The Cypriot collapse has called much into question in the world of international finance. As a result of Cyprus’ unstable economic grounding, and its inability to pay back loans to the State from international entities, several international finance organizations, including the IMF issued a €10 Billion bailout. As a condition for the bailout, a 40% levy was issued on all non-insured accounts in the Bank of Cyprus, which is the country’s largest commercial bank. This levy had far-reaching ramifications which affected a large portion of Cypriot nationals as well as many international citizens who used the country’s lax taxation laws as an international tax haven.
The debt crisis in Cyprus was a direct result of the long-term effects of the United States’ subprime mortgage crisis from ’07-’08. In 2008, Cyprus’ debt was less than 50% of the Eurozone’s average. Before the bailout, that percentage skyrocketed to 116% and is projected to continue to climb, with estimates of 127% above the Eurozone average by just 2105.
Take a moment to read this article from the Wall Street Journal. Joe Garza, a tax attorney in Dallas talks about the imperative need to know how and where you are investing your money before committing assets to plans that will end up costing far more than they save.