We don’t really blame the European Union for trying to squeeze a little payback from Cypress for a planned €10 billion (with a “B”) bailout. But the effort to prop up the failing country is like bailing water on the Titanic using a bucket with a hole in the bottom. Gouging Cypriot citizens who trusted the system enough to put their money in the bank is truly evil.
Here’s what’s happening.
The fiscal mess infecting certain nations of the European Union (EU) continues to astound those of us on the outside looking in. This time it’s Cypress that finds itself in dire financial straits and the EU knew they needed a bailout plan. Unfortunately for those citizens of earth who believe freedom and fairness, the plan pushed by Germany included a one-off “tax” on money currently deposited in Cypriot banks to partially offset a planned bailout loan from the euro zone and International Monetary Fund.
Say what? You read correctly. Accounts with more than €100,000 would pay 9.9 percent, while those with less than that arbitrary figure would be forced to pay 6.75 percent. As Mr. Karl Denninger rightly said writing for The Market Ticker, “Taxed? Like hell that’s a tax. That’s direct confiscation of the funds of people who did nothing wrong!”
Jason Hartman heartily agrees with Karl’s sentiments. The Cypriot government, in cahoots with the euro zone, intended for the Cypriot Parliament to adopt the measure over this past weekend so that the “contributions” could be extracted from accounts on Tuesday, following a public holiday on Monday. To insure compliance, electronic transfers were blocked over the weekend.
The happy ending (sort of) to the story is that the Parliament rejected the bailout package without a single vote being cast in the odious plan’s favor. We say “sort-of” because Cypress is still left with a heap big financial mess that might ultimately end in national bankruptcy, but strike up the band that at least lawmakers didn’t cave in to EU bullying and force citizens to pay the bailout fee for a mess they didn’t create.
The harsh reality of this world is that events should be allowed to unfold as they will. Poor economic choices have consequences. If your government engages in suicidal socialist policies, vote the bastards out and try another batch. The term “too big to fail,” which has been bandied about in the United States the past few, years is a ridiculous concept. Any nation, company, or person can and should be allowed to fail when poor decisions push them to the brink of insolvency.
In the case of Cypress, even President Nicos Anastasiades, who negotiated the agreement with the EU, declined to cast an affirmative vote on it. Now Cypriot officials must try to figure out another way to raise the €5.8 billion needed to secure the €10 billion bailout. One plan is to go to Russia, hat in hand, and offer stakes in the island nation’s failing banking system, and energy assets. Russia says without enthusiasm, “Gee, how could we resist?”
Good luck, Cypress. You’re going to need it. (Top image: Flickr | Tax Credits)
The Commercial Investing Center Team