Cyprus is a small island in the Mediterranean Sea off the coast of Turkey and Syria. On a map it seems to belong more in the Middle East than Europe, but for a host of historical reasons it is included. The 1.1 million people who live there are citizens of the European Union.
I don’t live there, so should that matter to me? It matters because the banking abomination being attempted in Cyprus is the first of its kind in modern times—the literal confiscation of “taxes” from bank accounts. Cyprus should matter to you if you have money in any Western bank, prefer to use credit cards instead of cash, or believe in the rule of law.
Cyprus is basically insolvent and the economy is about to repeat scenes you’ve watched in every movie about the Great Depression. To stop it from happening, the European Union offered a loan, but only if the government of Cyprus “taxes” bank accounts.
How can the government tax bank accounts? They cannot; they can only steal from them. It is called a “tax” because to call it theft invites revolt against the government. A bank account is a repository for private property that has already been taxed. It would be as if the government came to your garage and “taxed” your car by pulling a wheel off in the middle of the night after you already paid for it.
Is the government of Cyprus insane? No, only desperate; the nation was heavily invested in Greece and when the Greek economy failed, Cyprus was likewise exposed. However it still listens when people riot outside the legislature. As ordinary people learned what was about to happen, they vociferously protested, and it was enough to frighten representatives who rejected the plan that the EU’s Troika proposed.
The “Troika” is slang for the tripartite committee of the European Central Bank, European Commission, and the International Monetary Fund. These organizations are the de facto authority in setting financial policy for bailouts (government loans) in the European Union such as occurred in Greece, Ireland, and Portugal.
They probably shouldn’t matter, but ever since Charlemagne many people on the continent have been mesmerized by the notion of a united Europe, believing this increases European power and influence. Alongside the plutocrats in Brussels come the technocrats of the Troika.
Cyprus received about 10 billion euro to remain solvent.
That doesn’t seem like much, comparatively speaking. The Troika has recently funded bailouts many times larger. For example, the Troika offered Greece loans of well over 100 billion euro.
People are making a fuss over the Cypriot bailout because the nation’s annual economic output is only about 24 billion euro. As a consequence, the Troika put the bite on Cyprus to make sure they have some skin in the game.
There’s a difference between “having skin in the game” and “being skinned alive.”
Cyprus agreed to a bailout plan on Monday that may cost “large investors” up to 40% of their bank deposits.
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