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Economists warn Cyprus will face a recession ‘for decades’

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Russians are preparing to withdraw billions of euros from Cyprus and the island will plunge into a recession lasting for decades due to the onerous terms of a EU bailout, economists warned on Monday.

“The Russians are already indicating they want to withdraw their money. Why should they stay? They will go somewhere where they can be protected; we can’t protect them,” economist Simeon Matsi told AFP.

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“We have indications that billions (of euros) will be withdrawn, we already know of about three billion that is ready to move. They are already asking lawyers to draw up documents to withdraw money.”

As a condition for a desperately-needed 10-billion-euro ($13 billion) bailout for Cyprus, fellow eurozone countries and international creditors Saturday imposed a levy on all deposits in the island’s banks.

Deposits of more than 100,000 euros will be hit with a 9.9 percent charge, while under that threshold the levy drops to 6.75 percent.

The controversial tax is seen hitting Russian pockets hard, with experts estimating that Russian deposits in Cypriot banks amount to at least 15.4 billion euros ($20 billion) of the estimated 67 billion euros of deposits held by Cyprus banks.

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Russian President Vladimir Putin on Monday criticised the proposed tax, describing it, according to a Kremlin spokesman, as “unfair, unprofessional and dangerous”.

Russian Prime Minister Dmitry Medvedev was equally forthright.

“We should say this directly: this simply looks like the confiscation of other people’s money,” Russian news agencies quoted him as saying. “I do not know who the author of this idea is, but this is what it looks like.”

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Economist Matsi predicted that Cyprus banks which were scheduled to reopen on Tuesday after a three-day weekend, would remain closed for a time to prevent a rush on accounts.

“The deal by the eurogroup dealt a very heavy blow to Cyprus — it was the death knell for the financial sector,” he said.

Economist Castas Apostolides said the Cypriot government went unprepared into negotiations with the eurogroup.

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“We should have called Europe’s bluff,” he said.

“A bank haircut on deposits is unacceptable; they should have walked out because without a business sector there is no Cyprus economy,” Apostolides said.

“Cyprus will be unable to exit recession for the next 20 years. Our children will pay for this mistake.”

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An analysis by IHS Global Insight said there was a “potential for contagion from the move to impact bank sectors in other troubled economies on the periphery of the eurozone.”

“A mass of withdrawals from eurozone periphery banks could heat up the debt crisis once again after the international financial community had decided that lending to countries such as Spain and Italy would not require the extremely high risk premia it had earlier demanded,” it said.

“The financial markets’ immediate bad reaction to the part funding of the Cypriot rescue by taxing bank depositors has highlighted the concerns that it could be opening a nasty can of worms.”

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UBS Investment Bank managing director Reinhard Cluse said the deal “raises the obvious question whether the depositor bail-in in Cyprus is a ‘one-off’ or whether it will eventually be repeated elsewhere in the future”.

In our view, the immediate implication for other periphery countries might be limited, but we see a substantial risk that depositors will behave a lot more nervously elsewhere in the future,” he said.

Jennifer McKeown, a senior economist with Capital Economics, said that eurozone depositors may not be convinced that the Cyprus action will be a one-off measure.

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“And even if Cyprus is a special case, the key point is that depositors elsewhere might not be willing to take the chance. … and if the authorities are unwilling to save an economy as small as Cyprus … will they really save the others?” she asked.

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… then let us make a small request. Like you, we here at Raw Story believe in the power of progressive journalism — and we’re investing in investigative reporting as other publications give it the ax. Raw Story readers power David Cay Johnston’s DCReport, which we've expanded to keep watch in Washington. We’ve exposed billionaire tax evasion and uncovered White House efforts to poison our water. We’ve revealed financial scams that prey on veterans, and efforts to harm workers exploited by abusive bosses. We’ve launched a weekly podcast, “We’ve Got Issues,” focused on issues, not tweets. Unlike other news sites, we’ve decided to make our original content free. But we need your support to do what we do.

Raw Story is independent. You won’t find mainstream media bias here. We’re not part of a conglomerate, or a project of venture capital bros. From unflinching coverage of racism, to revealing efforts to erode our rights, Raw Story will continue to expose hypocrisy and harm. Unhinged from corporate overlords, we fight to ensure no one is forgotten.

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Trump has been ‘insulated’ by his wealth to never have to learn from his mistakes: biographer

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President Donald Trump's inherited wealth has meant he's never had to learn from his mistakes, Trump biographer Tim O'Brien told MSNBC's Brian Williams on Thursday.

"Bloomberg Opinion writer and our next guest Tim O’Brien writes today, 'Yes, of course, you need a certain kind of appalling narcissism to be comfy promoting yourself as heaven-sent in a televised press briefing and as a deity on Twitter. It’s doubly unhinged when you’re doing this as president,'" Williams said. "He goes on 'The Trump of the past few weeks is the same disordered figure of the past several decades with, I suspect, a big dollop of something new blended in: unbridled and unmanageable panic.'"

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‘Both Putin and Xi will be voting Trump in 2020’: NYT columnist says Russia and China want ‘turmoil and chaos’

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The Russian Federation and the People's Republic of China are both rooting for President Donald Trump to win re-election in 2020, a New York Times columnist argued on MSNBC on Thursday.

Thomas Friedman was interviewed by Lawrence O'Donnell on "The Last Word."

"What do we know about how the leaders of other countries see Donald Trump at this stage in their dealings with him?" O'Donnell asked. "Especially this weekend, when it comes at the end of a week in which they’ve heard him call himself the King of Israel, they have heard him say he is The Chosen One. They have heard all the crazy things that everyone here has heard the president say."

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Trump is ‘not a stable genius’: GOP strategist says the president ‘doesn’t remember who and where he is’

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President Donald Trump's mental fitness is lacking, a top Republican strategist explained on "The Last Word" with Lawrence O'Donnell.

Rick Wilson, the author of the 2018 bestselling book Everything Trump Touches Dies: A Republican Strategist Gets Real About the Worst President Ever, blasted the commander-in-chief.

"Rick Wilson, your assessment of where the president stands as he heads off to the G7 summit?" O'Donnell asked.

"I think Donald Trump has had a week in which he is proving that this isn’t 87-dimensional chess game, this isn't some masterful strategy of communications or persuasion," Wilson replied. "This is an old man who is sick and who has problems and who has mental disconnects and who has aphasias and who has moments where he doesn’t remember who and where he is."

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