You’ve probably already read the news about Cyprus planning a levy against retail banking deposits. On Friday, Cyprus announced that it will apply a one-time levy against all retail bank deposits held in the nation. Officials plan to take 9.9% of all deposits over 100,000 euros and 6.7% of all deposits under that threshold.
The Cypriot government is in a pickle about how to rescue its banking sector, and it’s trying to get EU bailout money. Where other bailouts made bank creditors and bond holders take huge hits, Cyprus has fewer options. But this draconian measure seems more like something that could tip the EU financial sector into a deeper financial crisis rather than shore up the Cyprus economy.
[Related: "6 Reasons Why Some Politicians Just Don’t Get the FTT"]
There has already been a limited run on the banks in Cyprus, as depositors rushed to ATMs over the weekend trying to withdraw their cash. Most of the ATMs were emptied within hours, preventing Cypriots from accessing their money. Today is a bank holiday, so no money can flow out until tomorrow.
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2 Comments to "Is Your Money Safer Under The Mattress?":
rhealey2
18 March 2013
Thanks Candyce - actually it was not all that long ago in Spain that the mattress was the place to put your savings. Black money as it was known was not declared until Spain ditched the peseta for the Euro - which is how the property boom was financed. Unable to declare all the pesetas stashed away, Spanish families piled it into bricks and mortar. Sometimes it feels that we are just going full circle in Europe. As the German elections get ever closer this year, politiicans will do all they can to convince the German electorate that they will not be picking up the tab for the whole of Europe (aka Russia in the Cypriot case). We can expect more of the same.
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candyce
19 March 2013
Hi Rebecca, Thanks for your comments. Spain's history is a great example. You make a good point about the German electorate not wanting to pick up the tab, and it makes perfect sense that the Cypriot rescue (or any other rescue) should be funded primarily by the country's own people. I realize that the Cyprus situation is not the same as other EU countries, particularly because of the Russian money there. But from a consumer point of view, I'm wondering what impact this Cypriot bailout plan will have on the efforts to make a single banking entity in the EU? Even if Cyprus rejects the plan, I'd imagine that many EU members, particurlarly those in troubled economies, will worry that Germany and the ECB would unilaterally decide to dip into their accounts without an electorate vote. That would be troubling to any consumer, I would think. It would be devastating to the EU banking industry if EU consumers started withdrawing or moving their money offshore enmasse. Overall, this seems like politicians finding a politically expedient short term solution without considering the longer term impact.
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