More Rot from the EU, Cyprus Edition
Asked why he robbed banks, Willie Sutton is said to have replied, “because that’s where the money is.”
Obviously, Willie Sutton did not live in contemporary Cyprus, whose banking system, as Walter Russell Mead observes, is “easily the shadiest” in the eurozone. “Russian oligarchs use the island’s banks as a combination piggy bank and money laundry,” he notes — it’s a good rule of thumb that Russians + money = corruption — and then there is the problem of stupendous mismanagement: “Largely because the Cypriot bankers invested lots of their clients’ cash in Greek bonds, the financial system is underwater.” (Memo to self: why are Russian gangsters always called “oligarchs”?)
Now what? Well, in exchange for a €10 billion bailout, the International Monetary Fund and European lenders (Deutschland, Deutschland über, etc.) are exacting a one-off (or so they say) 10 percent “levy” on all bank deposits over €100,000, payable Monday. Goat herders, taxi drivers, et al. (what the New York Times calls “pensioners, workers and regulator depositors”) with less than €100,000 get whacked 6.75 percent.
As Business Insider reports, this so-called “stability levy” is expected to raise €5.8 billion. It is also expected to raise a “flood of concerns” — that’s bureaucratese for “panic” — about a run on banks elsewhere in the eurozone, where (as the report delicately puts it) “fragile public finances are also under scrutiny.”
Right. So that €100,000 it took you years to save is, come Monday, worth €90,000. And how about the following Tuesday, when it will turn out Cypriot banks need more dough? What then? Jörg Asmussen, a member of the Executive Board of the European Central Bank, explained it thus: “In order to have burden-sharing, you extend the tax base. To residents and also to non-residents.” Spoken like a true socialist (or Social Democrat, which is the same thing). Politicians and bankers mess up, you pay. Private property? Ha, ha, ha. [Update: my friend Janet Daley writes: "It's worth noting that this EU confiscation of private savings is using the same excuse (catching money-launderers and foreign currency smugglers) that the US uses to justify FATCA [Foreign Account Tax Compliance Act]. The civil liberties and property rights of law-abiding people can be trampled over in the name of pursuing 'criminals.'"]
So what do you suppose happened in Cyprus? Yes, Virginia, people rushed to the closest ATM and tried to get their money out. Alas, many machines are already refusing to honor withdrawal requests. (Deposits, though, are happily accepted.)