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Eurozone Crisis Worsens: EU Seizes Cyprus Bank Account Across the Board

By Brandon Moseley
Alabama Political Reporter

The European Union was supposed to make the continent more prosperous and even a “United States of Europe” that would rival the U.S. and China.  In reality, the European Union has caused more problems than it solved and it appears to have made the lives of millions of Europeans much worse. It certainly took economic decision making out of the hands of elected national leaders and gave most of the power to European central planner living far removed from the disasters their policies inflict on the local peoples. This slow motion train crash we have been watching for months his a new low on Saturday when the E.U. announced that it was seizing 9.9% of all bank deposits over 100,000 Euros and 6.9% of all bank accounts less than that in the small country of Cyprus to fund yet another poorly executed bailout to try to contain the disaster we call the Eurozone Crisis.

Since World War II, we have all been told that the safest place to have your money is in banks.  U.S. banks, German banks, Italian banks, Japanese Banks, Cyprus Banks, etc. all have mandatory government backed deposit insurance so that the bank failures that worsened the Great Depression.  Apparently that truism no longer is fact…..or at least it isn’t for the people of Cyprus.

After the banks closed, the European Union announced that it would bailout the struggling Cyprus government, but is financing this bank bailout on the backs of depositors in Cyprus banks.  The 13 billion Euro bailout of Cyprus is the latest in which Europe’s wealthiest nations get to centrally plan the economies of Europe’s poorest nations.
The European finance ministers announced their “bailout” solution for the island country of Cyprus.  The move makes European Union account insurance essentially useless.  Bank accounts pay interest that usually is well below the rate of inflation.  Bank depositors give up a competitive market rate of return in exchange for absolute security.  Investors make a low rate of return on money in the bank: but they never lose money.  Or at least they did NOT until Saturday.

This will be felt far beyond Cyprus as the island country lured deposits from all over the world, especially from Russia.  The island country’s banks were favored by Russia’s powerful oligarchs.  They, like the other depositors saw their account balances decrease electronically.

It is likely that Monday will see a depositor run on some European banks as well as a short term drop in the value of the Euro on currency exchanges, and it is equally possible that stocks and mutual funds could see a drop as a result of this escalation in the austerity packages being  imposed on many European countries.

Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, said that this could raise 5.8 billion Euros, but it doesn’t stop there: a partial “bail-in” of junior bondholders is also possible, as well as other measures which could be announced later this week.   Cypriot President Nicos Anastasiades agreed to the demands on Friday.

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Brandon Moseley is a former reporter at the Alabama Political Reporter.

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