It was a little over a year ago, just as the Cyprus deposit confiscation aka “bail in” was taking place, when we asked, rhetorically, if “Spain is preparing for its own deposit levy” when an announcement by Spain’s Finance Minister, Montoro, hinted at the imminent arrival of just that.
Specifically we said:
While Spain’s economy minister Luis De Guindos proclaimed in the Senate today that bank deposits under EUR100,000 are “sacred”and that “Spanish savers should stay calm,” Spain, it would appear, has changed constitutional rules to enable a so-called ‘moderate’ levy on deposits – as under previous Spanish law this was prohibited. For now, they claim the ‘levy’ will be “not much higher than 0%” and is mainly aimed at regions in Spain that have “made no effort to collect taxes” based on new revenue expectations.
As El Pais reports, the minister of finance and public administration, Cristobal Montoro, defends the need for such a ‘levy’ in their constitution on the basis of standardizing taxes across regions (and is preparing a proposal on the amounts to be paid) and although it would appear that while the European Commission could previously argue that such a ‘tax’ would violate the free movement of capital in Europe, it now leaves the door open to eventually effectively taxing the deposits.
Of course, back in March 2013 imposing such a tax would immediately bring up images of parallel bank runs in Cyprus and visions of confiscated deposits, culminating in an immediate collapse of the otherwise already insolvent Spanish banking system. In other words, the timing picked by Montoro to reveal what was coming couldn’t have been worse.
Now, however, things are different.
Not only is Europe supposedly recovering, not only is the Cyprus bail in a distant memory (until it comes back front and center with a bang), but it was only a few weeks ago when the ECB – desperate to crush the same EURUSD which just two years ago seemed would implode under the weight of Europe’s artificial political and monetary union – revealed NIRP, aka ZIRP on steroids: a negative deposit rate.
