Cyprus bank account holders are now waiting… thanks, EU

Written by Andrew Henderson

Have you ever noticed while on board a flight that delays in pushing back from the gate or reaching the runway are always fifteen minutes? I’m convinced that fifteen to twenty minutes is the focused-grouped timeline for keeping people in line.

That’s just what’s happening in Cyprus, which Tuesday rejected the Eurozone’s plan to confiscate some six billion euros ($7.5 billion) in Cypriot bank deposits to pay for the country’s bail-out. Not a single member of the Parliament voted in favor of the plan – to cheers from locals who didn’t want thousands of their euros seized. Yet, with no apparent lifeline, Cyprus is essentially calling the EU’s bluff. And they’re making the locals wait.

In the wake of this past weekend’s agreement to levy up to 10% of Cyprus bank account values, banks in the Mediterranean island nation have been closed since the deal was made. Wouldn’t want anyone getting any more than an ATM withdrawal’s worth of their own money. Later in the weekend, they shuttered banks through Thursday. Now there’s talk banks will be closed through next Tuesday.

The waiting game is brutal when the government doesn’t care about its citizens or their money.

Now Cyprus is going hat in hand to Russia, whose mobsters deposit their untaxed money in Cypriot banks. Russians already chipped in 2.5 billion euros to bail them out. Could you imagine the US government giving money to bail-out a country where Americans parked their cash out of the watchful eye of the IRS?

I doubt – as does the consensus – that Russia will put in more money to save Cyprus or its own outlaws who skirt Mother Russia’s rather low tax rates to launder money down south. That means the country could go bankrupt, and the waiting game continues.

The central banker’s playbook is pretty predictable these days. Making Cypriots clamor to get their own money out of the bank in a cat-and-mouse game is just the latest face of their devaluation of your money. Around the world, they’ve been working to push up consumption at the expense of savers. They keep the party going by never making the consequences of bad loans to places like Greece matter. Then they use “easing” to make sure the hangover after the party is never felt. They happily inflate your money away by making sure banks in the US and the Eurozone are too big to fail.

Now that the next fork in the road has been reached, their choice to seize everyone’s money and string along depositors is hardly surprising.

What’s surprising is why anyone thought banking money in the Eurozone – a union of countries less connected than those whose names begin with “M” – was a good idea to begin with. The situation in Cyprus is dire. Just like your jetliner sitting on the tarmac, I predict more delays and/or hand wringing will come to the benefit of no one there.

Don’t, however, fall into the trap that what happened in Cyprus means you shouldn’t internationalize. What happened there could happen elsewhere, especially if the EU is rocked by a Cyprus bankruptcy. Look for the right places to bank and don’t depend on bad marriages of unstable, bankrupt countries to last while you’re looking.

Andrew Henderson
Last updated: Dec 30, 2019 at 12:46PM

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