A SECURITY GUARD ENTERS A BRANCH OF THE BANK OF CYPRUS IN BUCHAREST MARCH 28, 2013.
Credits: REUTERS/Radu Sigheti
Like much of Europe, Cyprus’ banks are wobbly, teetering on collapse.
Cyprus is a small country of about a million people, so the money needed to prop them up was smaller than other European or American bailouts have been. It’s absurd to call 10 billion euros — about $13 billion — small, but these days politicians are used to talking in trillions.
But this time Germany, the strongest European economy and the largest bailer-outer, balked. Cyprus’ banks, they noted, weren’t really for Cypriots — they do the bulk of their business for wealthy Russians, who use Cyprus’ banks the same way other wheeler-dealers use Caribbean banks. Let’s be gentle and say it’s for “legal reasons.”
To give you an idea of the scale of it, Russian deposits in Cypriot banks total $31 billion. Cyprus’ entire annual GDP is only $25 billion. So that would be as if Americans kept $2 trillion stashed in Canadian banks.
So the European Union’s masters of the universe refused to help, unless Cyprus agreed to a shocking condition: They demanded Cyprus’ banks literally seize 10% of all of their customers’ money and use that to prop themselves up.
That is normally called theft. But in this case, it was the EU government pressuring Cyprus to do it.
Anyone and everyone who had money in a Cyprus bank account would have had 10% of their savings — 10% of their children’s college fund, 10% of their retirement nest egg, 10% of their life savings — just taken. They called it a “tax.”
It was a shock. There was a run on the banks, so the government closed the banks for a week to stop it, permitting Cypriots to withdraw just $130 a day from ATMs.
Realizing the insanity of their solution – and sensing a popular revolt – the EU and Cyprus’ government switched to a second version of insanity. They revised the terms of their heist. Now the first 100,000 euros ($130,000) in savings would be exempted. But anyone with a larger bank account could lose 30% to 40%.
You can imagine the rage from Russian millionaires — and the terror struck into the hearts of every single person, rich or poor, across Europe who lives under the increasingly powerful, unaccountable, whimsical rule of politician-bankers. Let’s call those rulers “banksters,” because after their Cyprus raid, that’s just accurate.
Remember, this theft was excused because Cyprus’ depositors weren’t really Cypriot. But after the banksters got away with this without riots, they realized they had a new, lucrative model. And so the Dutch chairman of the eurozone — the countries that use the euro — told reporters that raiding bank accounts of savers could be repeated across Europe, in places like Italy and Spain, too.
Jeroen Dijsselbloem said, “If there is a risk in a bank, our first question should be, ‘OK, what are you in the bank going to do about that? What can you do to recapitalize yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders.”
It all made sense until that last sentence. Of course, a bank’s shareholders should be on the hook for their own bank. But letting banks seize money that people trust them to keep in their safes? That’s like telling car mechanics that to pay their debts, they should feel free to seize any car they’re working on in their shop — as long as it’s a fancy car.
This is what has become of the European Union.
Except there’s one more detail. The two main banks in this crisis — Bank of Cyprus and Cyprus Popular Bank — have branches in other countries. And those foreign branches were not shut down this past week. Customers — like Russian gazillionaires — weren’t limited to withdrawing $130 a day. They took millions out, while ordinary Cypriots were frozen.
This isn’t just a banking disaster. It’s a democratic disaster.
And it’s a taste of what’s about to come.
Cyprus is a small country of about a million people, so the money needed to prop them up was smaller than other European or American bailouts have been. It’s absurd to call 10 billion euros — about $13 billion — small, but these days politicians are used to talking in trillions.
But this time Germany, the strongest European economy and the largest bailer-outer, balked. Cyprus’ banks, they noted, weren’t really for Cypriots — they do the bulk of their business for wealthy Russians, who use Cyprus’ banks the same way other wheeler-dealers use Caribbean banks. Let’s be gentle and say it’s for “legal reasons.”
To give you an idea of the scale of it, Russian deposits in Cypriot banks total $31 billion. Cyprus’ entire annual GDP is only $25 billion. So that would be as if Americans kept $2 trillion stashed in Canadian banks.
So the European Union’s masters of the universe refused to help, unless Cyprus agreed to a shocking condition: They demanded Cyprus’ banks literally seize 10% of all of their customers’ money and use that to prop themselves up.
That is normally called theft. But in this case, it was the EU government pressuring Cyprus to do it.
Anyone and everyone who had money in a Cyprus bank account would have had 10% of their savings — 10% of their children’s college fund, 10% of their retirement nest egg, 10% of their life savings — just taken. They called it a “tax.”
It was a shock. There was a run on the banks, so the government closed the banks for a week to stop it, permitting Cypriots to withdraw just $130 a day from ATMs.
Realizing the insanity of their solution – and sensing a popular revolt – the EU and Cyprus’ government switched to a second version of insanity. They revised the terms of their heist. Now the first 100,000 euros ($130,000) in savings would be exempted. But anyone with a larger bank account could lose 30% to 40%.
You can imagine the rage from Russian millionaires — and the terror struck into the hearts of every single person, rich or poor, across Europe who lives under the increasingly powerful, unaccountable, whimsical rule of politician-bankers. Let’s call those rulers “banksters,” because after their Cyprus raid, that’s just accurate.
Remember, this theft was excused because Cyprus’ depositors weren’t really Cypriot. But after the banksters got away with this without riots, they realized they had a new, lucrative model. And so the Dutch chairman of the eurozone — the countries that use the euro — told reporters that raiding bank accounts of savers could be repeated across Europe, in places like Italy and Spain, too.
Jeroen Dijsselbloem said, “If there is a risk in a bank, our first question should be, ‘OK, what are you in the bank going to do about that? What can you do to recapitalize yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders.”
It all made sense until that last sentence. Of course, a bank’s shareholders should be on the hook for their own bank. But letting banks seize money that people trust them to keep in their safes? That’s like telling car mechanics that to pay their debts, they should feel free to seize any car they’re working on in their shop — as long as it’s a fancy car.
This is what has become of the European Union.
Except there’s one more detail. The two main banks in this crisis — Bank of Cyprus and Cyprus Popular Bank — have branches in other countries. And those foreign branches were not shut down this past week. Customers — like Russian gazillionaires — weren’t limited to withdrawing $130 a day. They took millions out, while ordinary Cypriots were frozen.
This isn’t just a banking disaster. It’s a democratic disaster.
And it’s a taste of what’s about to come.
No comments:
Post a Comment