It’s now official: Governments can decide you have too much in bank deposits and, without your consent or even a vote by your elected representatives, simply
confiscate steal a percentage of your savings.
Cyprus has just shown rapacious governments across the world how easily it can be done.
After a week of feverish negotiations, the government of Cyprus — a small island country in the Eastern Mediterranean Sea and a member of the European Union (EU) — finally made a deal with
the Devil the grand poobahs of the Eurozone, thereby bringing an end, for now, to the financial crisis that had plunged the small country (population: about a million) into riots and chaos.
The Eurozone is an economic and monetary union of 17 EU member states that have adopted the euro (€) as their common currency and sole legal tender.
The crisis began on March 16, 2013, when the Eurozone told the people of Cyprus that as much as 10% of the deposits in their personal bank accounts would be
levied confiscated, in exchange for a $13 billion (€10 billion) bail-out of their heavily indebted country to avoid bankruptcy and a banking collapse.
But the proposed levy was resoundingly rejected by the Cypriot parliament. Meanwhile, to prevent a bank run, banks in Cypriot were closed (a “bank holiday”!) and ATM withdrawals limited to €100 ($128) a day.
Jan Strupczewski and Michele Kambas report for Reuters, March 25, 2013, that mere hours before the deadline to avert a collapse of the Cypriot banking system, Cyprus President Nicos Anastasiades clinched a last-ditch deal with the three-headed money lender (EU, European Central Bank, and International Monetary Fund) in return for a €10 billion bailout.
Without a deal, Cyprus’s banking system would have collapsed and the country could have become the first to crash out of the euro currency.
Here’s the deal:
- In return for an EU loan of €10 billion, Cyprus must raise €5.8 billion from its banking sector by:
- Shutting down the country’s second-largest bank, the largely state-owned Popular Bank of Cyprus (PBC), also known as Laiki. Thousands of jobs at PBC will be terminated; senior bondholders in PBC will be wiped out.
- Shifting all PBC deposits below €100,000 ($128,630) to the Bank of Cyprus (BoC) to create a “good bank.”
- Freezing deposits of more than €100,000 in both banks (PBC and BoC), which are not guaranteed under EU law. About 30% of those deposits will be
usedconfiscated to “resolve” PBC’s debts and recapitalize Bank of Cyprus through a deposit/equity conversion. Those uninsured deposits total €38 billion (more than half of the €68 billion total bank deposits in Cyprus). Eurogroup chairman Jeroen Dijssebloem said the raid on uninsured depositors is expected to raise €4.2 billion.
- No across-the-board levy or tax would be imposed on deposits in Cypriot banks, although the hit on large account holders in the two biggest banks is likely to be far greater than initially planned.
IMF chief Christine Lagarde said the agreement was “a comprehensive and credible plan” that addresses the core problem of the banking system and “provides the basis for restoring trust in the banking system, which is key to supporting growth.” Blah, blah, blah.
German Finance Minister Wolfgang Schaeuble said the Cypriot parliament would not need to vote on the new scheme, since they had already enacted a law on procedures for bank resolution. Blah, blah, blah.
Some Cypriots are wary about the deal. Georgia Xenophontos, 23, a hotel receptionist in the capital, Nicosia, sensibly asked, “How long will it last? Why should anyone believe anything this government says?”
But many in the capital appeared intent on enjoying a sunny holiday morning, drinking coffee at pavement cafes and watching camera crews filming people drawing money from bank machines.
- “The Left approve of stealing your bank savings,” March 21, 2013.
- “Cyprus copycats: NZ and Spain talk wealth tax on bank deposits,” March 20, 2013.
- “Confiscation of bank deposits: Can it happen in America?,” March 19, 2013.
- “Eurozone confiscation of Cyprus bank deposits: Fallout & Analyses,” Mar. 18, 2013.
- “Unelected Eurozone ministers to confiscate 10% of bank deposits in Cyprus,” Mar. 17, 2013.