European Leaders Seize Funds Directly From Bank Account Holders
European finance chiefs ordered an unprecedented raid on personal bank accounts. Up to 60,000 British savers are to lose thousands of pounds each as expats in Cyprus have their savings decimated in part of a painful bid to bail out the bankrupt island.
A move by Cypriot authorities that could see up to ten per cent of bank deposits seized to bail out the bankrupt sparked panic and violent protests. One disgruntled customer parked a bulldozer in front of a bank in the coastal town of Limassol in protest.
People are withdrawing money from a cash-point machine in the Cypriot capital of Nicosia and Cypriot banks in Britain are not going to be included in this bank tax. It’s a very difficult situation for people who live in Cyprus.
The Cypriot government has agreed to seize up to ten per cent of savings and use the money to bail out the island’s crisis-hit banking system. The move sparked panic and violent protests yesterday as crowds desperately tried to withdraw their money at cash machines.
Restrictions have been imposed to stop people emptying their accounts or moving their money out of the country following the deal with other Eurozone finance ministers, under which ordinary citizens’ deposits will be directly raided for the first time.
But financial experts said the move – designed to stop Cyprus crashing out of the Euro, potentially destroying the currency – would send shock waves through the Eurozone.
If savers in other troubled nations fear their accounts might be next, they could withdraw their money and spark a catastrophic run on the banks.
We should all be extremely worried about this. It shows that ordinary Europeans are being fleeced by the Continent’s elite in order to rescue foolish banks. Why would you risk putting your money in Greek, Spanish or Portuguese banks after this?
Cash machines had been working, but many ran out of notes because of the panic withdrawals. Tomorrow is a bank holiday in Cyprus, so savers will have to wait until Tuesday until they can access their money.
And now they’ve done it once, what’s to stop them deciding to do it again next week?
When the banks reopen, people will start moving their money out of Cyprus because they don’t want this happening again. This could create a run on banks, which would be a very bad thing for Cyprus. Savers will be offered shares in Cyprus banks as compensation for the raid on their savings, but it is unlikely to appease those who have lost hard cash.
Currently, all 17 European Union countries that use the Euro offer deposit insurance to protect customers if their bank fails. But the measure in the Cyprus deal is a tax – not losses incurred because of a bank failure. In fact, it’s meant to hold off a bank collapse.
Banks have already acted to seal off the amount of the levy – a 6.75 per cent tax on deposits under 100,000 Euro and 9.9 per cent on those above – so depositors can’t access it. Bank customers still can draw on the rest of their funds via ATM machines this weekend, and nervous depositors did that on Saturday to drain their accounts. But the few banks that opened on Saturdays did so only briefly, and no international transfers will be able to go through until Tuesday, since Monday is a holiday. Cyprus’ Parliament is expected to meet Sunday to pass the required legislation. The deal also needs the approval of several Eurozone parliaments; it’s unclear how fast they can act and what will happen to bank deposits in the meantime.