The Extreme Dangers of a Deposit Tax

Makin, John H.
March 2013
AEI Outlook Series;Mar2013, p1
The banking system in Cyprus remains in a state of crisis, only narrowly avoiding collapse through a recent agreement between the nation and the European Central Bank (ECB), European Union (EU), and International Monetary Fund (IMF)--the "Troika." The €10 billion rescue package includes the condition that Cyprus come up with a portion of the rescue funds through a tax--now called a "restructuring"--on deposits over €100,000 in the nation's banks. Such a tax cripples Cyprus's banks and frightens depositors in other debt-laden weak economies like Greece, Spain, Portugal, and Italy. Once again the Troika has doubled down on a losing bet to rescue the eurozone from a breakup. They fail to acknowledge that Cyprus and Greece cannot be in a currency zone with Germany, Holland, and Finland, and the Troika tax only underlines this fact.


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