Years ago, in the early days of the financial crisis, Cyprus was one of the first European countries to reassure bank savers of relatively modest means by guaranteeing their deposits up to a limit of €100,000.
What this meant was that the government made a promise. Anything could happen to a bank. It could go bankrupt. Branches could crumble into lumps of concrete and shards of glass, servers explode in showers of sparks, cashiers and mortgage consultants plunge flaming from fourth-floor windows, and small savers would still get their money back.
But this promise has been eh well...broken. As savers have 10% of their life savings deducated from their accounts to keep the Euro afloat.
How is it, then, that when real banks in Cyprus face actual financial collapse as a result of their conduct, it is not the banks themselves that suffer, nor the foolish rich who stashed their money there, but those savers of modest means who were promised their money was sacrosant? Those who thought they were safe with the guarantee are now being hit with a tax of €6.75 for every hundred euros they have in savings, in order to save the banks that screwed them over. It is true that those with over €100,000 are being made to pay more – €9.90 for every hundred euros – but the percentage game is in itself a game for the rich, whereas the less well-off live in a world of absolutes. A euro savings millionaire still has €901,000 left after the levy. If you’re saving up for a €200 plane ticket, on the other hand, and your savings go from €200 to €186.50, you don’t fly.
Currently Cypriot and German politicians are blaming each other for the terms of the deal
In Cyprus, the less well-off face a deposit tax to pay for the rescue of their banks by Europe and the IMF; in Britain, we continue to endure spending cuts, higher VAT and the hidden tax of a weakened currency as a consequence of a bank rescue carried out from our own resources. We rescue our banks; who will rescue us?
Source
What this meant was that the government made a promise. Anything could happen to a bank. It could go bankrupt. Branches could crumble into lumps of concrete and shards of glass, servers explode in showers of sparks, cashiers and mortgage consultants plunge flaming from fourth-floor windows, and small savers would still get their money back.
But this promise has been eh well...broken. As savers have 10% of their life savings deducated from their accounts to keep the Euro afloat.
How is it, then, that when real banks in Cyprus face actual financial collapse as a result of their conduct, it is not the banks themselves that suffer, nor the foolish rich who stashed their money there, but those savers of modest means who were promised their money was sacrosant? Those who thought they were safe with the guarantee are now being hit with a tax of €6.75 for every hundred euros they have in savings, in order to save the banks that screwed them over. It is true that those with over €100,000 are being made to pay more – €9.90 for every hundred euros – but the percentage game is in itself a game for the rich, whereas the less well-off live in a world of absolutes. A euro savings millionaire still has €901,000 left after the levy. If you’re saving up for a €200 plane ticket, on the other hand, and your savings go from €200 to €186.50, you don’t fly.
Currently Cypriot and German politicians are blaming each other for the terms of the deal
In Cyprus, the less well-off face a deposit tax to pay for the rescue of their banks by Europe and the IMF; in Britain, we continue to endure spending cuts, higher VAT and the hidden tax of a weakened currency as a consequence of a bank rescue carried out from our own resources. We rescue our banks; who will rescue us?
Source
The Cyprus Debacle
18 March 2013 London Review of Books
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