Sunday, March 17, 2013
Let them try it once and they WILL try again
The latest European Austerity/Pain measure has most of Europe abuzz and Cypriots looking for ways to get their money out of the banks. The European finance ministers agreed to bailout Cyprus banks which were devastated by the enforced Greek austerity. The new twist is a requirement that a percentage of all savings, from 6.7% to 9.9% be stolen up front from all current accounts to partially pay for this.
Euro zone policymakers made a point of saying they would monitor any signs of money moving out of Cyprus but did not say how they might react in the event.Theoretically the purpose of this is toprevent large Russian depositors from profiting from the bailout, a situation that really bothers Herr Chancellor Merkel. But in a largely peasant economy, who will leave their money in a bank that will steal up to 10%? Will there be an uncontrollable run on the banks? Will Cyprus go bust refusing the bailout? Will Tuesday be the day that Cyprus blows up the Euro? Time will tell.
"For us, Cyprus is systemically relevant. Despite the small size of the economy, disorderly developments in Cyprus could undermine the important progress made in 2012 in stabilizing the euro zone," ECB policymaker Joerg Asmussen said after the Eurogroup meeting concluded before dawn on Saturday.
A Cypriot bank holiday on Monday will limit any immediate reaction. The deposit levy - set at 9.9 percent on bank deposits exceeding 100,000 euros and 6.7 percent on anything below that - will be imposed on Tuesday, if voted through in parliament.
That is not certain to happen, but fear of the alternative - probable default - will focus minds.
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