How safe are our private accounts?
“The experiment of forced missapropriation of all Cyprus account holders has failed. The parliament in Cyprus rejected the EU-proposal and gave so a clear answer. I would not be surprised, if a bank run in the European countries of crisis would start now,” says Dr. Barbara Kolm, Director of the Austrain Economics Center.
The leading EU countries confronted Cyprus over the past weekend with the alternative to either dispropriate private bank accounts or to leave the euro. At 10 billion euro rescue package was announced if the parliament agrees to the forced misappropriation which would have yield approximately 5.8 billion euros.“The approach of the EU towards the sovereign island of Cyprus was dictatorial and alarming at the same time. The EU must not be surprised if Russia steps in,“ says Kolm.
Two years ago huge amounts of gas in place was located south of Cyprus. Approximately 5 to 8 trillion cubic feet of gas below the sea ground by the American company Noble Energy. “Despite: the fear of southern European citizens who might start the run on banks is legitimate since sooner or later each EU citizen will have to bail out his own government,” Kolm continues.
2,4 trillion euros are located at Italian accounts, in Spain it is up to 2.3 trillion euros, where as in Greece it’s a maximum of 250 billion euros. The proportion of foreign account holders is comparatively small. In comparison: approximately 70 billion euros are located at accounts in Cyprus, although the GDP amounts to 3 billion euros. One third of all accounts in Cyprus are of foreign origin. The tax heaven of Cyprus attracted investors with interest rates above averages.
In the past 12 years interest revenue in cypress where three times higher than Austria. Russian oligarchs obviously could not resist the temptation. In addition, no other EU country provided that many credits to foreign borrowers in cypress. The EU and the ECB stressed that cypress is a special case and can neither be compared nor will the case be repeated somewhere else. The share of banks by GDP in cypress is twice as high as in Austria and the European average.
“The failed misappropriation by the European Union shows their attempt that sovereignty does not count at all in a case of emergency and that the EU attempts to take over the finances of the respective countries in crisis and together with the ECB also wants to control the financial markets. Obviously the EU considers harmonizing not only bank deposits, but also bank regulation “this definitely is the wrong step in the wrong direction at the wrong time” – warns Kolm – “only free markets can be effective and adjust.” Furthermore, Angela Merkel “If the Euro collapses than Europe collapses” has nothing to do with the solution of the sovereign debt crises and must not be linked to the survival of the euro. Austrian federal minister of finance, Maria Fekter, seems to be in line with the Eurocrats: “The insolvency of Cypruscan only be prevented by access to private accounts in Cyprus.”
In Austria and most of EU countries the saver is protected by law up to an amount of 100 000 euros. In case of emergency first of all other the banks and finally the government act as lender of last resort. But, after the EFTA court ruling from January 2013, this is questionable: “Generally the government does not have to act as lender of last resort, in a big financial crises when the ensuring has reached it limits. The outstanding money of foreign account holders at Island banks amounted up to 3.8 trillion, which equals to 25% of the annual GDP of Island. Island with 330 000 inhabitants is not an EU member, but committed itself to the rule of the common (European) market.
“Even if all governments emphasise that the court ruling must not be accorded to EU countries, this precedent case shows that the protection of savings accounts is none effective. The compulsory levy on bank accounts in Cyrpus will sooner or later be means to prevent national insolvency. Whether this is the European citizens free will or not, this question is not of importance any longer“ – says Kolm.