This is right on cue following Friday’s post…
Does anyone else find it extraordinary that Cyprus is — basically planning on taking money out of people’s savings accounts to pay for the latest European Central Bank bailout?
The big winner here is the ECB, which has extended a lot of credit to dubiously-solvent Cypriot banks and which is taking no losses at all. And although they might wake up bruised, the big Russian depositors are probably winners too, given that they risked losing everything and will end up losing just 10%. Finally, of course, there are all the hedge funds who have been betting that the Cypriot government won’t default: they’re all popping Champagne right now.
Apparently Cyprus is a huge money-laundering mecca for illegal cartels and so the government appears to be keeping Cyprus safe for the money launderers. As always, it’s a small savers who are going to feel it the most — the working class people of Cyprus…those who can ill afford to lose any money.
This sets such a bad precedent. It’s enough to make one start hiding money in the mattress.
***Update: Nobel Prize winning economist and New York Times columnist Paul Krugmanwrote in his Sunday column that “It’s as if the Europeans are holding up a neon sign, written in Greek and Italian, saying “time to stage a run on your banks!”***