Cyprus banks may cut 40% from some deposits
The country probably won't declare a national bankruptcy, but major banking customers are still taking a hit.
The island country's banks have been closed for nearly two weeks and are scheduled to open Thursday. Officials are expecting customers to flood the banks when they open and withdraw as much money as they can. And that could plunge the economy into further darkness.
Officials are trying to find ways to stop people from withdrawing large sums of money and leaving the country.
Here are six ways that Cyprus residents are getting hurt in the country's economic crisis:
Frozen accounts. Anyone with more than $128,000 in deposits will see their accounts frozen.
A 40% 'haircut.' Those large depositors could lose 40% of their money to banks that need the cash. In exchange, they will get shares in a recapitalized bank, The New York Times reports.
Businesses are suffering. The president of the Cyprus Supermarkets Association told Reuters that consumer confidence has "hit the floor."
Banks folding. The country's No. 2 lender, Cyprus Popular Bank, will be shut down, and anyone with less than $128,000 deposited will see their money moved to the Bank of Cyprus. Some experts say the Bank of Cyprus will be insolvent within a year.
Retailers out of supplies. With the banks closed, retailers and other businesses have not been able to pay vendors or employees, and are running out of inventory.
Lost jobs. Cyprus already has a 14% unemployment rate. With its banking industry essentially collapsing, former bank employees will be out of work and adding to the unemployed count.
Government officials really want to keep all the foreign money within their banking systems for now. Russians, Greeks and other foreign depositors have long viewed Cyprus as an economic safe haven, owning more than 30% of the long-term deposits in the Bank of Cyprus. Now, those foreigners are anxious to get their money out of the country.
The government needs that money to stabilize the economy, so it's freezing the accounts. That's leading to threats from Russia; Finance Minister Anton Siluanov is implying that Russia may not restructure or extend the $3.2 billion loan the country made to Cyprus in 2011.
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A basic income policy can actually ensure a decent standard of living for everyone.
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