05.01.2013 0

Cyprus lawmakers finally agree to steal $17.1 billion of savings deposits

By Robert Romano

Is anyone, anywhere in the world willing to fight against debt slavery that is encroaching on national sovereignty all over the world?

In Cyprus, lawmakers voted to approve a €10 billion ($13.1 billion) loan from the so-called Troika — the European Commission, International Monetary Fund, and the European Central Bank — to bail out Cypriot banks that bet poorly on Greek sovereign debt.

Of course, there’s a catch. Cyprus must levy a €13 billion ($17.1 billion) tax on savings deposits more than €100,000 ($131,620). That amounts to almost 20 percent of the country’s €66.8 billion ($87.9 billion) of deposits, according to the European Central Bank.

Depositors at the Bank of Cyprus could see as high as a 37.5 percent levy, with another 22.5 percent that could be confiscated at a later date. In return, depositors get “shares” in the bank.

Lawmakers approved the measure despite the fact that the size of the savings tax has ballooned by €7.2 billion ($9.5 billion) since March. A previous €5.8 billion ($7.6 billion) savings tax had been rejected by the Cypriot parliament nearly unanimously last month.

What a difference six weeks or so can make. This time, the measure passed by just 1 vote with a 29 to 27 margin. To gin up support, the government there warned of a massive “disorderly bankruptcy” and an economic crash if the bank bailout were not approved.

Which is what politicians usually have said throughout the financial crisis in order to socialize the losses of financial institutions. What the analysis ignores is that even with the bailouts, countries with bank trouble are likely to suffer through a recession anyway.

In fact, European countries that have accepted bailouts whether to shore up sovereign debt or bank crises have the worst economies with the highest unemployment rates. Greece has an unemployment rate of 27.2 percent. Spain at 26.7 percent. Portugal at 17.5 percent. Ireland at 14.1 percent. Cyprus already has a 14.2 percent jobless rate — which everybody should expect to rise.

The latest Gross Domestic Product numbers are not much better. In the fourth quarter of 2012, Portugal contracted 1.8 percent. Cyprus shrank by 1 percent. Italy and Spain, which are receiving tens of billions of euros of bailouts from the European Central Bank, shrank by 0.9 and 0.8 percent, respectively.

Meanwhile, Iceland, a country that refused to bail out its banks in 2008, although uninsured foreign depositors lost their savings in the process while it guaranteed domestic depositors — is doing much better off.  Its unemployment rate is down to 6.4 percent. It had peaked at 8.9 percent in September 2010. Its economy grew by 1.6 percent in 2012.

So, while letting the banks fail still can have adverse consequences — Iceland’s economy had contracted 6.6 percent in 2009 and 4.1 percent in 2010 — the duration of the recession was much shorter. And the fallout on the people was far less than seen on mainland Europe.

In the meantime, voters in Iceland recently threw pro-European political parties out on their ears as the center-right Independence and Progressive parties ran against European Union membership, and were swept into power with a majority.

The leader of the Progressive party had this to say: “deeper integration with a Europe in historic decline isn’t necessarily the best for Iceland,” and that the “economic crisis in Iceland and Europe has taught us the importance of being able to control your own destiny.”

In contrast, Cyprus has accepted indebted servitude to the European Union — and the high unemployment and slow growth that comes along with it — perhaps for posterity. It should have left the common currency and told the Politeuro to take a hike.

The lesson is that, like Iceland, nations can stand against the debt machine, but the people must be prepared for the short-term economic costs so they can see the light of freedom at the end of the tunnel.

Robert Romano is the Senior Editor of Americans for Limited Government.

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