From THE WALL STREET JOURNAL:
Nation Aims to Restructure Bank to Secure Aid, Stay in Euro
By CHARLES FORELLE, MATINA STEVIS and DAVID ENRICH | Updated March 21, 2013, 8:02 p.m. ET
Cyprus, in an 11th-hour bid to unlock international aid, reopen the nation’s banking system and preserve membership in the euro, readied a plan that would restructure its second-largest lender and enforce unprecedented restrictions on financial transactions.
The proposals, if they take effect, would allow authorities to restrict noncash transactions, curtail check cashing, limit withdrawals and even convert checking accounts into fixed-term deposits when banks reopen. They have been closed since March 16.
Translation: the Cypriots wouldn’t lose their money, but they couldn’t have all of it, either.
Parliament is set to debate the measures on Friday. If Cyprus can’t pass them, it could find itself with little choice but to leave the euro zone—opening a Pandora’s box that could threaten Spain and Italy.
Time is short: The European Central Bank on Thursday threatened to cut off a financial lifeline if Cyprus’s banks aren’t stabilized by Monday.
Cyprus’ problems didn’t originate in the same manner as Greece’s, in which the government kept borrowing and borrowing and borrowing, to give the people more than their production earned, for decades. Rather, Cyprus’ financial system became an off-shore haven for foreign money, largely Russian, and the Cypriot banks made good money off of this; Cyprus financial deposits are many times the country’s GDP.
But the problems in Greece hit Cyprus: Cyprus’ major banks were heavily invested in Greece, and Greece’s problems led to huge losses for Cypriot banks. The bad policies of the Greek government are now leading to bankruptcy in Cyprus; the Cypriot people are going to pay the penalty for the Greeks living beyond their means.
The moral of the story is that socialism doesn’t work, and capitalists who invest in socialist countries like Greece wind up getting Greeked.