Brummer: The raid on Cypriots’ accounts could cause a monetary tsunami… will Italy or Spain be next? (10)

Until now it was felt that however bad the crisis in the euro area became, governments would move heaven and earth to protect ordinary bank depositors.

Over the weekend that Rubicon was crossed, as policymakers imposed an immediate tax on all deposits held in Cyprus, as part of a rescue package for the island’s failing economy.

This brutal decision by euroland finance ministers and the International Monetary Fund threatened a run on the whole financial system as depositors rushed to try to get their money out.

And the reverberations could reach beyond further Cyprus to hard-pressed euroland countries including Italy and Spain.

Terrified savers, who until now felt protected by the 100,000 euros guarantee for deposits, must now be wondering if they are next.

As a result of the decision by euroland leaders to transfer supervision of the banking system from national governments to the European Central Bank in Frankfurt they will claim they now have all the legal authority they need to interfere directly in the banks of the 17 countries that are part of the eurozone.


See Also:

Can Cyprus tax all bank deposits? A look at the deal and its potential problems

More Rot from the EU, Cyprus Edition

A ‘Europeanization’ Warning at CPAC

Tomorrow, Cyprus could vote to leave the euro. This is political dynamite

Cyprus bailout deal rattles investors around the world

Afternoon Update:

12:02 pm EDT, March 19th, 2013 — Cyprus bank levy unlikely to pass parliament: Government

12:03 pm EDT, March 19th, 2013 — Will Russia try to seize a foothold in the Med?

12:04 pm EDT, March 19th, 2013 — Betrayal of Our Boys in Cyprus

12:05 pm EDT, March 19th, 2013 — Why does Russia have so much money in Cyprus?

12:06 pm EDT, March 19th, 2013 — Cyprus: the rescue plan that backfired on Brussels

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  • Joe

    So let me get this straight: A bunch of criminals (Russian mafia) prevented a criminal act (stealing other people’s bank accounts). As Artie Johnson used to say, “Veddy interestin'”.

  • Jack

    Gideon Rachman writing in the Financial Times yesterday is a good read I just came across. At the moment I’m waiting to see how the Cypriot vote goes but I’m doubtful they will even hold it today due to the fact that the entire EU has it’s knickers in a twist. With good reason.

    I’ll tweet the result if it happens.

    Update (1:08 pm EDT):

    I just tweeted that the deal was dead but that may not be true as the Telegraph reports:

    “16.29 More from AFP, which now says that although the Cypriot parliament has opened a session to vote, it is unclear whether any voting will take place as all parties – including the ruling party of President Anastasiades – have threatened to abstain.”

    My first guess may yet turn out to be correct.

    Another Update (2:42 pm EDT):

    And so it goes:

    “18.16 So they voted after all. And surprise surprise, the bank levy bill has been defeated. There were 36 votes against, and 19 abstentions. One MP didn’t even show up. Cyprus’s parliament has 56 seats.”

    I’ve often wondered what it would take to break a camel’s back. Some say a straw and when we stop to consider the weight of a straw and tiny Cyprus’ economic contribution to the EU one might make that comparison. Nevertheless, the cat is now amongst the pigeons. I’m now looking for multiple re-runs (the EU “modus operandi“) as they try again and again to get the result they want.

    My view: “They won’t”.

    “Good luck with that one” as an entire world picks up. More on that tomorrow but I will point out now that if you think one tiny island “in a land far, far away” and what happens there can’t affect you I have “a rocket” coming.

    You couldn’t be more wrong as you will “soon see” and I also note that Obama “Et Al” who continue recommending more and more debt are about to get a very strong shot “in the side of the head”. In my view it’s long overdue (video) and “God Bless” Sarah Palin — the best President the U.S. has never had — “so far”.

    She makes Obama look like the complete idiot he truly is and “Take My Breath Away” barely begins to describe her political message. Americans need to pick up because the answer to their problem is staring them right in the face in 2016 and most fail to see her because she’s “an idiot” if you believe an overwhelming “lefty” media which owns the US voter.

    “Some idiot.”

    I feel she needs to be recruited immediately by the GOP quite contrary to what GOP “spokespeople” (I’m thinking Karl Rove here) seem to think.

    This lady is a new Maggie Thatcher and that is no lie. She would be a winner all the way and the fear the embedded political establishment in Washington feels everytime she shows up proves my point. She scares them to death and correctly so. There has to be a reason for that and the GOP (in my view) should be all over it. In the process (as in Canada) burying the “left” for many decades — if not forever.

    “Harper” — the female version.

    I think that a fine idea and “by the by” — as a passing thought — I think the Manning Institute should invite this lady to speak here soon. We have much in common.