The Cyprus Bailout Should Be a Warning to EU Citizens

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http://www.bbc.co.uk/news/world-europe-21824495

To paraphrase the linked article, Cyprus is getting a bailout with a twist: savings over 100,000 euros get a 10 percent levy, and anything less gets a 6.5 percent levy. Predictably, there is a run on banks there.

Now I know this measure is aimed at those that use Cyprus for offshore financing, but there is no doubt this will hurt ordinary Cypriots. And by extension, this will hurt everyone else in the EU, if only because this will trigger other bank runs. I would personally be very nervous if I had money in a European bank right now.

So I say bravo, Brussels. You are treating the patient with blood letting. Just a little more, and you may succeed in killing the patient.

Gotta say I dont think its that bad. So you have to pay anyway, for that stuff. As example, Spain, Italy, Greek become money from the EU to save their financial companies, but for that they were forced to raise taxes and so on. Most people that payed that in form of taxes were low and middle class, while rich classes got awy in corrupt ways.

While this time on cypern, everyone pays as well. Instead of taxes in the direct way of money on the banks. But this time the rich one, cant spare themselfs out. Their money is on the bank and they have to pay. That cypria is known as a place where russian mafia leaves their millions and legalizes their illegal money: The better. I only would be really afraid now if I was a EU finance politic, because russian mafia will get really mad about that.

It is.

I bet this won't be the first time this happens either - and if I had money in Southern European banks, I'd be worried now too.

The EU does not deserve to exist.

Oh, and here's an article on it from The Commentator:

(shrug)

I see a few advantages, both for Cyprus and the EU.

First, it's targetted at cash reserves. For domestic money, that's precisely what Cyprus needs to unlock. Get corporations off their cash reserves, and get savers to put their money into the capital markets. Second, it gives government a way into regulating banks that have been complicit in money laundering for years. Regulation has been pretty unsuccessful at getting proceeds of crime out of Cypriot banks--but this initiative may provide much better enforcement.

As for the EU, this will serve to hit Russian reserves, a not inconsiderable issue considering the balance of trade between the EU and Russia, and Cyprus' position as a significant entry point for Euros into the Russian economy.

I think part of the issue here is that everyone does pay this levy, and it will affect workers more than Russian plutocrats. There will be Russian depositors who will pay, but all savers will pay something. This does more than punish those who save their money. Rather, it sends a signal to Cypriots and others that banks are not secure places to store their money. It is better to store savings under your bed, and let inflation eat at their purchasing power. The rich hurt some, but let's face it, those with over 100,000 euros won't feel as much pain as those with fewer savings.

I guess I am also frustrated because, as an American, we strongly believe in protecting savers. In the 1930s, mass bank failures wiped out untold millions of savings, making the depression worse than it otherwise could be. Since then, the Federal Deposit Insurance Corporation guarentees a certain amount of savings (up to $250,000 today) in the event of a bank failure. This prevents everyone from withdrawing money at once, as is happening in Cyprus. When banks do fail, it is an orderly process.

Savings are guaranteed up to 100k in the EU. That guarantee is the responsibility of the individual member states. Since the Cyprus government is broke, the guarantee isn't worth very much. Without the bailout people would probably lose a lot more than 6.75%. For the people with over 100k, if the banks fell they would get nothing, whereas now they still get to keep 85-90% of their money over 100k.

The alternative is that taxpayers in other countries have to hand out even more money. These bailouts are not very popular in countries like Germany, the Netherlands, Finland and so on. Taxpayers don't even like paying for bailouts in their own country, paying for foreign banks makes them more upset.

Some people are totaly missing the point. The problem with this has nothing to do with being fair or not. If the banks didn't close their agencies, the money from all depositants was gone in a week. And what will happen is that the money will be translated as soon as the banks open. Even after the tax. So, whoever were the geniuses who thought of this (aparently all european finance ministers agreed), they have just destroyed the banks in Cyprus. That is a tragedy for the country's economy and thus to the people of Cyprus. Furthermore, and more importantly from my selfish point of view, this withrawal of money from banks will escalate in Portugal, as well as in Greece, Spain and Ireland. If I had more than 1000 euros in my bank I would withraw it tomorrow (unfortunately I have less). And from there on, there's no telling what will happen in the rest of Europe. This is probably the nail in the coffin. Well done EU!

And by the way, let me tell you something about this "help" the EU is giving us "PIGS" (what a great choice of acronim for our countries; not racist at all). Those lending the money are having record profits from our debt. And we (and by we I mean those who are not fortunate enough) are being robbed and forced into poverty by these pricks who lend us the money so that they can have maximum profit. Those who worry if their taxes are going to help others than their own country men, don't worry; we are going through misery, recession and 17% unemployment so that your banks can have the money they lost speculating, back into their possession. You want your money back? Go knock on the banks' doors and ask for it.

The Cypriots must be a peaceful people, this theft is a declaration of war.

money exiting the banks and entering mattresses and cubbyholes in walls nationwide.

I dont think that the cypriots, that had their money under their beds, got 30% win on their money over the last 6 years as the people did, that had their money at the bank.

There would be no "pricks" that lend if there were no borrowers.

ruveyn

i would not begrudge anybody who had to borrow in order to feed themselves and keep a roof over their heads.

Yes but they are borrowing so that we can't feed ourselves and we can't have a roof over our heads.

this world truly will have gone to the dogs when we allow dog-eat-dog moral atavism [IOW "every man for himself"] to rule the day. such a hobbsian world would not be worth living in, IMHO.