INVESTOR FLIGHT FROM EUROPE FEARS AFTER CYPRUS BANKING DEBACLE

Just when the dust seemed to settle in Cyprus and everyone was tending to their respective wounds, a warning has been issued by Brussels on the unintended consequence of Cyprus' austerity and banking measures.

The banking regulations and levies have sparked terror in the European continent. People, already worried about the declining fortunes of the countries in the Euro Zone, fear both similar levies on their bank accounts and the possibility, quite real, that the Euro will plummet both because of the Cyprus debt, but also because of the foreseeable recessions and depressions of some of the countries in that union that have  high debt loads.

The flight of capital is nothing new.  Many of the Euro countries adhered to the unified currency as a way, among other things, to stop some of the citizens from seeking to invest in a stronger currency.  

The solution reached by the Cypriot government, that is to tax wealthier account holders up to 40% of their money, is scary enough to send most people abroad with their hard earned money.  The destruction of trust that the measures have wrought are unforgivable to some in the financial sector.  

To make matters worse, the Euro group president, Jeroen Dijsselbloem asserted that the measures adopted in Cyprus should or could be applied to the entire Euro zone in the future.

There seems to be a disconnect between the banking powers ruling the Euro currency and the population.  Is it really coming to pass that governments in trouble will resolve part of their banking problems by taking what is most definitely not theirs?

Even as the European Parliament is trying to enact regulations that would curb the bank's irresponsible behavior there are, in some of the planning, concessions to future levies for the wealthiest investors.  

Under the current Euro policy, private creditors do not have to cover banking imbalances until 2008.  But in Germany some of the Bundesbank board members would like to see these measures anticipated, as soon as 2015.  

source: Spiegelonline 3.30.13