Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

http://www.businessinsider.com/cyprus-bailout-deal-2013-3

by chailatte • 13 years ago

49 98 13 years ago

businessinsider.com

tudorizer• 13 years ago

And the Bitcoin community did this http://www.reddit.com/r/Bitcoin/comments/1aes4q/bitcoincentr....

braxton• 13 years ago

The people who elected a government that made their country a tax haven leading to the crisis in the first place.

marshray3• 13 years ago

When did being a "tax haven" become a bad strategy for country or smaller jurisdiction?

quink• 13 years ago

Not in order, and to be continued by others:

1. Iceland

belorn2• 13 years ago

Money in the bank is not your money anymore. By the time of credit cards, banks moved from being a custodian of money, to a service provider that can cut anyone off from their service.

Sure, this time it was not the banks itself but rather the government that did this, but they could only do this because banks and government has stopped seeing money in the bank as belonging to the person who put it there. They would have never gone to a farmer and taken 10% of their grain. They would have never gone and taken physical property in peoples home. That would had been an complete impossibility. I even strongly doubt that any safety deposit boxes will be effect by this.

I understand the idea that this is a blow against companies that are using Cyprus as an tax haven. Its fully understandable. But I really dislike this current system of treating money in the bank as belonging to the bank. This story is just a clear example of this behavior expanding further.

InclinedPlane3• 13 years ago

There's no such thing as an intrinsic value for "money", even in gold. If you keep your money in the form of dollars (or Euros) shoved into a mattress the value can go away through inflation. If you keep your money in the form of gold bars the value can also go away through inflation, but perhaps less so.

rtwtlkj• 13 years ago

I thought gold went up with inflation.

wintersFright4• 13 years ago

Physical gold bars are not money but a phyiscal, tradeable asset. It cannot be inflated except via mining - but even then there are roughly known quantities of metal in the ground that are then liberated. What can be inflated however is paper gold where more paper gold exists and is traded than physically exists - some estimate a 100 - 1 paper to physical ratio.

True that gold has no intrisic value, it's value is derived from other people valuing it and willing to trade services for it - and they have done so for thousands of years, where as a typical fiat currency (USD) does not have such a timespan. "Paper money eventually returns to its intrinsic value – zero." (Voltaire, 1694-1778)

btw - as i understand it wasn't a 10% tax, it was a mandatory debt for equity trade- meaning the depositors now own some part of the bank.

awakeasleep• 13 years ago

This sure seems like it would be a violation of a person's right to be secure from seizure of property in the USA.

Does anyone with a legal background have any insight they want to share? I am having trouble wrapping my brain around the idea that money I have in the bank could be seized to pay for someone else's fuckup. I know inflation can sort of do that on a society-wide scale, but seizure of post-tax income from a private bank account? That's mind-boggling.

snowwrestler2• 13 years ago

In the U.S., a new tax like this would require an act of Congress. If it passed it would most likely be found Constitutional--there are basically no limits on the power of the Congress to levy a tax.

But, it would take truly dire straits for Congress to even consider such an obviously unpopular idea. And those dire straits would have a much harder time arriving in the U.S. than the EU.

Cypress (and Greece, and Italy, etc) is in such big trouble because they cannot print their own currency. The U.S. can always bail out its banks because it can create as many dollars as it needs. In fact this is what happened a few years ago, and why the U.S. financial system is currently in better shape than the EU.

The flaws in the EU concept have been laid bare by this financial crisis. When you have financial consolidation without political consolidation, you get unelected bureaucrats deciding to take 10% of the bank accounts in one member nation, and there's nothing that population can do about it. In the U.S., the threat of getting voted out office is a powerful restraint on the governent's eagerness to levy shocking new taxes.

mcantelon2• 13 years ago

>This sure seems like it would be a violation of a person's right to be secure from seizure of property in the USA.

The US government made a 50%+ profit by forcing people to sell their gold in 1933:

http://en.wikipedia.org/wiki/Executive_Order_6102#Effect_of_...

>Executive Order 6102 required all persons to deliver [gold] owned by them to the Federal Reserve, in exchange for $20.67 ... The price of gold from the Treasury for international transactions was thereafter raised to $35 ... resulting in an immediate loss for everyone who had been forced to surrender their gold ... The resulting profit that the government realized funded the Exchange Stabilization Fund

Pro_bity7• 13 years ago

I cannot comment on the rights of a person in the EU against seizure of personal assets. In the United States there is a right to due process of law if the government wants to deprive citizens and some other classes of people (long conversation) of property (money or actual physical property) or freedom (jail). This can happen through legislative action and (sometimes) by the fiat of an government agency like the IRS, but when either of these happen people can get the matter heard in court. However, at times Due Process can be a fuzzy concept, like when property is seized as part of certain drug related or anti-terrorist laws. TL;DR: This type of taking would be harder to do in the US unless you are a terrorist of a drug dealer/smuggler/or in possession of drugs.

ahomescu12• 13 years ago

They would have never gone to a farmer and taken 10% of their grain.

Except this actually used to happen a lot in European countries in the Middle Ages. Farmers would still pay taxes to the king, and they'd have to pay in goods if not in gold.

burntsushi7• 13 years ago

> Except

Pretty sure the OP was talking about the present times...

yuhong2• 13 years ago

I think that is just a normal tax in a different form.

yuhong2• 13 years ago

Yea, there is a reason why Glass-Steagall was enacted.

rottencupcakes• 13 years ago

Is this really any different than US Monetary policy that leads to continual inflation making your savings worth less over time?

dchest• 13 years ago

Yes.

tnuc• 13 years ago

You wanna buy a bridge? I got a nice one I can sell you.

marshray3• 13 years ago

Please elaborate.

ameister1411• 13 years ago

It's significantly different.

If I told you that every year your money would be worth 3% less, that's different than me saying that 10% of your savings are gone now.

It's more complex as well because inflation influences salaries and prices, plus the whole long-term vs immediate aspect.

ahomescu12• 13 years ago

Yes, one problem I see that this is repeatable and not predictable. Continual inflation can be predicted and planned for, but confiscation of people's money can happen whenever the government needs money. What if next week they take another 10%?

snowwrestler2• 13 years ago

The difference is that U.S. monetary policy seeks to create a low, predictable, consistent level of inflation. This allows everyone to incorporate it into their long-term financial plans.

It's harder to plan for surprise 10% haircuts.

thatswrong02• 13 years ago

> seeks to create a low, predictable, consistent level of inflation

Too bad seeking isn't reality, and too bad it isn't low and isn't consistent. Unless, of course, you alter the metric that measures inflation as the U.S. has done periodically.

deelowe• 13 years ago

Yes.

One is intended as an encouragement to invest and, it works for the most part(401k, roth, 529, etc.. etc..) Most Americans know that that just sticking your money under a mattress is stupid, so we actively invest. Just about anyone in the US with disposable income invests in some way. This is something that benefits society as money that would normally be sitting idle is out in the market being used. And, how it gets used is determined by society and the markets, not a bureaucrat.

This, on the other hand, is simply confiscation. There's no plan, no incentive, nothing. It's a short sighted implementation that will hurt things in the long run. What's everyone who's had their money taken from them without warning now thinking? They certainly aren't considering options that allow them to stay active in this country's markets. Quite the opposite, I assume.

arbuge2• 13 years ago

I agree with this answer. The expectation in a bank account is that whilst the interest may or may not cover inflation, at least you don't have confiscation to worry about in addition to that.

tsuyoshi• 13 years ago

Well, for one thing, inflation doesn't cause bank runs. Even if you suppose that inflation is really an asset tax, this tax in Cyprus has just been evaded by anyone who's been keeping their money stuffed under the mattress.

Greece, Italy, Spain, etc. will now be lucky if they don't themselves start having a problem with bank runs. Arguably it won't happen elsewhere, but who can say for sure?

KateScisel2• 13 years ago

Cyprus is clearly not the most typical european country (with vast quantities of Russian money flowing through it). However this clearly demonstrates that people do not fully control what happens to their savings. I'm wondering how much it'll take for, for example, Spaniards to start removing their money from their banks. The French have already been doing so.

memi• 13 years ago

I do have offshore company with Cyprus company current account. Does this tax also affects my company?

xachen• 13 years ago

The risk of doing business in an offshore jurisdiction.

Pro_bity7• 13 years ago

I think so.

KateScisel2• 13 years ago

Yes, if your money is in Cyprus. You will be granted shares in your bank of equivalent value to your losses. Does it help? LOL

martinced6• 13 years ago

This tax only affects residents living in Cyprus.

This is already a crazy tax but if they're confiscating money on private companies' bank accounts they'll be killing the economy.

IbJacked• 13 years ago

I didn't see any references to "only affects residents living in Cyprus". From the articles I've read, it appears to be a tax on all deposits, regardless of foreign or domestic, personal or business.

miles• 13 years ago

Is Satoshi Nakamoto's secret identity José Manuel Barroso? It's hard to imagine a way for the government to drive people to Bitcoin any harder (short of officially adopting it).

wintersFright4• 13 years ago

an old lesson that has been forgotten needs to be relearned. Money is not meant to be saved. Money is for earning and spending. Saving should be done in real tangible assets.

ameister1411• 13 years ago

Actually, money is specifically designed for saving.

hmottestad2• 13 years ago

I recommend a referendum to default on the European loans, convert to a new currency, and become an even larger tax haven for the russian mafia.

mdasen• 13 years ago

In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having trouble.

This is not some sort of illegal seizure - and wouldn't even be in the United States. While we normally tax income or consumption, governments can and do tax wealth. In the United States, property taxes are quite normal. What is the difference between charging someone x% of their house value in taxes and charging someone x% of their bank account balance in taxes? It's mostly normative: we're used to taxes on physical property like houses, but not used to taxes on cash that we carry in banks. If the government decided tomorrow to switch from property taxes to bank account taxes, would you care? Mostly, it would depend on where the bulk of your wealth is. If it were in your home, you would welcome the change.

I think the reason that they chose to go after the bank balances is that a lot of it is foreign-owned. In many ways, this is much better for the Cypriot people. They may not like seeing their bank accounts go down by 6-10%, but this method spreads the burden to a lot of foreigners. If they went the route of imposing a high property tax, they would have to shoulder a much higher burden.

It's also easier to implement, in a certain light. If you impose a new tax of, say, 2% on the value of real property holdings, people are going to lose their houses when they can't come up with the money for the tax. You don't want that: it would just be chaos. Taxing the bank accounts is taxing a liquid asset. You know they have the cash to cover 10% of their bank account balance because, well, it's their bank account balance.

Since they're going to impose the levy before the banks open on tuesday (monday being a banking holiday) and banks putting a withdrawal limit of 400 Euros on customers, it looks like it can be implemented.

In many ways, it's the easiest, quickest successful tax that they could impose. And, while it will cause a lot of uproar from Cypriots, it's probably better than any other measure for them. If the government were to try and raise the money from other means (whether a real property tax, higher consumption taxes, higher income taxes, etc.), the burden would fall on residents more than this tax will. Similarly, this tax will hit the rich harder than the poor. If they raised VAT, income tax, or real property tax, the rich could move elsewhere and be spared a lot of it.

EDIT: I'm going to respond to some replies here.

First, I never said this was a good plan. I said that it would be easy and quick from an administrative standpoint. The ECB doesn't seem to want something long and drawn out or get into a situation where legislative processes and elections throw everything into chaos. Since Cyprus wants the bailout, the ECB holds a lot of the cards. We've seen how governmental changes can throw a wrench into the bailout agreements. Because this levy can be implemented "overnight", it's easy and doesn't rely on a legislature agreeing on austerity measures for many years.

This solution will be a betrayal of people's trust, it will hurt people. It will make people think twice about putting their money in banks. In fact, this is something that parts of Latin America face. However, are there alternatives for coming up with 5.8 billion Euro that would be better?

Frankly, in order to criticize well, you have to bring up other solutions against the chosen solution. This move is bad. No one thinks this is a happy move. It has cons. People will lose savings (including money they were counting on having). People will distrust banks for the foreseeable future. It will create resentment and anger. It will be bad. So, what would be better?

Now, one can argue that defaulting on the debt would be better - that's certainly a position to take. However, assuming that Cyprus doesn't want to default, how else should they have secured the ECB bailout (assuming that one needs to raise 5.8 billion Euro to do so)?

ameister1411• 13 years ago

In no way was this a good plan. It doesn't net a significant amount of money in terms of EU GDP, and it enrages and frightens a lot of people.

The difference between a government switching what it taxes and this is that the former goes through intense oversight and debate by the elected officials of the country involved. People can influence the decision and it is an internal matter.

In this case, it was an external force that decided the seizure was necessary. More, it was a German-led decision. Germany imposing its will on the southern countries hasn't been well received in the past and I don't believe it will be now.

mistercow• 13 years ago

>In no way was this a good plan.

mdasen gave some very reasonable arguments that in fact, yes, in some ways it was a good plan. Fr the reasons you gave, you can certainly argue not a good plan on balance. And I would tend to agree with you, although I would confess significant ignorance to the particulars of the situation

But it is misapplication of the affect heuristic to say that because the plan stinks over all, there is nothing good about it.

hmottestad2• 13 years ago

Seeing as I'm a student with a big loan and limited savings that will go towards my first proper flat deposit.

If I lived in Cyprus, would the government now take some 6% of my savings and leave my loans untouched?

Anyone?

Pro_bity7• 13 years ago

Seems to be the case. There is no information about personal loan forgiveness being part of the EU's plan.

samstave2• 13 years ago

In any circumstance where a bank employee of any bank receiving a bailout receives any bonus at all - this is criminal.

The first measure should be a cut of all executive pay and bonus monies in any bank that so poorly managed themselves that they needed a bailout.

revelation• 13 years ago

In this circumstance, the first measure should be to cut losses now and dissolve the most toxic banks. Cyprus' banking system is ridiculously oversized for its economy. We need to get back to the idea of banks facilitating business, not being it.

Pro_bity7• 13 years ago

Your conclusion that this action would be lawful in the US is an overstatement. Without contorting the Euro Zone economic rules into the US monetary system, if something like this happend in the US, it would not be a tax, but a seizure of private property without Due Process. Kinda a no-no, legally speaking.

martinced6• 13 years ago

Yes but the difference is that Cyprus lost its sovereignity regarding money creation by entering the eurozone.

The U.S. has its own way to confiscate citizen's money and that is called quantitative easing, which creates inflation. That's why they abandoned the gold standard: to be able to confiscate as much as they want using inflation.

vellum2• 13 years ago

>This could do harm to other countries whose banking systems have been having trouble.

This. Cyprus isn't the most troubled southern EU country. That honor goes to Italy or Spain. It was a bad idea for Germany to have tipped its hand this early in the game. They should have reserved this for Italy or something. You're going to see a bunch of people moving their cash out the southern EU countries ASAP.

Nightrider2• 13 years ago

Extracting money from people's bank accounts without even an acknowledgment is akin to foraging through their purses and wallets without consent.

Can't you see the larger issue here? This shortsighted measure will backfire.

Imagine you saved just enough money to cover rent, or see a dentist. You counted on that money being there. Wouldn't this be upsetting and a betrayal of your trust? Would you be so quick to leave money in a bank account ever again?

Edit: Actually, re-reading your comment, you went both ways and waffled like a politician. You didn't actually say anything.

Pro_bity7• 13 years ago

Agreed

markdown2• 13 years ago

It's the cost of living in a group. Your receive all the benefits of living in the group, and when the group as a whole is in trouble, you need to do your part.

If you want to be libertarian, go be a hermit in the mountains. You'll be the master of your domain there, and won't have to pay taxes or pay a penalty when other people screw up.

martinced6• 13 years ago

It is shortsighted: it is a temporary to prevent the sky from falling in a few days. But it's just kicking the can a bit further down the road: economically it makes no sense. You'll destroy trust and discourage people so much that you're giving a blow to the private sector so big that in a matter of years the state shall have less income than if they didn't do this.

The problem is that the state is broke. It's that or they're out of the eurozone.

gph• 13 years ago

While it's not illegal, it's hard to argue that this move is just or moral. Yes a country can levy taxes however they like, but a surprise 10% wealth tax is unprecedented. The analogy with VAT/income/property is a bit difficult because in almost any case where a government has instituted those taxes the populous would have fair warning before they went into effect. At least in America, these things weren't enacted overnight with no legislative oversight/debate, and I doubt in any other Developed nation such a thing has occurred.

That said, I can understand why they went this route. It's basically a free down payment on an emergency loan mostly provided by wealthy Russians. Again, not illegal, but it isn't exactly just to have foreigners pay for your countries debts. I don't feel terribly sorry, since most of that Russian money likely came from less than reputable means. But as the saying goes, two wrongs don't make a right.

But the repercussions will be far reaching. First off, Cyrpus can expect a run on their banks from foreigners. Don't know if they have plans on stopping that, but I don't see why any foreigner would keep money there. Secondly, Smaller countries (and possibly large ones as well) in financially precarious situations will probably start seeing a run on their banks. This can set off contagion in a region without a strong central economic force to stave it off.

Though I expect some off-shore type country to pass a law soon stating they will never perform such a tax, and a lot of money will start flowing into their banks.

arbuge2• 13 years ago

It's a perfectly horrible idea:

- penalizes savers who lived within their means and didn't overextend themselves, saving up for a rainy day. Debtors who took out excessive mortgages etc. aren't affected.

- penalizes foreign investors like the Russians, who will be paying about 40% of the money to be raised from this measure if you do the math. Never a good idea to scare foreign investment away.

- might create a bank run in other weak economies in the EU, like Italy, Spain, and Portugal. That could create a problem on a huge scale.

ww520• 13 years ago

This is highway robbery. It reneges on the contractual agreement between the depositors and the banks to get the full deposit back. If they impose a 10% levy on the new deposits, then fine. They are levying on existing deposits retroactively. That's simply robbery.

Just because the money is from foreigners doesn't make it right. EU banking will have not credibility after this.

This will discourage people to put money in the banks and encourage them to keep them at home.

vellum2• 13 years ago

>Just because the money is from foreigners doesn't make it right.

Well, the locals got screwed, too. Here's some good analysis: http://bit.ly/110JLpm He speculates that they could have taxed the foreigners (Russians) @ 30%, but that would have finished off Cyprus as a destination for foreign money. Instead, they taxed everyone at 10%. The Russians might see 10% as the cost of doing business.

martinced6• 13 years ago

I've submitted this first but it didn't take off...

Anyway: this is just the beginning and it's not going to stop anytime soon. The Eurozone is in big trouble: it simply cannot work when you have people who only want to work 32 hours / week and stop working at 60 years old (France) while on the other side you have hard-working germans.

The crisis we're witnessing since a few years in the eurozone is really simple: the GDP growth number in most of the eurozone are fake in that they do not correspond to wealth created but to wealth created + state debt. Nearly every single country in the eurozone is running at deficit.

The crisis is due to one and only one thing: states that are so indebted that they cannot borrow anymore.

Economists warned about precisely that scenario before the first euro even circulated: Greece, Spain, France, Cyprus... 15 years ago people warned that it would happen just like that. It was just a matter of time.

I can tell you what's coming next: Greece is going to default a second time.

In 2014 France shall have its deficit skyrocketing and shall have issue re-financing itself on the market.

France is the 2nd biggest economy of the eurozone and the eurozone is f^cked. It's game over. France has taxed the private sector so much that it cannot tax it anymore and, anyway, it's too late: investors did flee the country and now individuals are engaging in a bank run (or leaving the country).

The obvious solution would be a massive devaluation of the euro but this cannot happen because if it happens Japan goes down (and probably the U.S.).

We're near the endgame: the house of cards may fall soon.

And I can tell you thing: I want less state. This entire euro-crisis is a debt of sovereign states having way too much public debt because they've constantly been running at deficit, for decades. And now they're running out of money.

It didn't help that they borrowed money to save banksters but don't be mistaken: nobody forced these states to run with crazy-high deficit for decades.

F^ck socialism. Really f^ck it.

Btw I don't care if Cyprus was supposed to be very liberal: Cyprus is 0.2% of the GDP of the eurozone and doesn't matter.

What matter is that socialist Spain, Greece, Portugal and France are close to state default.

They'll be watching closely how announcing money confiscation just before a long week-end plays out (monday is a legal day off in Cyprus) and they'll probably be desperately trying to do the same in these countries.

And it's not going to work.

People should really start realizing that Keynes was all wrong all along and that the Friedman school is the only correct one: they did predict all this. Keynesians didn't.

Btw if the eurozone goes down dont' think the U.S. is going to be fine: some economists are predicting a worldwide drop of the world GDP by as much as 30%.

It's just a matter of years, maybe less.

alan_cx• 13 years ago

Socialism and capitalism are tools, not complete methods to run and provide for a country's people, or society. No country exists as purely one or the other. Every country is a shade of socialist and capitalist grey. Even the US has a huge amount of socialist spending. The huge military for starters, all that money that goes via the military to the industries that supply it. Money straight in to jobs. And so on....

Socialism is basically government spending. That is all. Capitalism is the bit that raises the money for the government spending. The very simple problem is when the balance goes wrong. The balance has gone wrong, every where.

Thing is, what the anti socialists seem very keen to forget is that this all kicked off with subprime loans, badly regulated, free market loans, not government loans or spending. That was us, the public and its ever increasing demands for personal borrowing, and capitalism absolutely lapped it up, until it failed. Capitalism failed, not socialism. Capitalism ran rampant and crashed. Luckily socialist levied money was there to bail it out. The bail outs are government spending. If government didn't have money to bail them out, they would have catastrophically failed. I assume the anti socialists wanted the banks to fail? Fair enough actually, that is how capitalism works, the weak fail. In some ways, I think the banks should have failed. But, if we are to get angry at 10% of people money being converted in to bank shares (did people miss that? It is a bullet point here: http://www.bbc.co.uk/news/world-europe-21818598 ), then losing everything in a bank fail must be very much a no no. So, we do like government spending when it suits.

So, one cannot complain about the spending when it was the money provider, capitalism, that screwed up in the first place, leaving no money to spend.

Put it this way: If Mr Hubby lose his job, its not the wife's fault for spending the family budget each week, is it? Equally not the wife's fault if she asked Mr Hubby if she could take out a loan, he agreed, and not cant pay it back because hubby lost his job. More, over, if Mr Hubby was pushing her to take loans, it is even more not her fault.

So stop with the finger pointing rightard anti socialism hate stuff. It doesn't work, its childish, and way too Glen Beck for sensible discussion.

Now, of course the socialism bit has to do its bit and contract so that the capitalism bit can breathe and rebuild, while regulating it enough such that insane lending and borrowing cant happen again. The balance must be restored.

thatswrong02• 13 years ago

> The huge military for starters, all that money that goes via the military to the industries that supply it. Money straight in to jobs.

Jobs which create guns and bullets which are fired and kill people and do absolutely nothing for the betterment of man and do nothing (or very little) to increase productivity. In other words, this is a great example of the broken window fallacy.

> what the anti socialists seem very keen to forget is that this all kicked off with subprime loans, badly regulated, free market loans, not government loans or spending.

So you're just going to ignore all the government encouragement along the way? You're going to ignore the Community Reinvestment Act, Fannie Mae and Freddie Mac, mortgage deductions, and everything else the government has done in the past half century to encourage home ownership? You're just going to ignore the very low interest lates proceeding the dot-com bust? You're going to ignore the implicit bailout guarantees provided by the government and the FDIC? You're going to ignore all the regulation that encouraged too-big-to-fail banks to grow and continue to exist?

No, the housing crisis was a joint effort. It was, as I've heard described best, the private market getting drunk off booze provided by the government. The private and the public sector both messed up. Derivative packaging and trading and all of that was certainly ugly. But you cannot possibly blame this on the free market (because free it wasn't) and you cannot absolve the government of responsibility. To do so would be irresponsible itself.

> I assume the anti socialists wanted the banks to fail?

It was government policy that encouraged their creation, so yes. Of course.

> So, we do like government spending when it suits.

Government spending to solve a problem created by the government. Brilliant.

> So, one cannot complain about the spending when it was the money provider, capitalism, that screwed up in the first place, leaving no money to spend.

No. Just no. This is like saying capitalism caused the Great Depression. See above.

Pro_bity7• 13 years ago

Anyone want to put odds on this starting bank runs across Europe?

martinced6• 13 years ago

Not gonna happen. Several countries moreover already have withdrawal limits per day / week / months to precisely prevent bank runs. Those limits have recently been lowered (for example in Italy). Laws are passed nearly on a daily basis to lower the maximum amount of "physical" money (bills) you can use to buy stuff.

What is going to happen is lots of politicians blatantly lying and saying: "Something like this is unthinkable in our country, even if we're in the eurozone our situation is not the same as that one of Cyprus".

Just as politicians from Cyprus blatantly lied throughout all this week when that option was mentioned: they said it wouldn't happen.

And people didn't bank run.

Cyprus is too small (0.2% of the GDP) to be detonating factor.

Pro_bity7• 13 years ago

It not the size of the GDP that is at issue, bank runs happen out of fear. I can tell you from conversations I have had with friends (not very scientific, admittedly) that people in European countries are legitimately freaked out by this. Additionally, there may be a physical limit on withdrawals, but electronic transfers are far easier and more common in the EU. That is the real threat. If we are all lucky, tempers will cool by Tuesday.

Gormo2• 13 years ago

> Laws are passed nearly on a daily basis to lower the maximum amount of "physical" money (bills) you can use to buy stuff.

Do those laws also prevent people from transferring funds into other banks or currency denominations, or purchasing gold or other liquid assets?

rafski• 13 years ago

It's funny to see a bank holiday used for what it was initially invented for — preventing a bank run.

Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

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