Cyprus has been having some financial difficulties and are now in the unenviable position of needing a bailout. The EU and IMF were willing to step in with some conditions. This story is nothing new as lots of EU countries have been bailed out with strings attached. The strings have been painful and caused all kinds of strife but they have at least been very defensible: Insisting that a government try to balance its books before loaning them money isn't crazy. In Cyprus' case though things went to bonkerstown.
The EU demanded a one time tax on all bank savings between 6% and 10%. (Even funnier, the tax is such that someone holding 99,999 pays 6,749 and someone holding 100,000 pays 9,900!) Not a tax on all holdings, or net worth, or investments, or anything else but specifically bank savings. Can anyone predict what would happen next? Well gee, I guess every resident of Cyprus will run to the bank, get their money out, and put it under their mattress! Which they tried to do, until the government shut down the banks to avoid a run that would bankrupt every single bank in the country. So now the country is effectively operating without banks, the citizens are righteously outraged, and revolution is on their minds.
How in the hell does an idea this colossally stupid get rubber stamped by so many people including the leaders of Cyprus? Nobody in the entire chain of events noticed that this tax could be avoided by a full withdrawal? I know that a flat tax on all cash and assets (as in Monopoly) wouldn't be practical but at least it wouldn't immediately cause a run on every bank in the country.
Sthenno was talking to me about this and he pointed out that this is tantamount to the government of Canada simply nationalizing Bell and Rogers and taking all of their money. No foul, right, because the IMF officially sanctions the seizing of private property... hell, they require it!
The EU was an interesting experiment that sure seems to be unravelling at a ever increasing pace. Having no way for a country to get out of nasty debt and deficit problems is a disaster. There are really good reasons for countries that can't get it together to have their own currencies and be responsible for their own problems and this certainly provides a great illustration of that fact. Not that leaving the EU will necessarily help those countries, mind, but at least the tensions between Germany and the rest of Europe wouldn't be going so bad so fast if they weren't in a position of enforcing lunatic policies on deadbeat nations.