Cyprus has decided on a hybrid solution
Cyprus is the fifth eurozone countries that asked for help. The reason for the problems the third smallest economies of the eurozone's crisis in the banking sector, which consists of two fifths of the Cypriot economy. The case is very similar to the situation a few years ago in Iceland and Ireland, where the banking sector grew reasonable rate. In Ireland, the government cleaned up the banks, while in Iceland to bear the costs shouldered by creditors. Cypriot banks should like Greek bonds as one of the main assets held, after which they decrease their value virtually erased equity.
Cyprus corporate tax rate of 10 percent, together with the European currency were among the attractions of foreign investors who They moved their headquarters here. And they will be most affected by the expropriation of deposits over € 100,000. Businesses lose the amount of working capital. Among them will be 1,700 Czech companies, which had moved residence. Another group will be damaged Russian savers who took to the island not only because of the sunny weather.
Overall it can be said that European leaders will reach that Cyprus will have to take measures, which will increase corporate taxes, which will result in an outflow of foreign capital. At the same time, however, demolished the dogma of inviolability of bank deposits in the euro area. This could have the problems of other countries disastrous consequences. At the slightest problem could cause bank runs and general loss of confidence in the banking system. Confidence unfortunately no taxes restored.
Conseq Investmenet Management, Inc.
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