanded that the Cyprus government fleece small savers. In fact, it was the Cypriot government who proposed to do that instead of just targeting large deposits.

[K. A. Pital]

It is obvious that a lot of ordinary businesses will suffer, and as with any offshore, many companies would use it; I guess I've grown too cold-hearted to care.

So, the destruction of a country's primary source of livelihood (tourism is a DISTANT second) and likely total economic collapse is okay if it makes Abramovich unable to afford another billion-dollar yacht?

I'm not that cruel, and you know it. But reducing the tax load by putting your money in foreign bank accounts, though legal, is bound to create unsustainable bubbles like the Cyprus one.

[Irbis]

Yet amendments into the first 20 are virtually unheard of. If you know any, please point them out.

Let's list some amendments that touched 1-20, first number being amendment number:

7. changed 1 III, 12, 49, 60 I, 96 III, 137 I, inserted 17a, 36 II, 45a, 45b, 59a, 65a, 87a, 87b, 96a, 143.
17. inserted 9 III 3, 12a, 19 IV 3, 20 IV, 35 II & III, 53a, 80a, 115a-115l, changed 10, 11 II, 12 I 2, 73 No. 1, 87a, 91, repealed 12 II 2-4, 12 III, 59a, 65a II, 142a, 143
39. repealed 16 II 2, inserted 16a, changed 18 Sent. 1
42. inserted 3 II 2 & III 2, 20a, 28 II 3, 29 VIII, 74 I No. 25 & 26, 74 II, 75 I 1 No. 6 & Sent. 2, 75 II & III, 77 IIa, 80 III & IV, 87 II 2, 93 I No. 2a, 118a, 125a, changed 29 VII 1, 72, 74 I No. 18 & 24, 75 I 1, 76 II & III, repealed 74 I No. 5 & 8
45. renumb. 13 III, inserted 13 III-VI
47. inserted 16 II 2
48. changed 12a IV 2
50. changed 20a

Cross references for articles, paragraphs and sentences is noted as "Article 10 II 2" instead of "Article 10, Paragraph 2, Sentence 2".

Is that good or want more of them?

Because that would violate the trust principle built into the constitution as well as violate parliamentary process.

Speaking of trust, constitution forbid Germany to ever have army or conscription. Both limitations were erased by quick amendments, despite conscription being rather large hit to individual freedom. That, by the way, required touching first 20 articles, including adding whole article 12a, several times longer than article 12 and imposing many limits on freedoms found there. If you can force someone to serve for months and years, taking some money is peanuts.

[fgalkin]

It is obvious that a lot of ordinary businesses will suffer, and as with any offshore, many companies would use it; I guess I've grown too cold-hearted to care.

So, the destruction of a country's primary source of livelihood (tourism is a DISTANT second) and likely total economic collapse is okay if it makes Abramovich unable to afford another billion-dollar yacht?

I'm not that cruel, and you know it. But reducing the tax load by putting your money in foreign bank accounts, though legal, is bound to create unsustainable bubbles like the Cyprus one.

True, but on the other hand, there aren't that many options for small countries to prosper. There's tourism....and that's pretty much it. Here's a list of the top six offshore tax havens:

1.Jersey
2.Guernsey
3.Isle of Man
4.Bermuda
5.Cayman Islands
6.Curaçao

Notice any similarities? By the way, here is the FATF current list of countries that are involved in money laundering. Not one of the countries above on that list, because offshore tax havens are actually very bad for that kind of thing (since the whole point of them is to avoid taxes, you generally have to indicate how and where the money was earned to confirm eligibility under the tax treaties).

Cyprus' problem is that it integrated into the EU and adopted the Euro. There is simply no way a country whose only foreign investment comes by way of being a tax haven can sustain itself when it has to maintain some kind of parity with developed European economies.

Have a very nice day.
-fgalkin

[Simon_Jester]

What is required to amend the German constitution?

Is it as hard as amending the US constitution, which is so hard to change that constitutional reform in the US is effectively impossible in today's political climate? Or is it as easy as amending some of the US state constitutions, which are so easily altered by majority votes that their constitutions are effectively written in the wind?

[Dominus Atheos]

In short, if the people and companies who cannot access their deposits in Cyprus had done everything above-board, they wouldn't be in this mess.

So the entire population and every single business in the country were all in on it and deserve it. Got ya.

Way to clip off most of the conversation. Let's remind everyone what that was.

Sure, there are plenty of actual criminal oligarchs with accounts in Cyprus, but there are also legitimate companies that are based in Cyprus for the same reason that Facebook is now based in Ireland.

If Ireland collapsed tomorrow, I would not shed even one single goddamn tear for Facebook. That the companies who did this are legitimate has nothing to do with it, the biggest reason they did it was to dodge taxes, an illegitimate (although still legal) thing to do.

Dishonest cunt.

[Thanas]

Let's list some amendments that touched 1-20, first number being amendment number:
*snip*

Is that good or want more of them?

Yeah and now point out how many of those actually limited liberty instead of enhancing it and how many of those actually resulted in fundamental guarantees being destroyed.

BTW, that list of yours is pretty hilarious, just listing changes without elaborating how and why changes were made. It is pretty much copy paste idiocy.

Speaking of trust, constitution forbid Germany to ever have army or conscription. Both limitations were erased by quick amendments, despite conscription being rather large hit to individual freedom. That, by the way, required touching first 20 articles, including adding whole article 12a, several times longer than article 12 and imposing many limits on freedoms found there. If you can force someone to serve for months and years, taking some money is peanuts.

No, actually it is not, especially since conscription left ways out of it open. And bullshit about conscription required touching all first 20 articles. Forcing someone to serve for months is not on the same scale as taking their money. One is a national service for which they in turn were compensated for, the other is a direct violation of basic property rights.

[Welf]

Let's list some amendments that touched 1-20, first number being amendment number:
*snip*

Is that good or want more of them?

Yeah and now point out how many of those actually limited liberty instead of enhancing it and how many of those actually resulted in fundamental guarantees being destroyed.

BTW, that list of yours is pretty hilarious, just listing changes without elaborating how and why changes were made. It is pretty much copy paste idiocy.

Funny how "amendments are virtually unheard" suddenly changed to "liberty reducing mendicants are virtually unheard" changed.

But here some:
-conscription (already mentioned)
-the "Great Bugging" (Großer Lauschangriff) because screw privacy of the home
-the compromise about rights of asylum (Asylrechtskompromiss), a.k.a. the screw basic rights when you can make xenophobic election campaign compromise
-the German Emergency Acts

And while it wasn't an amendments, the BVerg created with it's decision the foundation for the Radikalenerlasse, which is considered a breach of human rights elsewhere.

BTw., money on bank account = liberty?

It does matter. The market value is the value has right now, not in some other situation. A Cyprus-Euro can't leave the country, that's the point. So right now a Cyprus-Euro is worth less than a Germany-Euro.
Yes, the government can't just devalue something by random and then claim new value to be foundation for compensation. But if outer elements force the government, then yes. For example could capital-controls devalue money and money equivalents by 10 bn, but at the same time prevent capital flight causing real estate and shares from losing 20 bn, then the state doesn't have a choice and has to choose the lesser evil. And this is the baseline from which judges have to work from.

Ok, present some BVerfG case law supporting this assertion, because I am pretty sure you are just talking out of your ass now.

[/quote]

Well, show me yours, and I show you mine? Post-war Germany hasn't been in the situation above, so there aren't fitting decisions. We are talking about a situation where a country is legally part of an larger currency union, but economically has it's own currency. And in which a wrong decision will lead to national bankruptcy.

However, there are judgements that coiver certain aspects.

On national bankruptcy of the Deutsche Reich:

law says: FDR doesn't pay debt if it doesn't want to:

"Durch die in Art. 134 Abs. 4 und Art. 135 Abs. 5 vorbehaltene Gesetzgebung des Bundes kann auch bestimmt werden, daß nicht oder nicht in voller Höhe zu erfüllen sind
1. Verbindlichkeiten des Reiches ..."

BVerG says: okidoki

Diese Auslegung des Art. 134 Abs. 4 GG nach dem Sinn und Zweck ergibt sich noch besonders daraus, daß es sich um eine Übergangsvorschrift handelt. Schon grundsätzlich ist davon auszugehen, daß der Abschnitt XI. des Grundgesetzes in seinen mannigfachen Übergangsvorschriften alle verschiedenen Aspekte bedenkt, die der Zusammenbruch des Reiches für die staatliche Neuordnung hatte. Speziell Art. 134 Abs. 4 GG bezweckt nicht die Bereinigung der Konkurslage des Reiches gewissermaßen "um ihrer selbst willen", sondern wegen ihrer grundlegenden Bedeutung für eine geordnete künftige Finanzwirtschaft in Bund und Ländern, die sonst größten Unsicherheiten und Risiken ausgesetzt gewesen wäre.

Yes, it's an transition law. But it also says default is okay if it's not just to save money but to keep the state going.

And more importantly:

Das Bundesverfassungsgericht hat bereits ausgeführt, daß eine übergesetzliche Norm, nach der dem Gesetzgeber schlechthin verwehrt sei, eine dem Wohle der Allgemeinheit dienende Enteignung auch ohne Entschädigung anzuordnen oder zuzulassen, nicht festgestellt werden kann (BVerfGE 2, 237 [Leitsatz 3 und S. 253 f.]; 4, 219 [232])

So total expropriation is okay sometimes.

Auch der Grundsatz der "Kontinuität" kann nicht hindern, unter die frühere verhängnisvolle Finanzwirtschaft einen Strich zu ziehen. Treu und Glauben, insbesondere das Vertrauen in diese Kontinuität, gebieten nichts anderes, weil gerade eine Fortsetzung ruinöser Finanzwirtschaft verhindern würde, daß Treu und Glauben wieder einkehren.

If a total restart of public finance after default is also okay, if it makes sure stable situation then returns.

[Irbis]

What is required to amend the German constitution?

Is it as hard as amending the US constitution, which is so hard to change that constitutional reform in the US is effectively impossible in today's political climate? Or is it as easy as amending some of the US state constitutions, which are so easily altered by majority votes that their constitutions are effectively written in the wind?

Basically, you need 2/3 majority of the Bundestag voting something in. Which is normally hard to gather, as governing coalitions rarely have even 60% of votes, but! When crisis comes, you often have grand 'agreement' coalition of two largest parties plus their sattelites that easily has 70-90% of seats and thus can change anything it wants to. Last time it happened was actually previous Bundestag term, not long ago.

Yeah and now point out how many of those actually limited liberty instead of enhancing it and how many of those actually resulted in fundamental guarantees being destroyed.

Nice goalpost shifting we have here. From ironclad, untouchable articles where any change is unheard of, we go to "but now that you gave me more than I wanted, now do twice the work to prove my claims, waaah!".

Actually, over half of them reduces individual liberties, which you'd knew if you actually bothered to read them, such as Article 12 going from "everyone has right to pick job" to 12a "unless Government wants you to drive tanks", but hey, enlighten us how conscription or adding clause Germans can be extradited to any EU country for trial (both of which severely limiting your guarantees) are examples of more freedom.

BTW, that list of yours is pretty hilarious, just listing changes without elaborating how and why changes were made. It is pretty much copy paste idiocy.

What, am I supposed to do your homework for you now? You asked for list, you got one. Now take it and demonstrate it proves your baseless claims in any way. I am sure if you dig hard enough you can maybe find one amendment that did not reduce liberties.

No, actually it is not, especially since conscription left ways out of it open. And bullshit about conscription required touching all first 20 articles. Forcing someone to serve for months is not on the same scale as taking their money. One is a national service for which they in turn were compensated for, the other is a direct violation of basic property rights.

Oh, so now we have example that violated all 20 untouchable Articles yet was pushed through? Who could have guessed

Anyway, the point is, Article 12, pretty fundamental freedom, was watered down and castrated by Article 12a that could not be found in original constitution. If you can sell 50 years of youth Germans pointlessly walking from one end of Fulda Gap to another "training" as service to the state, I am pretty sure that Cyprus-grade crisis would be labelled and sent to presses as 'service to the state' so fast the ink of amendment wouldn't even dry before confiscations began.

Also, you were all gung-ho about Courts compensating people for stuff taken from them at market values. I happen to know how much Germany paid conscripts - shall we find average market pay given at the same time, compare both sums and have a laugh finding all the court cases where youths sued state for compensation for what was essentially free labour?

Oh, wait, there were none as state declared that a year of barely paid work is compensated enough. Gee, there goes that nice theory Germany cares about just compensation for property or liberty taken in service of 'public good'.

[Welf]

Also, you were all gung-ho about Courts compensating people for stuff taken from them at market values. I happen to know how much Germany paid conscripts - shall we find average market pay given at the same time, compare both sums and have a laugh finding all the court cases where youths sued state for compensation for what was essentially free labour?

To give an idea: in my nine months I made net what I later did in my first two months with my entry salary. That doesn't include my reduced retirement pension and the time I lost I could have used for actual work experience.