Courtesy of Mish.
In Cyprus, a decision was made to screw savers with a 6.75% to 9.9% “Tax” on deposits.
Supposedly this move was made to “avoid unsettling investors in larger countries and sparking a new round of market contagion.”
In reality, the action was mandated theft, imposed by EU officials to protect senior bondholders.
How can such an action do anything but cause contagion?
The move is expected to raise a mere 5.8 billion euros according to Dutch Finance Minister Jeroen Dijsselbloem, leader of the euro-area ministers. Fallout from this action will cost far more than that.
Contagion-Begging Actions
What is someone in Greece, Spain, or Italy supposed to think?
Consider Spain. By a 526 to 86 vote, the nannycrats in Brussels just passed a regulation that will require a country to accept a bailout if offered. (Please see An Offer You Cannot Refuse; EU Passes Law Forcing Countries to Take Bailout; Is Spain the First Target?)
Also note that EU Court Strikes Down Spain’s Eviction Law.
Think the parlay of EU contagion-begging actions for a second.
- Spanish banks will not be able to evict homeowners, who in turn will be give reason to default. Losses will soar at Spanish banks and they are insolvent already.
- The “Offer You Cannot Refuse” action by the EU is sure to arouse suspicion of a forced bailout in Spain.
- Cyprus actions will heighten fears of bank takeovers, capital controls, and theft of deposits via confiscation.
Expect Bank Runs…
