Cyprus: Comment. International press outlets have provided detailed reporting on the so-called tax Cypriot leaders have proposed imposing on bank deposits to help pay for an international bailout. Cyprus is the fifth European Union country to request a bailout. The issues are complex and not relevant to this brief discussion.
NightWatch sees three threats in the situation. First is the breakdown of public confidence in the government and public financial institutions. That is already manifest in the run on ATMs. Banks on Cyprus were closed on the 18th, but the run on the banks should continue when they open on the 19th. There will not be enough cash to service the customers. Civil disorders should be expected.
The breakdown in confidence feeds the second threat which is the breakdown in respect for law and order. Cyprus is one step away from widespread rioting and a serious breakdown in public order. Rioting is likely when ordinary citizens conclude that they are powerless to protect what they have earned and no amount of effort on their part ensures their property rights.
The third threat is that the fear of losing everything will spread to other countries.
