The new face of austerity: account holder seizures in Cyprus
by David Atkins
The U.S. is largely ignoring it, but there's a terrifying new wrinkle in the austerity business: in exchange for another bailout for Cyprus, the E.U. is directly seizing funds from the accounts of regular people with money in Cypriot banks. No, that's not a joke.
Cypriots reacted with shock that turned to panic on Saturday after a 10% one-off levy on savings was forced on them as part of an extraordinary 10bn euro (£8.7bn) bailout agreed in Brussels.
People rushed to banks and queued at cash machines that refused to release cash as resentment quickly set in. The savers, half of whom are thought to be non-resident Russians, will raise almost €6bn thanks to a deal reached by European partners and the International Monetary Fund (IMF). It is the first time a bailout has included such a measure and Cyprus is the fifth country after Greece, the Republic of Ireland, Portugal and Spain to turn to the eurozone for financial help during the region's debt crisis. The move in the eurozone's third smallest economy could have repercussions for financially overstretched bigger economies such as Spain and Italy.
People with less than 100,000 euros in their accounts will have to pay a one-time tax of 6.75%, Eurozone officials said, while those with greater sums will lose 9.9%. Without a rescue, president Nicos Anastasiades said Cyprus would default and threaten to unravel investor confidence in the eurozone. The Cypriot leader, who was elected last month on a promise to tackle the country's debt crisis, will make a statement to the nation on Sunday.
This policy of directly punishing the middle class and poor for the sins of the banking establishment by simply stealing their money is a new and striking development. How creating a run on banks is supposed to help the Cypriot economy out of recession is anybody's guess.
This is a global insanity. One day the world will look back and wonder how any of it happened, and why no one listened to the Keynesians. But when that day comes, we'll just be on to the next insanity. Progressives are only ever allowed to be right, grudgingly, in retrospect.
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