The Cyprus Great Bank Robbery
James Hall
When does banksters’ extortion become outright theft? The latest example and escalation by the placing a levy fee on bank deposits in the tax haven of Cyprus illustrates the bold step of seizing private liquid saving accounts, under the guise of a government tax. The prospects of an all out run on the banking system have jumped tenfold. Essentially, a government is using the power of the state, to steal funds not because of the bankruptcy of a banking institution, but because of a failure of the entire EU financial system. The forbidding precedent of a seizure of individual wealth, by a stroke of a pen, runs contrary to the shrinking confidence in fiduciary trust of cash placed in banking accounts.
"President Nicos Anastasiades said Cyprus had little option but to accept the bailout deal, which imposes a levy on the country's bank deposits - an unprecedented step in the eurozone crisis. Without it, he said, Cyprus' banking system would have collapsed on Tuesday.Anastasiades said that's when the European Central Bank would have stopped providing emergency funding to Cyprus' troubled banks. Such a collapse would have driven the country to bankruptcy and possibly out of the eurozone, he said."
Now the excuse used by the establishment press to soften the blow of systematic larceny points to the Russian Oligarchs Lose Friend In Cyprus Banks, as exoneration for tapping the pocketbooks of shady elements. "Cyprus is known as a hot bed of Russian money laundering." Well, that justification surely does little to make whole the struggling Cyprus natives that can ill afford the hit.
The article, Russian Ruble, Stocks Nosedive on Cyprus Debt Crisis outlines the initial response to the announcement. "Under the terms of the bailout deal, Cyprus will have to impose a levy of 6.75 percent on deposits of less than 100,000 euros and 9.9 percent on deposits with greater sums. Cypriots reacted with shock and rushed to cash machines to withdraw their savings, but many machines refused to pay out."
Not long thereafter, The Telegraph newspaper reports on plan B, a feeble attempt to gain legislative support to pass the measures. "The Cypriot government has submitted a draft bill to parliament scrapping a controversial levy on bank deposits up to €20,000, amid calls from its central bank governor and eurozone finance ministers to ramp the exemption threshold up to €100,000."
The perspective analysis from ZeroHedge warns of the unintentional consequences from this pompous scheme of outright larceny in the essay, Will Russia Kill The Cyprus Bailout?
"As Monument Securities' Marc Ostwald notes "there's a 50/50 chance Cypriot bailout fails because of the 'massive danger' a large amount of Russian cash flees Cyprus following deposit tax plans." Russia has ~$60 billion exposure to Cyprus, including loans to companies registered in the country and after the haircut 90% of Russian deposits will still be free to leave the country if the levy is approved.
The critical point is that, should this occur (such a large outflow of Russian cash - dwarfing in fact the size of the bailout package itself) it is hard to see how the Cypriot banking system could survive (even with the assistance of the ECB's ELA)."
"And here’s the larger picture. Cyprus is badly indebted. Its debt-to-GDP ratio pushed to 127% in the third quarter of 2012, the latest period tabulated by European Union officials. Such high debt reflects Cyprus’ ill financial health. Only Greece (at 153%) has a higher level. The bailout would begin to reduce its debt, sending it back below 100% of GDP within the year."
"Despite Cyprus being small, and arguably unique, a depositor in a peripheral bank is likely to ask the obvious question: how likely is a deposit tax for me? The answer to this question, we believe, will differ, depending on the peripheral country where it is asked. But it should, in essence, boil down to two issues: (1) how likely are savings to be bailed-in in any future bank rescues; (2) how likely are savings to emerge as a tax-base for any future wealth taxes?"
James Hall – March 20, 2013
http://www.batr.org/negotium/032013.html