"Much of the day was given over to cross-border finger pointing and a public reluctance for anyone to take responsibility — some might say blame — for a decision that some analysts worry could cause a run on banks in Cyprus, and possibly in Italy and other troubled euro zone countries. Cyprus, whose banking system is on the verge of collapse, is now the fifth nation among the 17 members of the euro to seek financial assistance since the crisis broke out three years ago. "They keep printing and stealing, but the problem keeps getting worse. That's because printing and stealing is the problem.
EU backs off and now wants to spare smaller savers.
""They are treating us like guinea pigs," said Takis Georgiou, 49. "The government has lost its credibility in the eyes of the people. We'd be better off leaving the euro and returning to the pound, we don't want to end up like Greece.""They're right.
""Essentially parliament is called to legalize a decision to rob depositors blind, against every written and unwritten law," said Yiannakis Omirou, speaker of parliament and head of EDEK, the small Socialist party. "We refuse to subscribe to this." ($1 = 0.7654 euros)"They're right too.
Prediction of an EU bank run.
"More importantly than the actual amount of money seized from the measure is the precedent set by the willingness of Europeans to retroactively tax deposits to protect bondholders. As of the writing of this column, there is still a chance that the Cypriot parliament may soften or reject this levy entirely. However, any reversal of this policy in the near term hardly makes a difference. By even considering the option of direct wealth taxation, Brussels has shattered the confidence of the European banking system."You can't put the genie back in the bottle. The western banking system is based on confidence. Bank don't keep enough money on hand to deposits. In fact, they keep a tiny fraction - in the US, it's around 10 percent - of their deposits. That confidence has been shattered.
"Why would any depositor risk holding their money in a euro-denominated bank? Interest rates do not offer any real yield and with the high debt levels on sovereign balance sheets and undercapitalized banking systems, there is no reason to assume that any country's bank is safe from deposit confiscation. Individuals' risk of losing 6-10% of savings without notice far outweigh any convenience of a domestic bank account. In addition wealthy individuals can easily move enough money to US dollar, pound, or Swiss franc denominated bank accounts who do not have the same currency contagion risks."The dollar will certainly make temporary gains because of this, but only temporary. Central banks are in a world-wide race to the bottom.
"On top of this, Brussels is looking to pass laws that force struggling countries to accept bailouts. If problems with Italy or Spain's banking system persist beyond a point acceptable to German creditors, similar bailout terms to Cyprus can be thrust onto these people without any recourse."
The percentage went up.
"The hit could now be as high as 15% on deposits of more than $646,000, an insider tells the Wall Street Journal, while smaller deposits could be subject to a 3% or 10% tax. The goal is $7.6 billion, in the first European bailout to be financed by depositers. Still, there's no guarantee the measure will pass. There's no majority party, Reuters notes, and three parties have already refused to support it. But Cyprus President Nicos Anastasiades is calling on lawmakers to take action, saying that failure to back the levy could result in a "complete collapse of the banking sector." A lawmaker, however, offered a different take: "Essentially parliament is called to legalize a decision to rob depositors blind, against every written and unwritten law.""This is getting worse, fast.
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