Sherwood Forest in Cyprus: Robin Hood With a Mediterranean Flavor

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Humor, Macroeconomics

We all like the story of Robin Hood, right?

Rob from the rich and give to the poor – well, not if we are the rich, of course – but the story was set sufficiently long ago and far, far away that we can identify on a liberal level with the incorrigible rogue that was Robin Hood.

It seems some members of the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF), egged on by the Germans, it is said, have got the story a bit muddled because their moves over the weekend precipitated a plunge in equity and metals prices, not to mention outrage on the streets of a little Russian enclave in the Mediterranean known as Cyprus.

Now those of you in the US could be excused for not being too familiar with Cyprus.

It’s a pretty (in parts) little rock in the Mediterranean Sea with a long history, which, fortunately – or not, depending on your point of view – has become over the last decade the defacto tax dodge for Russian companies (and, no doubt, a significant number of individuals, too).

In fact, so important has Cyprus become to Moscow that Russia extended a €2.5 billion loan to the tiny state two years ago, which has all but kept the economy there afloat. What was the cause of this outrage?

Well, in a reverse of the Robin Hood ethos, the troika of EU, ECB and IMF had agreed with Cyprus’ president (but not his parliament) on Saturday that Cyprus would impose a dual rate of tax on bank deposits in order to raise €5.8 billion. The sum had been demanded by the troika, it is said, in order to qualify for a €10 billion bailout.

Needless to say, everyone has back-tracked smartly in the face of widespread outrage at the theft of savers funds, particularly as the EU had moved in the aftermath of the financial crisis to guarantee savers deposits up to €100,000, only to renege on the guarantee when it suited them.

What happens under the deal? Continued in Part Two.

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