Cyprus banking crisis: an update (of sorts)

It's almost a week since we woke up to the news that the Cyprus government was planning to take a 'levy' on all deposits in banks, up to almost 10% for those with more than €100,000.  

It was a topic of discussion wherever we went; some people shrugged and said that those with large amounts of money could afford to give some to the government. Some felt that foreign investors, who benefit from low tax rates, should certainly contribute. But it all seemed very unfair on the ordinary Cypriots and ex-pats, with much smaller amounts in our accounts, having to fund the almost collapsing banks from our own pockets. It's not as if we make any interest these days - nothing at all on current accounts in Cyprus. 

Moreover, one of the main reasons that Cyprus is in such financial trouble is that it helped to bail out Greece - and the Greek people did not have to forfeit any kind of levy.  

By the time the vote was taken in parliament on Tuesday, the plan had been adjusted slightly, so that those of us with less than €20,000 in our accounts would be exempt from a levy.  However, there were protests going on around the island, and clearly the government were listening to the people... so the proposed levy was rejected.  Not even by a close vote: 19 people abstained, 26 voted against. Nobody was in favour. 

Cue lots of rejoicing....

... Except that this potentially pushes Cyprus into a much bigger problem.  The banks were supposed to open again on Wednesday, but three further days of bank holiday were declared. E-banking is frozen, to stop people moving their money abroad, or to different accounts. We can't even pay utility bills online at the moment. 

By Wednesday, Richard was getting concerned. I don't keep much cash in the house - I take some out at the start of each month to cover petrol and local grocery shopping, but we were over half-way through March, and I had about €60 left. He was worried that the banks might close indefinitely, and I did realise that we might have to pay our phone bill at the end of the month in cash.  We were safe from a levy - or so it seemed - but if, as now is possible, the banking system collapses entirely, would we lose everything?

So we went to the ATM at our bank, half-expecting a lengthy queue. There was one person who left as we walked up to it, and it dispensed money as normal. I really don't like carrying more than the minimum cash around, but it's certainly preferable to having none at all. 

Then we drove to Metro, and bought some things with long shelf-life - such as cat litter, and toilet rolls, and instant coffee.  We used our debit card to pay, and it was accepted without problem.

Was the press over-reacting, we wondered? Were the Cypriots and ex-pats in general assuming everything would be all right in the end? Was this a rational decision, or head-in-the-sand?  The banks were closed to stop huge withdrawals of money which could lead to disaster, but it seemed a bit strange that the population were not queuing up to take at least a few hundred euros of their money out, to have safe.  Should the banks collapse, or indeed if Cyprus decides to leave the eurozone, all money might indeed be forfeit, despite the official EU guarantee of safety for all deposits up to €100,000. 

Yesterday - Thursday - Richard was at some meetings in Limassol. He said that in the afternoon he noticed long queues at ATMs, particularly those of Laiki Bank, the one reputed to be nearest to collapsing. We heard from friends that they were unable to take money from an ATM, and that while their debit card was accepted in two shops, it was refused at a third. We read stories of petrol stations only accepting cash.  It seemed that there was, after all, some widespread panic.  

Meanwhile the government tried to come up with further plans to raise the five billion euros needed if the country is to receive EU support for a further ten billion. The amounts seem  phenomenal, although it did occur to me that with 750 million people in Europe altogether, just €10 per person would raise 7.5 billion.  And would be a lot fairer than heavy levies on the people of this tiny island (whose population is less than one million). 

This morning we drove down to the Post Office so I could mail some cards, and also check for an expected large parcel (which had, indeed, arrived).  As I came out, I saw that there was a small queue at the Laiki Bank ATM.  I've fuzzed out the faces, but this is a general idea of what we saw... and those prominent 'stop' signs look quite dramatic! 

Evidently people were getting cash. If Cyprus switches to the Cyprus Pound, it will probably be devalued against the euro, meaning that hard currency euros are worth more, relatively speaking. Not that I'm a banker or any kind of economist.

What will happen?  I wouldn't want to hazard a guess.  One BBC correspondent has explained some of the difficult choices that must be made.  I don't think anyone wants Cyprus to leave the eurozone, or for the banking system to collapse entirely.  I remain cautiously optimistic that some solution will be found - that, at tonight's meeting, a compromise of some sort will be found. I'm a great believer in negotiation and finding mutually acceptable solutions to problems. In this case it's impossible to please everyone; money is such a divisive subject. 

In the meantime, I'm keeping half an eye on the live update feeds from both The Telegraph and The Guardian (two UK newspapers).  The final decision should be made at a meeting this evening.....

Maybe. 

Levy on savings in Cyprus banks... Eurozone bailout?

I don't switch my computer on until after my walk, if  have one, and any necessary shopping or housework, and breakfast, and a shower... so it wasn't until about ten o'clock this morning that I sat down to check my email, and Facebook, and also the news.  Not that I'm a great one for world events, or politics.. I tend more towards human interest stories, on the whole.

But this morning, this story about Cyprus and the Eurozone bailout leapt out at me when I looked at the BBC news site. I don't begin to understand economics, but am aware that Cyprus is in huge debt - not entirely the island's fault - and that with the new government, elected recently, there was likely to be a big bailout package agreed. This appears to be the case, but according to the article 'savers' in banks - such as the Bank of Cyprus: 

Or the Laiki Bank:

are going to be subject to a one-off 'tax'.  Those with more than 100,000 euro in their accounts will have to pay almost 10%, which is rather a large amount of money at that level, and those with less will  have to pay 6.75%.  Moreover, to stop people transferring all their money out, or withdrawing it, all electronic banking is on hold for this (Carnival) weekend. Monday is a public holiday for Green Monday, and the levy will be imposed, I gather, on Tuesday morning. 

I was not clear whether this 'tax' applies just to savings accounts - in which case, we will be charged about €14 - or to current accounts, in which case it will be a bit more - but still not a great deal. We don't tend to keep much in our Cyprus account; we just transfer what we need each month from the UK. 

Having read the story at the BBC site, I then looked at the Cyprus Mail, the other place where I tend to glance at news each morning. Savers are forced to bear costs, the headline proclaimed.  The story is similar, and, again, no indication whether it's just savings (although that is perhaps implied) or all accounts.  There is a lengthy and somewhat angry comment thread at the end of that article, unsurprisingly.  It does seem like an odd thing, legally speaking, to be able to deduct money from ordinary people with no warning whatsoever. However, if the alternative was for the banks to become bankrupt and lose everything, it's certainly a lesser problem. 

I am surprised to learn that apparently about half the Cyprus savers are non-resident Russians, who will be contributing a large amount of this 'tax'.  Perhaps there are also ex-pats living here who have seen Cyprus as a tax haven - rates are low.  But there must also be people who have been saving carefully and frugally over the years, only to find that they lose a significant amount, out of the blue. Then there are small businesses, or organisations such as Richard's, who struggle to keep afloat, and who will be hit very hard indeed by this. 

Clearly it's a news story which will run for a while - other Eurozone countries are going to be worried, and if this tax is legal it's going to make a lot of people give up on banks, or withdraw all their savings, which - I would have thought - would make it still worse. 

Later news stories have reported incredulity giving way to fury in Cyprus, and shock as savers wake up to the levy.  The BBC is also reporting individual stories about the bailout. 

What mystifies me is that the reports say that levying this 'tax' is going to raise 6 billion euros.  That's a LOT of money. And since the majority is apparently going to come from people at the higher threshold, that means that 6 billion is only 10% of what is currently deposited in the banks.  

So... why are the banks supposed to be in crisis?  

Brief visit to Potamos

Another year has rolled by, accounting-wise, and our accountant friend has come out to stay for another week to work on Fixed Assets and Year-End and other such essentials for Richard's work.  While she's here, we usually try to take her somewhere that she hasn't been before.  Last year we went to Agia Napa, for instance.  Four years ago - hard to believe it's so long ago! - we spent a day in Limassol, visiting Kurium and Kolossi Castle.

This time, we decided to go out on Sunday afternoon, and our friend suggested Potamos, a fishing village highly recommended by one of the tourist books. It's somewhere I had never been in our fifteen years, although I have heard others talk about it. Richard has been there a few times, but only by boat. Apparently it's about thirty nautical miles by sea to Potamos from Larnaka, so a good destination for a day sail in the dinghy.

It was apparently 46km by road which is about 28 miles, and took us half an hour or so to reach. I had little idea what to expect. The word 'Potamos' in Greek just means 'river', but Richard told us that it was just a little inlet of salt water where fishing boats stay. Our first sight of the bay was this:

It was a pleasant afternoon; sunny, but only around 16C. We decided to walk along the beach first of all. Although there were one or two people with barbecues, it was mostly deserted: 

The water was extremely clear, with gentle rock pools and some seaweed floating around, although clear water is pretty much impossible to show in a photograph:

There's very little tide in Cyprus, so the sand was soft making it hard to walk in places. Where we could, we walked on damper sand; in other places we walked along a rough path.  As in Larnaka, there are yellow wildflowers just about everywhere:

Of course, nowhere is a true idyll. I was quite shocked to see quite a bit of litter lying around, some of it looking quite recent:

Other litter had evidently been caught up in the foliage:

There was some slightly larger litter too, which would be rather more difficult to remove:

Or perhaps that's what happens when waiting... and waiting... for a bus.

As we walked back, we passed a very busy fish restaurant, and saw some prickly pears growing wild:

We didn't even consider picking them, however! We would have needed rather strong gloves. 

Many of the fishing boats looked old and tired, and the walkways over the sand decidedly ramshackle:

I think this pretty much sums up the relaxed attitude to the law that's prevalent in Cyprus (you can click the photo to make it bigger - but in case it still isn't clear, the white squarish sign surrounded by parked vehicles says 'NO PARKING':

I loved the reflections made by this boat, which looked a bit cleaner and brighter than many:

Before long we reached the end of the water, and saw what must once have been a hotel of some kind:

We all shuddered a bit at the thought of the metal bridge that gave access from the other side!

While I'm not surprised that an old hotel would still be standing, albeit abandoned, I did wonder quite how this hut continued to stay upright:

As we returned to the car, I looked out over a landscape which was green enough that it could almost have been a roadside in the UK:

.. except that, moving a little to one side, there was yet more large-size 'litter' in the form of ancient rusty boat trailers:

It was a pleasant enough place to go for a walk, and on a warm day the beach might have been quite fun for children. But the sea was too rocky to be much use for swimming, and there wasn't really a whole lot to see.  We've been here fifteen years now, and this is my first visit. I don't think I've missed out on anything.

Still, as a typical example of an old-style fishing 'village', Potamos is perhaps worth a visit for an eager tourist wanting to see traditional Cyprus. 

Achna fruit stall, revisited...

Although good friends with abundant lemon trees have been generous in giving us bags of lemons over the past few months, we were just about running out. With our colds and coughs we have been drinking a lot of hot honey and lemon, and I had frozen lots of 'lemon cubes' in ice cube trays, for times when we need just a tablespoon or two of lemon juice and don't have a fresh one handy. 

Richard had almost finished the last bottle of our current batch of lemonade, and although I had frozen some peel and juice, I wanted to keep that for the summer. 

So we took the car to the fruit stall where crates of produce are on offer for low prices.  

We bought 4kg oranges (enough for early morning juice for the next week or so):

3kg potatoes (which should last us a couple of weeks at least):

6kg lemons (which made 3 litres of lemonade, and 48 'lemon cubes', and still left about ten lemons for hot drinks):

3kg bananas (I dehydrated 20 of them on Saturday, as we very much like dried bananas):

and 3kg carrots (which will probably also last us about two weeks):

While I doubt if any of this produce is organic, the fruit is certainly unwaxed and it's all likely to be locally grown.  

The price of the 19kg fruit and veg which we bought? 

 €10. Total. 

(For British and American readers, according to Google that's £8.63 in sterling, or $13 US)

It's not as great value as the fruit we bought there in the Autumn, but it seems pretty reasonable to me. 

Some things are very expensive in Cyprus, but I'm happy that great quality fruit and vegetables are still very affordable.