By Susan Duclos
Guess those tax hikes Greek lawmakers decided to raise on the wealthy
in January 2013, to "prevent" all other citizens from further "pain," and called it a a vital fiscal reform” that would avert additional across-the-board cuts to workers and pensioners,
just wasn't going to be enough.
Depositors
in Cypriot banks will be hit with a one-off tax on their savings, as
part of a €10 billion ($12.96 billion) bailout for the Mediterranean
island from the euro zone and the International Monetary Fund.
The
deal, announced early Saturday, marks the first time in the euro
zone's five-year-old financial crisis that depositors in bloc's banks
will lose money. Accounts with more than €100,000 will be taxed at 9.9%,
those with less at 6.75%, raising an expected €5.8 billion for the
near-bankrupt nation.
"This
decision should not be compared to the ideal, but to the very real
possibility that much more money could have been lost in bankruptcy
of the banking system or indeed of the country," Cypriot Finance
Minister Michalis Sarris told reporters, looking strained after 10 hours
of often-fraught negotiations.
Mr. Sarris said the Cypriot Parliament would adopt the taxes over the weekend and the money would be extracted from accounts before banks take up business Tuesday. Monday is a public holiday.
"We
have taken immediate measures so that electronic transfers cannot take
effect before banks reopen on Tuesday," said the minister, who took
office just two weeks ago.
The levy will see deposits of more than 100,000 euros in Cypriot banks
hit with a 9.9 percent charge when lenders re-open their doors on
Tuesday after a scheduled bank holiday on Monday. Under that threshold
and the levy drops to 6.75 percent.
To guard against capital flight, Cyprus took immediate steps to prevent electronic money transfers over the weekend.
At
one cashpoint in the capital Nicosia, a pensioner couple said they had
visited several automatic teller machines without success. "We are
trying to pull as much as we can," one told Reuters, reaching for a
wallet containing four debit cards.
"I'm
extremely angry. I worked years and years to get it together and now I
am losing it on the say-so of the Dutch and the Germans," said
British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012
with his savings.
"They call Sicily the island of the mafia. It's not Sicily, it's Cyprus. This is theft, pure and simple," said a pensioner.
This next quote takes the cake.
In Brussels, Dutch Finance Minister Jeroen
Dijsselbloem said it would not otherwise have been possible to save
Cyprus's financial sector which, compared with national economic output,
is more than twice as big as the EU average.
"As
it is a contribution to the financial stability of Cyprus, it seems
just to ask for a contribution of all deposit holders," Dijsselbloem,
who chaired the ministerial meeting, told reporters.
Ask??? Contribution???
Doesn't sound like anyone asked the citizens who were saving money in the banks. That implies permission.
Excellent detailed analysis on this situation over at
Zero Hedge.
But don’t you worry. It could never happen here, at least if you listen to
Paul Krugman and company. Just keep on running up the debt and I’m sure everything will work out just fine.
