Expect A Big Dip In The Euro After Cyprus 'haircut'

[Pormax]

Those in the Euro zone should be very worried after, as part of the Euro bailout agreement the Cyprus government decided to charge all those with bank accounts in Cyprus 6.75% of the money in their accounts up to 100,000 Euros and a whopping 9.9% of anything above this amount with immediate effect. This has been called a 'Haircut'. don't ask me why. No one it seems is excempt from this levy. On top of this it is expected to raise the tax on interest paid on savings accounts from 20% to 25%.

Though English I lived in Cyprus for 4 years before moving to Thailand 4 and a half years ago. So in a way I am lucky I got out when I did.

This is the first time this sort of action has been taken but a precedent has now been set. So how many other Countries in the EU zone will follow the same path if they get into difficulties?

I can see many hundreds of thousands if not millions of bank customers throughout the Euro Zone withdrawing their funds and keeping their money 'under the mattress'or sending to offshore saccounts. This then will have a enormous effect on the banks and furtherv pressure on the Euro. The UK Pound will I suspect also be effected because the UK is in the EU. If the Euro takes a hit then it rubs off on the GBP.

The Cypriots have been trying to empty their accounts but have been told they can only witdraw their money up to the amount of the levy in their accounts. They fear that though this is supposedly a 'one off' levy, if the bailout agreed does not do it's job then a further levy might be imposed despite assurances from the Cyprus Goverment.

My feelings on the EU has not changed. The idea initially was good but in practise it is very poorly run especially taking in too many little and poor countries which were always going to struggle and be a burden on the bigger countries who have to pay massive amounts of money every year into the Euro coffers.

Take Cyprus as an example. Never really had too much of a financial problem even with the problem with the island divided in two with the Turks claiming one third of the island since 1984. One of the main reasons they joined the EU was for protection against Turkey and hoping for an acceptable conclusion to their differences. Now as it was feared by many (I was there at the time)it has not done them any good only harm. Still 'talks' after almost 30years are going on with no end in sight, now they are bankrupt.

Tomorrow the banks in Europe reopen after a public holiday today and I expect a sharp dip in the Euro and a drop in the value of GBP.

this is just my view,I could be wrong though as I am not a financial analyst or ever worked in the money markets.

[bonobo]

Interesting, but not Thai-related.

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