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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWhy Cyprus Matters: The Eurozone Strikes Again
http://www.thenation.com/blog/173395/why-cyprus-matters-eurozone-strikes-againNicosia, the capital of Cyprus, Europe's only militarily divided city. (Flickr/Jorge Láscar)
The kaleidoscope spins again; the shards are rearranged; this time, the fragment at the centre is Cyprus. Faced with yet another country needing an urgent bailout (and with the German election looming in September), Eurozone leaders and the IMF have come up with a new wheeze: make savers pay to rescue the banks that were meant to look after their money, in exchange for a bailout of 10 billion euros.
Not unreasonable, you might say: Why should the proverbial German taxpayer cough up for Russian oligarchs and shady foreign businessmen whove stashed billions on the island? But the plan will take a cut from everybodys savingsfarmers, pensioners, orphans, oligarchs and oil magnateson a roughly graded scale. (The proposed levy on accounts under 100,000 euroswhich were in theory guaranteed by the Cyprus governmentwill probably now be reduced from 6.7 percent to 3.5 percent, which reminds me of the sage Nasrudin Hojas advice to the man whose house was too small.) Over the weekend Cypriots queued at cash machines; one man drove his bulldozer up to the door of the bank.
As the newly elected government of President Nicos Anastasiades postponed a vote on the plan and closed the banks until Thursday, the blame-shifting began: Was it Anastasiades who sold out the small savers to keep the Russians sweet, or the Troika heavies who showed him the brass knuckles? (Answer: its complicated, but there were brass knuckles.) Vladimir Putin weighed in, calling the plan unfair, unprofessional and dangerous. Russia has loaned Cyprus 2.5 billion euros; the EU is hoping it will extend the terms.
Why does all this matter? One, because this is the first time the EU and IMF have decided to take money directly from peoples pockets rather than through the messy process of cutting wages and pensions and putting taxes up. You could perhaps read this as a tacit acknowledgment that austerity has failed, economically as well as politically: its messy, its unreliable, and it makes people vote for leaders who wont play the game, like Italys Beppe Grillo. You could certainly read it as a sign of how profoundly Europes leaders have lost the plot. Though the market meltdown predicted over the weekend hasnt materialized, howls of derision have issued from bankers and business leaders as well as Cypriot indignados: if guarantees on bank deposits arent worth the paper theyre printed on, if peoples savings can be siphoned off by fiat, then the world as we know it, or at least the banking system, will come to an end. (Its worth remembering here that before the last Greek election a Syriza economist proposed tapping private deposits to fund public investment; he was pilloried as a dangerous radical who would destroy the principle of private property.)
pampango
(24,692 posts) Cyprus has amended the terms of its controversial savings levy. Under the new proposal, savers with less than 20,000 in the bank should not see their deposits tapped to fund its bailout.
But despite the change, the country's president has predicted that the bailout will be rejected this afternoon. MPs believe the terms are unfair, he told reporters (watch the clip here)
Russia has escalated the pressure on Cyprus, warning that the savings levy could prompt the collapse of the Cypriot banking sector. Russia's envoy to the EU echoed president Putin's criticism yesterday, and warned of possible social unrest and bank runs (see here)
Cypriot cash machines were working today, with customers able to withdraw funds. The banks remained closed though (see here)
http://www.guardian.co.uk/business/2013/mar/19/eurozone-crisis-cyprus-bailout-government-vote
Sounds like the changes are being made to exempt small savers from any fee. The problem is that the large account holders are mainly Russian which means that Russia does not look kindly on this type of proposed fee structure.