Thoughts from an active pensioner who is now somewhat past his Biblical "Use-by date"

"Why just be difficult, when with a little more effort you can be bloody impossible?"

Tuesday, 19 March 2013

Cyprus - Advantage Germany?

A couple of days ago I outlined why I believe German's ultimate aim is to dominate Europe, but this time by financial rather than military means.
The action being proposed by the Cyprus Government to levy a tax of around 10% on all savings, in order to get an EU loan, will be the ultimate deterrent to anyone wanting to save. Assuming that it happens (and even if it doesn't), would you now even think of putting money in one of their banks? With the present low interest rates, there would be very little to lose by hiding it away as cash on the basis that what the government doesn't know you've got, it can't tax!

But Cyprus only represents a very small, indeed tiny, part of the Eurozone economy, so why all the fuss, and why the draconian action? Some see it s an implied threat to all the other debtor countries in the Eu - "Pay up, or else", but I would go further and ask what might happen in the other Southern European Countries which are in the same position.

Imagine that you are a citizen of Greece, Spain, Italy, Portugal and perhaps even Ireland and have still managed to have some savings in the bank. Suddenly, one country, which is in a similar financial position to your own, decides to levy a tax on all savings held in its banks. What would be your reaction? Surely it would be to ask why the same thing can't happen in your own country, and whether the Italian (or Greek, etc) government is likely to tax your savings. I certainly would if Britain was in the Eurozone, and even here I am sure that someone like Vince Cable, given half a chance, would think that it a brilliant idea to follow his mansion tax.

But what advantage is this to the Germans? Well, even a simple 10% tax will reduce the amount of money available for investment by that amount and if, as seems very likely, many times this amount is withdrawn from the banks there will be even less for investment. There will be no money for the banks to lend to businesses whether they are a small cafe on the coast or a large company seeking to expand. The economy would become stagnant, if it isn't already. If the citizens of Italy (or Spain etc), in turn start to withdraw their savings for fear that they will be stolen by the government, these countries too will find that funds for investment become virtually non-existent. And the Germans? They will be the only European nation with significant funds to invest. The little cafe in Cyprus will become part of a chain of German cafes seeking to expand, whilst the larger company will probably end up in bankruptcy because it can no longer compete with its modernised German counterpart. One can envisage German companies taking over businesses all over southern Europe to take advantage of their rock-bottom labour rates.

As I argued before, Germany will gain control of much of Europe, not by its military might, but by using its financial muscle.

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