Tuesday, March 19, 2013

Cyprus Utterly Rejects EU Demand for Deposit Haircut, ECB Says It Will Still Help "Within Certain Limits"

Whatever that means. The stock market algos liked this help "within certain limits", and Dow Jones Industrial ended up 3 points up for the day.

The amended "deposit tax" would have exempted accounts with less than 20,000 euros but taken money from all else. (More at Reuters.)

Cypriot Parliament vote on "deposit tax" (AP, 3/19/2013):

In favor: Zero
Against: 36
Abstentions: 19

Abstentions were from the ruling party.

ECB's comment (Reuters, 3/19/2013):

After Cyprus vote, ECB says ready to offer liquidity within rules

BERLIN (Reuters) - The European Central Bank said on Tuesday after Cypriot lawmakers overwhelmingly rejected a key element of a proposed bailout that it was in contact with its IMF and EU partners and remained committed to providing liquidity within certain limits.

"The ECB takes note of the decision of the Cypriot parliament and is in contact with its troika partners," the bank said in a statement. "The ECB reaffirms its commitment to provide liquidity as needed within the existing rules.

By the way, I think I know now why the reporting on the deposit confiscation in Cyprus has been very much subdued and equivocal in Japan. Japan is about the only country in the world that instituted the one-off, much more punitively progressive tax on wealth including bank deposits successfully, right after the World War II under the US occupation (GHQ) in 1946.

Anyone with the accumulated wealth (not necessarily in cash, but in goods and real properties) of 100,000 yen (probably today's 100 million yen, or about US$1.05 million) got 10% of it taken by the government. Unlike Cyprus, it was progressive, and the highest bracket was 90%. The 90% confiscation of one's wealth was justified by GHQ as "punishment" for profiting from the war. It didn't matter to them that most people whose wealth were confiscated had nothing to do with profiting from the war.

Roosevelt "New Dealers" in GHQ must have felt very righteous doing it, who went on to take away farmland from the large land-owning farmers in 1947 for the sake of "fairness". (Never mind that not all farmers wanted to be the land-owning farmers...)


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