Much of the press is describing the EU's demand that Cyprus seize a portion of bank account holders' deposits, a demand rejected yesterday by the island nation's legislature, as a "tax."
I think it's reasonable to suggest that this characterization is designed to minimize the frightening authoritarianism the EU has just attempted. In a bit of a pleasant surprise, one organization openly calling the move an attempt at "seizure" is the Associated Press.
At the UK's Financial Times (ft.com) and other places, another popular term is "levy." Although that word in the U.S dictionary has a two-faced meaning ("an imposing or collecting, as of a tax, by authority or force"; "as of" implies that a levy can take other forms), in the context created by Peter Spiegel and Kevin Hope at ft.com on March 18, it means "tax":
“We had proposed a levy with a rate of zero below €100,000, and a higher one afterwards,” said the official. “The Cypriot president did not want to agree to a levy higher than 10 per cent, and if you do the numbers you get the 6.75 and 9.9 [per cent].”
Cypriot officials insisted no levy on smaller depositors was impossible. One senior Cypriot official involved in the talks said that because about 35 per cent of all deposits are below the threshold, exempting them would mean a rate so high for the rest that it would no longer be viewed as a tax.
So I guess a seizure of less than 10% of balances is a "tax," while more than that is ... well? Spiegel and Hope don't say.
At the New York Times's Dealbook blog on March 18, as he dispensed "don't worry, be happy" bromides, Andrew Ross Sorkin put his contempt for private property on display in scare quotes (bold is mine):
... here’s a trivia question: Would you have been better off leaving your money in a bank in the United States or in Cyprus over the last five years?
The answer: You would have been better off in Cyprus, even after the bailout, when your money was “confiscated.”
Sorkin's argument is that you would still have more money after the partial seizure than you would have if you had your money in a U.S. bank paying a much lower interest rate. How is that relevant? Depositors in Cyprus have had an ongoing deal with their banks which the EU has attempted -- and hopefully permanently failed -- to impose. Sorkin's use of scare quotes assumes that the state has first dibs on your resources anywhere, and at any time.
A March 19 hard-news story at the Old Gray Lady ("Rejection of Deposit Tax Scuttles Deal on Bailout for Cyprus") describes the partial seizure as a "tax" six times.
A Reuters report on March 18 by Michele Kambas and Harry Papachristou leaned heavily on "levy" in its early paragraphs, but used the word "tax" four times deeper into the article.
At McClatchy ("Cyprus lawmakers overwhelmingly reject bank levy"), Christine Pirovolakis was all-in for describing the proposed statist heist as a "tax," using the word six times in her first eight paragraphs.
A breath of fresh air can be found at, again of all places, the Associated Press. The headlines at two Wednesday morning stories were "STOCKS SLIP AS CYPRUS CONSIDERS RAID ON DEPOSITS" and "A LOOK AT CYPRUS' MOVE TO SEIZE BANK DEPOSITS," respectively.
The first item's final paragraph: "Banks in Cyprus are closed until Thursday while the country considers demands from lenders to seize money from depositors' savings accounts to pay for a bailout of the country's banks and government." The second paragraph in the second item reads: "A plan to seize up to 10 percent of people's savings has been met with fury and it has raised concern, if not panic, in the rest of Europe about the security of bank deposits in times of financial turmoil."
Proving that the AP is still far from perfect, the second article goes to great pains to falsely compare Cyprus's proposed outright partial account seizures to far more nominal measures in Italy in 1990 (0.06% of account balances) and Iceland, which reneged on deposit insurance for account holders from overseas but "has ... started to repay some of that money."
Sorry, AP. This attempted personal propoerty seizure is unprecedented, because an outside multi-governmental entity attempted to impose it by blackmailing a country's government. Many of the same people who are now saying "it will never happen again" are among those who once said "it will never happen" in the first place. Why should we believe them?
Cross-posted at BizzyBlog.com.
