Get PJ Media on your Apple

The PJ Tatler

by
Bryan Preston

Bio

March 26, 2013 - 10:18 am

Mattresses across Europe are going to get a little bit fatter on this news.

The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, announced that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.

“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’,” he said.

“If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders.”

Ditching a three-year-old policy of protecting senior bondholders and large depositors, over €100,000, in banks, Mr Dijsselbloem argued that the lack of market contagion surrounding Cyprus showed that private investors could now be hit to pay for bad banking debts.

“If we want to have a healthy, sound financial sector, the only way is to say, ‘Look, there where you take on the risks, you must deal with them, and if you can’t deal with them, then you shouldn’t have taken them on,’” he said.

“The consequences may be that it’s the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take.”

The announcement is highly significant as it signals the mothballing of the euro’s €700bn bailout fund, the European Stability Mechanism (ESM), which Spain and Ireland wants to be used to recapitalise their troubled banks.

There’s a fundamental immorality to this tactic. Most of the accounts that would be raided don’t belong to anyone who made the investments that weakened the banks. They belong to people who parked their earnings in banks for one reason or another, but never contemplated that their money would be used to pay off someone else’s bad debt. Now they have been warned and given an incentive to pull all of their money out and park it elsewhere. So bank runs across all of Europe are a real possibility.

Dijsselbloem is now blaming the uproar on translating his statement from Dutch to English, or something.

 

Bryan Preston has been a leading conservative blogger and opinionator since founding his first blog in 2001. Bryan is a military veteran, worked for NASA, was a founding blogger and producer at Hot Air, was producer of the Laura Ingraham Show and, most recently before joining PJM, was Communications Director of the Republican Party of Texas.

Comments are closed.

All Comments   (4)
All Comments   (4)
Sort: Newest Oldest Top Rated
Buy whiskey,guns,jerky,a bed role, a Bowie knife ,and a good horse.
1 year ago
1 year ago Link To Comment
I'm sure that the Cypriot government officials responsible for this theft have a "special" list of government officials, labor leaders, public figures and their good friends and relatives who are marked as "exempt" from this action. Russians are, almost certainly, not exempt, although, they may be able to join the list by, say, making a deposit to a Cypriot government official's "private" account in a place like Trieste.
1 year ago
1 year ago Link To Comment
Learn the truth! One hour long class on America's true financial and economic impending collapse. Or continue in the "normalcy bias!"
http://pro.stansberryresearch.com/1303EOASALYN/LPSIP3XA/
Cut and paste this video. Agree with the premise-statistics and world history, somewhat ambivalent on its conclusion. One hour long, but a lesson on US finance and economics no IvyLeague college (has- or)will teach. Anybody hear about "dim-sum currency exchanges" Hows about IMF'S increasing SDR transactions and "clearing of accounts" between nations? And bi-lateral currency exchanges? This video explores it all...there is no way in the world the USA will escape a collapse...no way!!! Did you know Congress is secretly planning to seize all IRA accounts, savings and monetary assets held by US citizens-in the USA??? Any news on this? Why is there so much talk about "The Cayman Islands?" Everyday there are reports on "Bank's Favorable Stress tests!!!" A possible run on USA banks?
Pay attention to the USA, forget Cyprus!!!!Be careful of the "Left-hand/Right-hand" flim-flammery by Obama's administration. Pray. Amen. Wake-up America, for Christ sakes!!! You can't print $85 billion per month and even hope this will paper over ones debts...just isn't sanely possible. God Bless America, she's on life support. Spend one's way to Prosperity? With redistributed taxpayers hard earned money???HOW? Pray tell?
1 year ago
1 year ago Link To Comment
Not fully in agreement that depositors shouldn't be held responsible. In the days of much healthier banking that was the understanding when you deposited.
It is a rather harsh remedy considering the history of the issue but in one respect it could be a long term benefit. It would make banking/finance more transparent or risk losing depositors. That, in turn would undermine Central Bank and each nation's fiscal controls over thier decisions.
This would rapidly bring those responsible for excesses to heel.
These clowns are unleashing the winds of their own destruction. Good riddance.
1 year ago
1 year ago Link To Comment
View All