Europe and Cyprus – a onetime shot or a model for future bailouts?
Putting surplus money in the bank to save for the future is usually a good idea. But it looks like it may soon be a detriment if you’re a saver in the European Union, as there are rumblings the same model that rescued Cyprus’s financial system may soon roll out across other economies.
You will all remember how major banks shut down in Cyprus and strict transaction rules were put in place when they reopened. The agreement put in place means those in Cyprus who had more than 100,000 Euros had a good portion of their savings clipped to cover bank bailouts. This was to save taxpayers footing the bill.
Jeroen Dijsselbloem, who chairs the Eurogroup gatherings of the 17 Eurozone finance ministers, said in the Independent article that bank owners should be responsible before taxpayers in such situations. And Spiegel Online International noted in April that Dijsselbloem pointed to the Cyprus bailout as a future model for all Eurozone economies in trouble.
In fact, EU Internal Market Commissioner Michel Barnier said recently a “law is already being prepared to facilitate sequestering bank accounts” in similar situations, according to this website.
This New York Times article explains Germany backed the bailout plan so it wouldn’t bring down the rest of the Eurozone.
But the message from German politicians is that banks should be put through bankruptcy like any other company – with no special bailout concept. As such, they consider the cash in your savings account an investment into the bank.
What do you think Europe should do in future financial crises?