The real thing that has been lost is trust as one of the unwritten rules is "Don't ever touch depositors money".
Why?
Bank self-preservation, as bank runs, kill banks. Even if they pull back from this, by this evening if I had an account in Greece, Spain, Portugal or Italy, it would be empty by now with the contents under the floorboards. where banks pay next to nothing in interest, why take the risk of a haircut. In fact I would want to run and overdraft and they could take 10% off that anytime in tax.
With large amounts a trip to Switzerland or Germany to open an account and deposit it there would be well worthwhile.
What is really interesting is where Spain has required a complete wealth assessment of it's residents wealth, with fines and penalties higher than the value for non-declaration, for 'tax compliance' purposes. 10% complete wealth tax to raise the €200bn+ needed to bail out their banks anyone? The president has now been set in Cyprus.
A massive run on bank deposits will bankrupt the banks as no bank in the world has the liquidity to cover this, where capital reserves are only a fraction of what is deposited with them. As the Eurozone is a free single currency market, a bank run in any country would have to be stopped with capital controls, which breaks the point of the Euro, hence speeding up its demise. As this is Merkel's re-election tactic, where the populous are waking up to the bill German tax payers are going to have to pay as part of their Eurozone membership. Where UKIP is framing some of the agendas in the UK, the same is happening in Germany with the help of their new anti-Euro party.
It is also a bit of an own goal by Germany, because if there is capital flight to Germany, then this will increase Germany's Target 2 lending and liabilities, which in the event of a country refusing to pay what they owe or if they replace the Euro using Lex Monetae to pay in a their new devalued local currency, they have transferred liabilities from the private to the public sector and German taxpayers. In this scenario, this could end up with Germany taking international court action or Panzer action.
Stock up on the popcorn, things are getting interesting.
Author
Topic: Cyprus bailout takes a new and potentially dramatic turn. (Read 8068 times)