Cyprus has finally agreed to a bailout to help its ailing
economy. Cyprus will receive €10 billion to prop up its government after the
financial sector of the small island nation was devastated by the Greek debt
write-off. Some of the measures passed have been amazingly draconian in nature,
completely different to the bailouts of Greece, Ireland and Portugal. Instead
of hitting the taxpayer rather than the bond holders of the banks in trouble,
the Cypriot bailout goes the other way round. It’s people with large deposits
in Cyprus’ banks that will be worst hit, if you have more than €100,000 in a
Cypriot bank you will lose a jaw-dropping 40% of your deposit! Cyprus has
almost frozen the movement of capital: You can’t take more than €300 out of
your bank (this is to stop people taking their money out of the banks en masse
causing them all to collapse simultaneously) and you can’t take more than
€1,000 out of the country! This kind of capital control is unprecedented in
modern world history and it really highlights the desperation of Eurozone
leaders due to the unending crisis.
Each time a bailout happens European leaders attempt to
convince everyone that this will stop the contagion spreading, but so far
Greece has been in permanent trouble, Ireland and Portugal have had their
governments bailed out and Spain has had its banking sector bailed out. Most
European countries have lost their AAA credit rating, with Germany as the last
major economy to retain it!
I’m in no way convinced that this crisis is anywhere near
over, so which country will be next?
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| An angry protester in Cyprus sourece: www.money.cnn.com |
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