Have any of you heard of Cyprus? It's a small mediterannean island country. Sadly, their banking system is insolvent (like the rest of the EU). So they asked the European Central Bank (ECB) for a bailout. The conditions the ECB set on this bailout has and will change the entire scope of European banking.
A country-wide Bank Holiday was called and the ECB required the major Cyprus banks to confiscate a percentage of deposits held at the banks in order to get the bailout.
Cyprus turned down this offer, with not one single parliament member voting for the resolution. Capital controls were enacted shortly after, restricting people to only pull 100 Euro's a day maximum. Then there was much wrangling and finally on Sunday 3/24/13 a "deal" was made. The ECB went around the Cyprus government and made a deal that would see all insured deposits (Under 100,000) stay untouched and any deposit greater than that amount will see 40%-100% confiscated.
Think about what these moves will cause. It will cause anyone with an account to pull their money out, bank run style. So now they're saving banks that can't be saved because nobody wants to deposit money there.
Even worse, the European Financial Minister yesterday called Cyprus a template for what is to come. Of course he later tried to withdrawl his statement, but that was only because it sent the Euro spinning.
Now we find out that even though he tried to retract the statement, it's absolutely true. Because now we have an EU parliament resolution being pushed through that will make this the model for all of Europe.
Yes, you heard that right. If you have over 100,000 Euros in an account in the EU and your bank goes down, your money will be taken.
If that bill passes be ready for massive bank runs in Europe. If that occurs you can bet it will spread to the rest of the world.
UPDATE - It's already happening
UPDATE 2 - The idea has already jumped the pond
No comments:
Post a Comment