Confidence in security of deposits under 100,000 euros shattered
Paul Joseph Watson
March 19, 2013
Former British Chancellor of the Exchequer Alistair Darling has warned that the raiding of people’s saving accounts in Cyprus could trigger bank runs across Europe.
Darling said that the unprecedented step of looting banks account of those with 100,000 euros or less could lead to a collapse in confidence because it “blows apart” the notion that such sums are protected.
“They have actually now said to people ‘We will come after your deposits, no matter how small your savings are’ and that seems to me to make it more likely that, if you are a saver in Spain or in Italy, for example, and you have just the sniff of the EU or the IMF coming your way, you will take your money out and you will get a run on the bank,” he told BBC Radio Four’s Today show.
Highlighting the case of Northern Rock, a UK bank that became the first in 150 years to suffer a bank run, leading to its collapse, Darling warned that the precedent set in Cyprus could cause chaos.
“I’m not suggesting that tomorrow morning everybody in Southern Europe is going to take their money out of their banks,” he said. “We saw with Northern Rock, everything can be fine on day, and even though I said the Government was standing behind people’s money, we saw queues grow and grow and grow because people thought they were doing the right thing getting their money out.”
Darling concluded that the way the European Union had handled the issue illustrated how the EU was beginning to “unravel”.
Others such as Pimco CEO Mohamed El-Erian have also warned that the brazen looting of people’s bank accounts could trigger civil unrest.
Nobel Prize-winning economist and New York Times columnist Paul Krugman also raised the prospect of bank runs, writing, “It’s as if the Europeans are holding up a neon sign, written in Greek and Italian, saying ‘time to stage a run on your banks!’”
Italians will certainly not be comforted by German Commerzbank chief Joerg Kraemer’s call for a 15% tax on all financial assets.
With the Cypriot government struggling to gain support for the bailout bill in parliament, a new draft would spare those with 20,000 euros or less from having their savings looted. However, this new version would create a €400m funding gap.
Cyprus central bank chief Panicos Demetriades warns that unless savers with up to 100,000 euros are spared from the tax, the Mediterranean island’s banks will lose 10% of their deposit base within days.
After Vladimir Putin described the bank levy as “dangerous and unfair,” Vladimir Chizhov, Russia’s envoy to the EU, labeled the tax as an act of “forceful expropriation,” adding that it threatened to cause a collapse of Cyprus’ whole banking system.