This obscenity came in after I'd left the keyboard for the day:
Euro-area finance ministers agreed to an unprecedented tax on Cypriot bank deposits as officials unveiled a 10 billion-euro ($13 billion) rescue plan for the country, the fifth since Europe’s debt crisis broke out in 2009.
Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros -- the ceiling for European Union account insurance -- and 9.9 percent above that. The measures will raise 5.8 billion euros, in addition to the emergency loans, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, told reporters early today after 10 hours of talks in Brussels. The International Monetary Fund may contribute to the package and junior bondholders may also be tapped in a so-called bail-in, the ministers' statement said.
Officials have struggled to find an agreement that would rescue Cyprus, which accounts for just half of a percent of the euro region’s economy, without unsettling investors in larger countries and sparking a new round of market contagion. Finance Minister Michael Sarris said the plan was the “least onerous” of the options Cyprus faced to stay afloat.
“This decision should not be compared to the ideal, but to the very real possibility that much more money could have been lost in a bankruptcy of the banking system or indeed of the country,” Sarris said in Brussels....
[European Central Bank Executive Board member Jorge] Asmussen said tapping deposit holders was needed to expand Cyprus’s tax base. European Union Economic and Monetary Affairs Commissioner Olli Rehn called the assessment a strictly fiscal measure. Rehn had warned against so-called haircuts on depositors to avoid setting a destabilizing precedent.
When asked if a deposit assessment could be ruled out for future rescues, Rehn said in an interview: “It can and there is no concrete case where it should be considered.”
Let me see if I've got this right: To get a "bailout" loan from the ECB, which will then be used to "recapitalize" Cypriot banks -- and prop up the bloated government, of course -- the Cypriot government will seize a hefty fraction of the deposits in those banks. But just this once. Really! It's the "least onerous" of the available options. No, no, investors! Don't be "unsettled!" It's really, truly, just this once! Because of the emergency!
As it happens, Cyprus is a major financial center: something of a Mediterranean Switzerland. The article does briefly mention that deposits in Cyprus's banks amount to five times the size of the island's economy, but doesn't trouble to say why.
Also as it happens, I met with my broker yesterday. I mentioned my fears to him: among other things, that the possibility of nationalizing private citizens' personal pensions and 401(k) accounts has been discussed on the floor of Congress. He pooh-poohed the possibility. "It will never happen," he said. "The big powers in the financial system would never permit it."
I've forwarded the above article to him. I haven't heard back from him yet.
The Government Hates Competition