Explained in the most simplest of terms, Cyprus is different because it isn't a bail-out - it's a bail-in.
Imagine that one day the government decided to declare a bank holiday and stop all wire transfers while it agrees to a plan to seize 10% of your savings account in order to bail out the banks. What's more, the idea for this theft was created by a different government and imposed on yours. Most of your hard-earned cash will go straight to foreign banks.
That is the reality in Cyprus today.
Why bother holding a bank account when the government can violate its own banking laws and seize your savings? Accounts under 100,000 Euros are supposed to be insured.
What's more, the European governments have declined say that this "solution" won't be used again somewhere else.
A often forgotten concept is that when you put money into a bank, it is no longer yours. It is a loan to the bank. You are in essence a junior bondholder of the bank. The bank then uses it for whatever purpose it chooses.
That is why the now dead Glass-Steagall Act was so important for separating investment banks from commercial ones..
Once, long ago, there was the idea that the wealthy bondholders would be the ones taking the losses for their bad bets. Now its the working class that is getting strip-mined to insure that no Imperial banks and bondholders lose money on their absurdly risky loans. Rule of law be damned.
The immediate danger of this event in Cyprus is if depositors in Spain, Portugal, and Italy take notice of how Cyprus is being treated, and decide to withdraw their savings. Banks in those countries are already shaky to begin with.
This could lead to more bail-ins, leading to more capital flight, leading to more social unrest, and thus an end to the Euro.
What's more, Cyprus will be in even worse, long-term condition after this "bail-in". Their debt to GDP ratio will jump from 90% to 140%, thus insuring future bailouts. That is not to mention the repeated rounds of austerity in their future, and the economic contraction caused by the vanishing of capital.
Europe has repeatedly changed the rules in order to protect the Imperial banks and bondholders.
However, Cyprus is different because the rules weren't even changed - they were ignored.
The ECB, holders of Athens-law and foreign law Greek debt all received different treatment
The Dutch didn’t restructure SNS Reaal paper, they confiscated it
The Irish banned lawsuits against the ultimate wind-down of Anglo Irish
Portuguese private pensions were confiscated
The only real comparison to this (outside of banana republics) is found in America where our Orwellian-named Justice Department has decided that bankers are Too-Big-To-Jail.
Cyprus is simply a few years behind Greece is the bankers imperialist aggression against the working class. So its a good idea to take a closer look at the situation on the ground in Greece today.
Just a few weeks ago, subway workers were forced to cancel their strike under an old law, dating back to Greece's authoritarian rule which was not applied by any government since then. A week later, seafarers were forced to abandon their strike under the same law. The government is planning to go further, changing the law for the creation of unions and limiting the right to strike.The government of Greece has completely abandoned the idea of representing the working man and gone down the fascist path in order to defend their financial rulers. If things keep going the way they are, this trend will spread.
What's more, as part of the plan the government will decide the level of minimum wage each year starting in 2014 depending on the economy's competitiveness!
It's time for a European Spring.
The Cypriot parliament has rejected a deeply unpopular tax on bank deposits, throwing into doubt an international bailout for the troubled euro zone member needed to avert default and a banking collapse.
"The bill has been rejected," said house speaker Yiannakis Omirou, as thousands of protesters outside the parliament building in Nicosia exploded in joy.
The 56-seat parliament voted by 36 votes against, 19 abstentions and with zero votes in favour to bury the bill, a condition of a 10 billion euro ($13 billion) European Union bailout for the Mediterranean island.
The Cypriot parliament has thrown out a controversial plan to skim €5.8bn from savers' bank accounts, in a move that risks plunging the eurozone into a fresh crisis and heightens expectations that the cash-strapped nation will seek a funding lifeline from Russia.This would be an interesting move. While Russia has nothing economic to gain from bailing out Cyprus, it would be a political coup to snatch away a Euro nation. Russia has enormous currency reserves (as well as enormous energy reserves) and a historical interest in that part of the world.
For Cyprus, it would be the only way they could exit their situation without extreme pain.