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A Quick Take on the Cyprus Mess

Just in case you have not heard, the European Union, in their exceedingly finite wisdom, suggested a one-time tax on Cyprus depositors in order for Cyprus's banking system to receive a bailout. Ah, the joys of being a part of the Euro!

Let's put this into perspective. A foreign, unelected governing body is demanding the confiscation of a portion of another country's citizens' savings. That same country declares an indefinite bank holiday in order to freeze all deposit accounts so it can negotiate with the foreign group of bureaucrats to figure out just how much to take from each of its citizens. This is considered "necessary" in order to secure a bailout from the EU that is ultimately funded, not by actual reserves or savings, but by a printing press. Is it me or is there something very wrong with that picture?

There does not seem to be a good choice in the matter. If this passes Cyprus's parliament, a portion of the citizens' private property will be taken at the demand of the EU  to support Cyprus's failed banking system. If the parliament rejects the "bailout" then the country will likely default on its obligations, or perhaps, face a collapse of its banking system, which might wipe out its depositors anyway.

Either way, I think the damage has already been done in the original proposal. What would you do  the moment you could regain access to funds in an account that was frozen so that foreign bureaucrats could figure out how much of your savings they were going to confiscate because the banking system was on the verge of collapse? Yeah, me too, I would liquidate immediately at the first opportunity given.

I wonder what the good citizens of Spain, Italy, Portugal, et al., are thinking right now given the relative lack of health of their own financial systems? I suppose it's nice to be forewarned that the EU considers the deposits of once-sovereign countries to be fair game.

If this is the price to pay for being a part of the EU and the Euro, I wonder how long countries will be willing to pay it?

Written By: Joshua Ungerecht
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banking system, Cyprus, Debt, depositors, Euro, European Union, Italy, Portugal, Spain