A proposed "bail-in" of financial institutions in the tiny European Union (EU) nation of Cyprus has plunged the global economy into a period of doubt and dismay, following massive public outcry over what is essentially a wealth tax on Cypriot deposits. We've covered the ongoing troubles of this island nation in previous posts, but the developments are unprecedented so far in the ongoing European debt crisis.
Officials from the European Commission, European Central Bank and the government of Cyprus announced the emergency measures over the weekend. The original plan had been to impose a 6.75 percent levy on domestic bank deposits under 100,000 euros. Similarly, accounts with amounts over that number would be hit by a 9.99 percent tax.
Reaction to the plan, which Cypriot officials have stressed is necessary, was almost universally negative. Members of the island nation's parliament are reportedly torn over the proposal, but some, including the speaker of parliament Yiannakis Omirou, have come out against it.
"Essentially parliament is called to legalize a decision to rob depositors blind, against every written and unwritten law," Omirou told reporters. "We refuse to subscribe to this."
Since the announcement, eurozone leaders have struggled to develop an alternative. It may be another day before specifics are offered, although one idea involves reducing or eliminating the lower-bracket requirement altogether. This would result in an imposed tax of over 15 percent on bank accounts with more than 100,000 euros deposited.
Investors should be greatly concerned by this development. It suggests that even insured bank accounts are not safe from potential government seizure in order to orchestrate economic policies – such as budget austerity – that are not guaranteed to succeed. Those with European exposure may want to consider methods of wealth preservation in order to protect themselves financially. To learn more, visit GreatWealthStrategies.com today.