“Cyprus is a one-off” Whoops, Spain is doing it too!

To try and prevent bank runs in the other Club Med countries, our political leaders have been busy reassuring us that the levy on bank deposits in Cyprus is a “one-off” and a “special case” and will not be repeated in any other country. So we can all relax knowing our savings are safe in Europe’s banks. Oh, that’s alright then.

Hold on a minute! Here’s a story that doesn’t seem to have been reported in the British national press. In 2 to 3 weeks, the Spanish government will be imposing a levy on all deposits in Spanish banks. In Spain it will not just be on deposits over the “insured” €100,000. It will be on all deposits.

http://www.presseurop.eu/en/content/news-brief/3569661-spanish-banking-levy-will-collect-3bn

Of course, Spain is not quite as bankrupt as Cyprus. And the Spanish levy is much smaller – only 0.1% to 0.2% of all deposits. The Spanish have about  €1.5trn in deposits and the levy is expected to raise between €1.5bn and €3bn. The Spanish government will not be cutting the money directly from people’s accounts. Instead it is the banks who will pay the levy. But where will the banks get the money for the levy? By paying lower interest to depositors. So, the Spanish levy is more subtle than the one in Cyprus. But it amounts to the same thing – government desperate for money takes money from depositors.