There are many things I don't like, for example the use of Quantitative Easing (a purely monetarist fantasy of increasing money supply) which has the effect of weakening the internal economy and increasing inflation in import led countries. However, the Cyprus decision for a one of wealth tax on depositors to support a Euro Bailout has to take the biscuit.
There are many different options, from a default on debts and raising future funds through a Euro Bond (preventing markets playing a game of isolating one country from another) to a more Keynesian style investment but if we're going to create a tax on wealth why hit an asset class which can disproportionately hit the poorest?
If you're going to have a one off wealth tax then hit all asset classes and protect the most vulnerable i.e. set a minimum level of wealth (e.g. 200K+ euro), include all asset classes (cash, shares, property etc) and hit all legal persons (i.e. real people and also companies which are defined under European law as legal persons).
If you're going to insist on only depositors then at the very least have a minimum threshold (e.g. 100K+ Euro) and make sure you hit all legal persons (i.e. company deposits including the banks). The problem of course is that companies will shift money rapidly into other asset classes, there are always ways to avoid a tax which hits one asset class. So make sure you apply the tax on dates that have already past (i.e. take an average of four dates over the past year or use the end of the last financial year or better still apply it immediately) rather than some forward date. There will be plenty of appeals, lobbyist efforts, financial engineering and attempts to shift deposits into other classes by the wealthy. Amongst all this sham and acts of self interest, there will be some actual cases of unfairness e.g. the couple who sold their house on the wrong day.
If you're going to insist on only depositors then at the very least have a minimum threshold (e.g. 100K+ Euro) and make sure you hit all legal persons (i.e. company deposits including the banks). The problem of course is that companies will shift money rapidly into other asset classes, there are always ways to avoid a tax which hits one asset class. So make sure you apply the tax on dates that have already past (i.e. take an average of four dates over the past year or use the end of the last financial year or better still apply it immediately) rather than some forward date. There will be plenty of appeals, lobbyist efforts, financial engineering and attempts to shift deposits into other classes by the wealthy. Amongst all this sham and acts of self interest, there will be some actual cases of unfairness e.g. the couple who sold their house on the wrong day.
Cyprus has a large financial and shipping industry along with huge reserves of natural gas and extensive deposits by international banks. There are many ways to skin a cat, hitting your average depositor is not the way to do this, so at the very least protect the poorest.
