This just in from Euro-Correspondent Lucy Culpepper on the goings-on in Cyprus:
“What has happened in Cyprus this week is a stark reminder that diversification of assets is absolutely essential…and that being a saver does not always play out to be the most prudent strategy. As George Osborne, the British Chancellor of the Exchequer, delivered his budget today, there was a sense of insecurity here in the UK. With mounting and massive government debts in Europe, whose piggybanks will be raided next? Would the Cyprus debacle give George some unpleasant ideas?
“Over the weekend Cyprus’ residents were told that the government would impose a 10% levy on every single person’s savings to raise funds to comply with a Eurozone bailout. Uproar and outrage ensued.
“The FTSE 100 dropped 1.5% as fears of the bailout surged through the markets, and the euro fell to a three-month low against the U.S. dollar. Frankfurt’s DAX and Paris’s CAC-40 fell to between 1.5% and 2% on opening and Moscow’s MICEX was down 2.4%.
“President Anastasiades of Cyprus said on a TV address that the levy was the only way to avoid a “disorderly bankruptcy.” Cyprus’ citizens took to the streets.
“By Monday, German and Eurobank officials told Cyprus that they could amend the terms of the bailout. On Tuesday night, the Cypriot government voted against the tax; 36 Members of Parliament against, 18 abstained, and none in favor. The news cheered Cyprus’s savers, but Germany declared today that banks in Cyprus should not re-open until the terms of the bailout are agreed. Meanwhile, in Cyprus today not a single person has access to his bank accounts. I think the people of Cyprus are showing unbelievable restraint. Just imagine if that happened in the United States or the UK. There have been riots for less. (In a wise move, Chancellor George Osborne gave the go ahead to fly 1 billion euro into Cyprus to provide short-term loans to the UK’s government personnel and military families stationed there.)
“Any resident of that Mediterranean island, whatever their citizenship, is affected by the impasse. The worst off are those who have everything in one basket. Right now the message to all in Europe, if not the world, should be diversify, diversify, diversify…invest in something the banks cannot grab without warning…and look for a place where you can live a self-sustaining life.
“Belize comes to mind…”