Economics-Entry 5

Cyprus rejects bank levy, bailout in doubt

CNN, March 19, 2013
http://money.cnn.com/2013/03/19/news/economy/cyprus-bailout-europe/index.html?hpt=ibu_c2

Summary

Cyprus is experiencing a bank crisis due to undue taxation on bank deposits. As a result of abrupt taxation policy, Cyprus people suddenly got into trouble and confused what to do. The primary reason Cyprus government proposed unprecedented tax on deposits was to receive bailout from EU; however, its attempt to gain financial support led uncontrollable upheaval in Cyprus economy. For Cyprus, low tax on deposit is the incentives that attract investors; therefore, increasing taxation rate would be fatal for Cyprus' economic and resource development, including natural gas reservoir. Russia already perceived Cyprus' intention and stopped financial support on Cyprus since 2011. For the most part, Cyprus is facing a huge dilemma: to get bail out or to reject deposit taxation.

My Opinion

Bailout is the most important for Cyprus that is experiencing huge financial problem. All the banks are in default, and it is impossible for Cyprus to sustain its life solely based on investment of other country, which now won't even attempt to invest. Though it may create significant crash in Cyprus' economy, bailout is necessary for Cyprus; therefore, despite the unreasonable demand of EU, Cyprus should accept their demand and receive bailout as soon as possible. For now, it is necessary to deal with an urgent problem first.