, Salem, MA

March 20, 2013

Anderson: Opening a Pandora's box in Cyprus

Barbara Anderson
The Salem News

---- — “We loiter in winter while it is already spring. In a pleasant spring morning, all men’s sins are forgiven.”

— Henry David Thoreau

As I write this, I’m loitering: The snow is still falling, my golden daffodils are buried, it’s too cold to be called “pleasant.” Furthermore, too many sins have piled up since Thoreau was chronicling the advent of spring at Walden Pond. Forgiven or not by a loving God, we are going to have to pay for them.

One word, as the sun crosses the equator: Cyprus.

A group of Eurozone finance ministers in Brussels agreed last Saturday to give Cyprus’ government a $13 billion bailout, but demanded that depositors in the island’s banks pay between 6.75 and 9.9 percent of their bank deposits as their share of the bailout cost.

At first, that didn’t seem like much; as I did my own taxes last weekend, I had to add my interest to my other income and under $200 to my taxes. But wait!: The proposed Cyprus tax isn’t on the interest, it’s on the entire amount of money in the account! And the government, on behalf of the European central bank, would seize it directly. The Cyprus Parliament has to vote on this plan, but if it’s rejected, the country will not be able to pay its bills, will financially collapse.

Imagine being told that the government is going directly to your bank account and immediately, electronically, extracting 7 percent of your checking and savings accounts. You might be tempted to get your money out of the bank before the government gets there, though where you’d put it, I can’t imagine. As Cypriots considered this defensive action, the government closed the banks so they couldn’t withdraw anything.

Meanwhile, as depositors in other debt-ridden European countries became concerned, investors everywhere began to worry about runs on those nations’ banks.

What makes Cyprus somewhat different is that its banks are utilized by Russian oligarchs to stash their money in secret accounts; Russian President Vladimir Putin’s angry response may reflect the fact that some of the money about to be taxed is his. But one Russian billionaire got it right when he referred to the action as a “Pandora’s box.” Cypriot banks are invested heavily in Greece’s recently restructured government bonds. Portugal, Spain, Italy and others are living on the edge.

Can’t blame Germans and other EU members for resisting bailing out these fiscally irresponsible countries without demanding that their citizen/voters share the cost. Who elects these socialist tax-borrow-and-spend governments anyhow?

Here in the USA, we also have to wonder what our government will do as its own debt reaches unsustainable heights. Imagine China demanding part of every American’s personal savings accounts in return for yet another Chinese loan to cover what our country spends beyond its revenues. Of course, our own central bank, the Federal Reserve, also eats up the value of our savings by inflating our currency.

Suddenly, Congressman Paul Ryan’s new budget, that begins to address our deficit, may not seem quite so dramatic to its knee-jerk opponents.

Nah. I know what most Americans think if they see a reference to this crisis: Where’s Cyprus?

I happen to know because I lived in Greece soon after Cyprus became an independent nation, with major internal dispute between Greek and Turkish Cypriots. It was part of the Cold War, as the Soviet Union had influence there — and apparently still does, though in a different way!

Because of my past interest, my ears perked up when someone at a party last Sunday mentioned the new crisis and recommended we all watch the European markets when they opened on Monday. I was busy in 2008 and almost missed the banking crisis/fiscal meltdown as it almost happened, didn’t want to miss this one!

Well, I’m not feeling smug about my geographical knowledge; I discovered last week that I didn’t know where North Korea was. As it threatened us with nuclear weapons, I wondered why we were deploying our nuclear defense system to Alaska: I’ve always pictured Korea situated off the southern part of China, a peninsula sticking into the South China Sea near the Phillippines.

Not anywhere near. North Korea stretches along the northeastern China coast and, at its tip, touches Russia!

I had felt somewhat smug in 2008 knowing Sarah Palin was right when she said one can see Russia from Alaska; so many allegedly smart Americans made fun of her. North Korea doesn’t touch that Bering Strait part of Russia, but it’s too close for comfort if it ever gets a decent delivery system.

Putin probably isn’t thrilled about a nuclear missile flying over Russia either, guided by a technologically deficient Third World government. Maybe he and Obama shouldn’t have celebrated the cuts in Reagan’s Strategic Defense Initiative; it would be nice if North Korea knew any threat to nuke America will always be useless.

So, as you read this, spring is officially here. But the sins of fiscal irresponsibility and poor prioritization will eventually come home to roost with spring chickens. We won’t deserve to be forgiven until we atone for our ongoing inattention to the political consequences of our election decisions.


Barbara Anderson of Marblehead is a regular Salem News columnist.