I cannot even begin to fathom what it was that was going through these oh-so-august European finance ministers’ minds when they thought this insidious little scheme up, unless it was deepening Europe’s debt and economic crises with a vengeance — but Cyprus issued a resounding “no” on this particular bailout package on Tuesday. Via Bloomberg:
Cyprus’s parliament rejected an unprecedented levy on bank deposits, dealing a blow to European plans to force depositors to shoulder part of the country’s rescue in a standoff that risks renewed tumult in the euro area.
Protestors cheered outside the parliament in the Cypriot capital, Nicosia, as lawmakers voted 36 against to none in favor of the proposal. There were 19 abstentions. Hammered out by euro-area finance chiefs last weekend, the deal sought to raise 5.8 billion euros ($7.5 billion) by drawing funds from Cyprus bank accounts in return for 10 billion euros in external aid.
“This is not a good result, neither for Cyprus nor for the eurozone, and we have to look together for alternatives to the negotiated package,” Luxembourg Finance Minister Luc Frieden said in a phone interview. Another meeting of the 17 euro-area finance chiefs is needed to discuss “next steps” with Cyprus’s government. “What matters now is to undertake all necessary measures to ensure the stability of the eurozone,” he said.
Phew — for now, at least, although I think the incredulity that this was even a serious proposal will rightfully linger. It really doesn’t matter that Cyprus is a tiny island nation with only a million people and less than one percent of Europe’s GDP, nor that the bailout was a relatively tiny one — as Robert Tracinski explains, that is not what this is about at all.
This is described as a “wealth tax,” except that it’s not a tax. A tax is a regular rule that operates uniformly according to a pre-determine formula. A one-time, ad hoc seizure of money isn’t a tax. It is confiscation. Or we can use a plainer word for it: theft. …
But in showing us what they’ll do to an unsympathetic target, Europe’s leaders are showing us what they would like to do everywhere: dig themselves and the crony banks out of a tight spot through the mass confiscation of wealth. It’s the ultimate bailout plan: they just take whatever they need.
And there is more to it than that. This is confiscation, but it a particular kind of confiscation with particular implications. It is the end of deposit insurance. Depositors, particularly small depositors, are supposed to have an ironclad guarantee that their money will always be there, no matter what—that they won’t wake up one Monday morning to find that 6.75% of it is gone.
Meanwhile, back in the United States, the ruling party of our elected leaders is tiptoeing through the tulips, pretending that our mounting debt isn’t really a big problem with which we should be immediately concerned. Exit question (trademark, Allahpundit) from Charles Krauthammer: Enough with the “the U.S. is in danger of becoming like Greece;” time for “the U.S. is in danger of becoming like Cyprus”?
CHARLES KRAUTHAMMER: I think we do have to revise our doomsday pronouncements. We had been saying up to now America’s headed the way of Greece, I would say it’s headed the way of Cyprus, because if you start to confiscate people’s money retroactively you got a real problem on your hands.
And I guess, I think if you put it to a vote for the people of that state, you’d get the same result that you got today in Cyprus in the parliament where nobody, not a single member of the parliament supported an agreement that the government itself had proposed. The government party, not one of them voted yes. It abstained entirely on a proposal that it had agreed to. So that tells you how unpopular it is.