Skip to main content

View Diary: Bank Run in Cyprus, Will it Spread to Southern Europe? (322 comments)

Comment Preferences

  •  Not quite (1+ / 0-)
    Recommended by:
    Jeffersonian Democrat

    Three details tend to be overlooked in this mess:

    (1) the insurance system insures the money in the bank at the time of the actual bank collapse. This collapse hasnt happened yet. It is seen coming however - therefore the government enacts a property tax on every deposit - which it has the authority to do - to help stave off the actual bank collapse.

    Yes that is a technicality, but even so it is incorrect to see this as invalidation of the deposit insurance.

    The 6,75% arent completely gone, they are converted into equity. Someone who actually lives in the island has the hope to wait out the crisis and sell that equity later - for whatever it is then worth. Thats quite the risk for sure; but it isnt gone. (It would be a kind of grim joke if people now use this "equity" as a safety to take credits on).

    If the bailout didnt go through, and the banks collapsed, with ensuing state bankruptcy (but full european legal guarantee of the insured amounts), people would be FAR harder hit. And especially those people living in-country. Capital parkers who inreality live in say St Petersburg might hate losing the capital but could get on with their lives. People who have only a cypriotic state pension to live off (and therefore have no 100K in the bank anyways!) can be far happier with the bailout than with its absence!  

    That all said, I dont like the absence of a lower limit. I would have found it far better to have 100K as a lower limit in this tax just because of the similarity to the guarantee insurance sum and the obvious relative innocence of the smallest depositors. I also have - for now - the expectation that some limit of that kind will still be inverted (this deal has to pass national parliaments after all).

    And, whether I like it or not, I am going to pay ... I´m European. It´s my taxes that are going to be used for this.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site