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Uncertainty over the Cyprus bailout deal continues as the government delayed the bailout vote till Tuesday. The biggest point of contention is the tax on depositors.
The first version of the plan was to tax depositors in Cypriot banks 10 per cent on deposits of over €100,000, and 6.75 per cent for deposits lower than that.
But the outcry over the levy prompted Cyprus’ government to renegotiate the plan. Under the new plan, depositors with under €100K would be taxed 3 per cent, those between €100 – €500K will be taxed 10 per cent, and those with over €500K will be taxed 15 per cent.
Following this, news emerged of the losses to Russian depositors. And there have been some reports suggesting that Russian prime minister Vladimir Putin is happy to see those depositing their money offshore punished.
But in his latest note, Dennis Gartman discusses the presence of Russian money:
“There is no question but upon whom the decision by the Cypriot government noted at length above is going to fall most heavily: Russian oligarchs; Russian government officials and Russian criminals.
“Cyprus has been their own private Switzerland for many years. Legal and non-legal Russian cash has swamped the banking system in Cyprus since the early 90’s. The beauty of the island; the ease of admission too and exit from the island via boat or plane; the secrecy of the banking laws; the warm Mediterranean climate and the ease of which Cypriot authorities could be bribed and bought all worked to make Cyprus the centre of Russian capital flight.
“The Russians… legal and illegal… loved Cyprus for the reasons noted above, not the least of which was the tiny 4% corporate tax rate there. Who would not like that rate? It attracted money relentlessly, with the Russians leading the way. Criminal money especially was attracted to the secrecy laws, sending money to the island to have it “washed” and then either left there on deposit, or returned to other banking centres for “investment” abroad, but “washed” thoroughly and made nearly impossible to be followed and tracked. It was an enterprise that worked to the benefit of the Cypriot government and to the Russians, despite the comment by the new President, Mr. Anastasiades, that Cyprus was and is “not complacent about money laundering.”
Gartman refers to the levy as a “theft.” He also says Cyprus has now “angered the people in the world you’d least wish to anger.”
“One could only laugh as such a comment; of course Cyprus was complacent about laundering. To think otherwise was and is naïve. Ah, but now you’ve stolen Russia money… or soon shall depending upon the vote in the Cypriot parliament… and that is dangerous… very. One does not steal Russian mafia money and get away with it. There are fewer statements of fact that are more certain, more factual, more unyielding than this statement. Russian Mafia figures do not take well to being stolen from, and they take even less well to be made fools of. We see no reason to mince words at this point: People will be hurt over this decision; some shall be killed.”
It’ll be interesting to see how this all unfolds.
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