And these guys are serious.
Recall that Cyprus is as bankrupt as Greece. In order to bail out Cyprus (we’ve been over the legitimacy of bailouts elsewhere), the European Central Bank, European Commission, and the IMF have demanded a one-time tax on deposits: 9.9% on deposits over €100,000 ($131,000) and 6.75% on smaller deposits.
Nothing underhanded about any of this, either. Uh, uh. Because depositors, including many of the 3,500 British soldiers stationed in Cyprus, are complicit in the incompetence of the banks’ management. Yeah. That’s it. We’ll go with that.
Finance Minister Michalis Serris already has taken steps to block depositors from taking their money out ahead of the tax:
We have taken immediate measures so that electronic transfers cannot take effect before banks reopen on Tuesday [today is a holiday in Cyprus.]
Chump change was recovered by depositors over the weekend via Cyprus’ cash machines, but the machines’ money stocks were limited and not replenished as they ran out. Willy Sutton couldn’t have done it better.
A planned weekend vote by the Cypriot Parliament to pass this thing, however, was been postponed until today amid…concerns…that the Parliament may have more integrity than Serris and block the “agreement” with the ECB, the EC, and the IMF.
This is supposed to raise €5.8 billion ($7.6 billion). Think about this, though. Are the interest rates or investment rates of return that the Cypriot banks are paying on those deposits more or less than those taxes? You get three guesses, and the first two don’t count. For how long will those depositors leave their remaining money in those banks? Again, three guesses, and the first two don’t count.
This is what happens when the wrong folks are left in charge of OPM.
Update: Cyprus’ legislative vote has been delayed until Tuesday afternoon.
Update again: Today (Tuesday) the Greek Parliament rejected any “tax” on private deposits by a vote of 36 “No,” 19 abstentions, and 0 “Aye.”