Monday, March 18, 2013

Cyprus Has Backed Down a Bit

Today Cyprus back down on its decision to partially confiscate bank holders' deposits via a one time tax scheme supposed to affect every bank account holder.

Cyprus has to consider a more realistic way of remaining in the Euro zone as its government can not afford to punish people with bank accounts just because they have bank accounts. This is even more insane when we consider that the largest depositors are not even citizens of the EU (they are Russians).

What is completely unprecedented and incomprehensible is that EU officials actually recommended this partial confiscation to the Cyprus' officials.

I continue to rub my eyes in disbelief as this decision shows that EU officials have no idea how financial markets function in the real world. They are totally parallel to how the international financial system is set up and yet they take decisions 'off the cuff' about how it should work. What are they smoking?.

Political leaders are weasels that want to appear populist and will step on principles to support their positions. However their positions on Cyprus are abject, and despicable. EU should encourage positive capital flows and should promote the development of financial services as a way to revitalize the sagging European economy. 

Low level participants in the financial sector (bank account holders) need financial encouragement to leverage their own assets in the financial markets more and not less. Economic growth depends on market driven financial decisions and not on governments' abrasive intervention.

After all, even Putin can see that the EU is wrong and if the EU cannot see that then we are in trouble. Bada-boom trouble.

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