Cyprus places Germany in a dilemma. The country needs a bailout of around €17 billion (US$22 billion) to avoid going bankrupt. To German elites, this is a great opportunity to gain control of one of the world’s most strategic pieces of real estate. But ordinary German taxpayers don’t care about this. They don’t want their money going to what they believe is a crooked banking system.
Saturday’s decision allows Germany to have its cake and eat it. The meeting of eurozone finance ministers decided to loan Cyprus €10 billion. The International Monetary Fund (IMF) will probably also join in. But the bailout comes with a shocking and unprecedented condition.
Cypriots will have money taken directly out of their bank accounts. Monday is a bank holiday in Cyprus. By the time banks open on Tuesday, all depositors will have a chunk taken out of their account. Accounts with less than €100,000 will face a levy of 6.75 percent. Those with more, will be taxed at 9.9 percent.
This decision blurs the line between taxation and theft. If you had $10,000 of savings in a bank account—that you had already paid tax on—the government would take $675.
Even government members were surprised. “My initial reaction is one of shock,” said the head of parliamentary financial affairs committee, Nicholas Papadopoulos. “This decision is much worse than what we expected and contrary to what the government was assuring us, right up until last night,” he told Reuters. The current leadership has constantly promised there would be no tax on bank deposits. They have been forced into total surrender by Germany.
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