New Phase in the Global Financial Crisis: EU Summit Sparks Run on Cyprus Banks!

• New Phase in the Global Financial Crisis: EU Summit Sparks Run on Cyprus Banks! 
  by Stefan Steinberg and Chris Marsden, http://www.globalresearch.ca/ 
  It took until Saturday morning for the European summit to agree to a much reduced €10 billion ($13 billion) loan to bail out the banks in Cyprus, the fifth euro zone country after Greece, Ireland, Portugal and Spain to apply for aid.
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  Within hours, the decision to levy a tax on Cyprus bank deposits to pay for the rescue package resulted in a stampede to withdraw cash from the country’s banks via ATMs.
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  The EU’s aim is to raise €6 billion by levying a one-off 10 percent tax on savings over €100,000 and a 6.75 percent tax on small depositors. Senior bank bondholders and investors in Cyprus’ sovereign debt will be left untouched.
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  The response of the financial magazine Forbes was scathing, denouncing the “German-led group of EU officials” for “probably the single most inexplicably irresponsible decision in banking supervision in the advanced world since the 1930s.” Another Forbes columnist entitled his comment, “Welcome to Another Great Depression.” Business Insider noted the “multiple reports which indicated that Germany told Cyprus: Confiscate your depositors’ money or leave the euro zone. That’s a terrible political dynamic, and on top of Italy it exacerbates a bad overall political situation.”
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  The summit was the first to be held following elections in Italy that recorded a decisive “no” vote against the austerity policies imposed by the technocratic government of Mario Monti and the European Union (EU).
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  With Italy still lacking a viable government, Monti, in his role as caretaker leader, appealed to EU leaders to soften their austerity course or face the same fate. In a letter to the summit, he declared that the election result showed “public support for the reforms, and worse, for the European Union, is dramatically declining” as part of a “trend which is also visible in many other countries across the Union.”
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  Luxembourg Prime Minister and European Council President Jean-Claude Juncker warned at the start of the summit, “I have big worries about the coming economic developments. I won’t exclude that we run the risk of a social revolution, a social rebellion.”
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  French President Francois Hollande, whose implementation of strict budgetary measures has led to an unprecedented plunge in his popularity ratings, urged leniency for France after Finance Minister Pierre Moscovici warned that the EU’s actions “risk a loss of social and political confidence across Europe.”
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  Germany led the way in opposing any shift, with Bundesbank head Jens Weidmann warning, “The deficit countries must act. They must address their structural weaknesses. They must become more competitive and they must increase their exports.”
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  The head of the European Central Bank, Mario Draghi, was equally adamant that there be no change of course. In two separate speeches Thursday he addressed the 27 leaders of the EU and the 17 members of the euro zone on the need to further drive down their labour costs and increase productivity. German Chancellor Angela Merkel declared that Draghi’s “very interesting” reports made clear that it was “productivity levels and wages in a number of countries that were responsible for the high unemployment today.”
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  The International Monetary Fund (IMF) stepped in to insist that what was required was not less austerity for the working class, but more money for the bankers. It issued a 69-page report on the second day of the summit warning that hundreds of billions of euros in toxic loans remained on the books of European banks and that further action was needed to shore up the continent’s financial sector.
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