So Cyprus has been bailed out, for the time being, but we must ask the question : Isn’t the new plan worse than the first one? Given, of course, that both plans are nothing short of theft of private and company savings by incompetent political leaders, it’s like comparing pestilence with malaria.

The first plan entailed taxing all deposits (6.75% for accounts under 100,000 euros and 9.9% for accounts above). The chypriot government rejected it... because it was targeting all the voters. By not touching deposits under 100,000 euros, only the « rich » are targeted... and hit hard, because the new tax will have to be hiked to account for the loss.

Also, the first plan was calling for a single rate, whereas, for the second one, the rate varies according to the banks : 30% if you’re with Bank of Cyprus, the main bank, and more, maybe even 100% if you’re with Laiki Bank... we’ll see when they liquidate it. Those two banks hold about 80% of bank accounts on the island. It’s one thing having shareholders pay for losses, but depositors?! And, with rates that border on confiscation, many businesses won’t be able to pay salaries or keep operating.

The russian banks’ cypriot branches are not touched by this plan... thus a few of those « mean » tax-evading oligarchs will be spared! Since the troubles brewing at the two main banks had been known for awhile, a number of those had already left the country. Also, we’ve seen that the London branches of both main cypriot banks have stayed open as if nothing had happened, thus making massive withdrawals possible. Just another way for the oligarchs, and also the British, much present on the island, to avoid the tax.

We also learn in passing that the Banque du Pirée is taking over three greek branches of the Cyprus banks for 524million euros. Depositors at those banks will not be affected by the « tax » on the main banks. With the greek banks close to bankruptcy and under perfusion from the BCE, how can one of them shell out half a billion euros in cash? Are certain privileged clients being protected?

At the end, for deposits over 100,000 euros, the loss will be anywhere from 0% to 100%, depending on which bank you’re with and if you’ve been tipped the right way or not... it’s like an inverse lottery!

And then, those who will have been racketed will have but one idea in mind, leaving Cyprus for more hospitable countries (or invest in a foreign country for the residents). And a problem to come will be the strict capital controls that Cyprus is implementing to avoid another banking crisis. How long will they last? No one knows. We can also wonder if the euros from Cyprus will have the same value as those from the other member countries, since they will be closely monitored and will not be able to travel. Are we still talking about a « unique » currency?

When the banks reopen, we might realize that the local businesses will pay a hefty price, which will be catastrophic for the Island’s economy. But what’s most worrisome today is the contagion effect. How will those holding significant funds in Greece, in Spain, in Portugal, in Italy, in Ireland react? And the list is expanding (Slovenia the next one?).

And, throwing a bit of oil onto the fire, Jeroen Dijsselbloem, president of the Eurogroup, has declared that the restructuration in Cyprus was a « model »... and then retracted himself. Michel Barnier, commissionner of the Internal European Market, has indicated there could be a new european initiative calling for the contribution of bank deposits over 100,000 euros in case of bank bailouts. Therefore, we can be sure this method will be used again, of course.