The Austrian state will no longer guarantee bank deposits

In a world of money made from nothing, the illusion of stability has also been maintained by having the state "guarantee" the bank deposits of the population. However, the global financial crisis which began in 2007 has changed the rules of the game on the fly. The change has been so deep that there aren't even rules for the change of the rules.

Banks, more or less systemic, have needed financial support from governments to keep them afloat, but the extremely high costs have begun generating their effects.

Every bailout package aimed at the banking sector have only had temporary effects, because they did not tackle a fundamental aspect: the quality and value of the assets on the banks' balance sheets.

And they had no way of doing that anyway. The "value" of the assets, as well as the "value" of the guarantees behind them, were artificially inflated amid the uncontrolled rise in lending.

The return of the valuations of bank assets to more "earthly" levels was not possible because of the need to preserve the balance sheets in equilibrium, as the liabilities consisted, for the most part of the customers' deposits.

It has now come to a fundamental crossroads in Europe: the launch of the "experiment" to completely eliminate the guarantee of bank deposits by the state, amid the legislation that sets the bail-in procedure of the banks' creditors.

As strange and unlikely as it may sound, the "lab rat" is not some country on the outskirts of Europe or of the Eurozone. No, we are talking about Austria, a country which is part of the so-called "hard core" of the Eurozone.

Currently, bank deposits are guaranteed up to 100,000 Euros in Austria, of which the first half is covered by banks, and the rest by the federal government.

The new law, which will come into effect in July 2015, was drafted according to the new European laws and it eliminates the government's obligations to guarantee deposits.

They will be "ensured" by a fund set up through the contributions of the bank institutions, according to daily Der Standard.

According to current regulations, banks are required to contribute to the formation of the sources for the returning of deposits only after the occurrence of a bank insolvency. The new law sets up annual mandatory contributions, whose value depends on the individual risk ratio of each bank.

Unfortunately, the time frame for setting up the new guarantee fund is quite long (author's note: 2024), and it will amount to 1.5 billion Euros, which represents 0.8% of the combined amount of bank deposits.

"No changes will be visible for depositors", was the official statement of the Ministry of Finance, according to an article published by Die Presse.

It's true, but the horizon of the "bliss" that comes from ignorance and the blind faith in the government's assurances is nowhere that remote.

The new initiative of the government in Vienna has led online German newspaper Deutsche Wirtschafts Nachrichten to write that "depositors will have to thoroughly research the situation of the bank they place their savings in", but "this task is extremely difficult, because of the muddy financial statements and of the complexity of the interdependences in the banking system".

As Der Standard writes, certain types of deposits will enjoy increased protection. This also includes the full guarantee of deposits in foreign currencies, as well as those of major companies.

Also, deposits of up to 500,000 Euros, resulting from the sale of real estate properties, will be guaranteed in full for a period of up to three months from the date of their set up. Other deposits guaranteed in full will be those resulting from inheritances or of the amounts obtained through divorces.

An important change concerns the period of reimbursement of the amounts from the guaranteed deposits. This will be reduced to five days, down from twenty days currently.

Given the very low rate of coverage of bank deposits by the new bank guarantee fund, the law includes the possibility of attracting foreign financing sources by borrowing, but does not mention the sources, according to the articles in the Austrian press.

To American analyst Martin Armstrong, the plans of the government in Vienna amount to a default. "You pay taxes all your life and you are told that the government is ready to protect you. Austria proves what the world will look like to all nations, as a new draft law stipulates that bank deposits will no longer be guaranteed by the government", Armstrong writes on his website.

What is happening now is nothing but the final stage of a process with an expected end. "Governments are incapable of managing the economies, because they are corrupt by their very essence, and they can not function for the benefit of citizens", Martin Armstrong concludes.

The final draft of the law will provide a reference for the future of bank deposit guarantee funds in Europe.

The time frame, whose starting point for the European Union will be in the beginning of next year, still offers enough time for information and preparation, which must start from the premise "in space, no one can hear you scream", the motto of the Alien movie.

Just like in that movie, Europeans will find themselves defenseless before the "regulated" confiscation of their life savings, and no one will hear their pain, because the Central Banks and the governments aren't hearing their cries anymore, as they only have ears for the banks' "whispers".