The news that the Cypriot government has seen fit to “rob” savers of between 6.75 and 10 percent from their bank deposits without warning is mind-blowing both economically and morally. It is not only grossly unfair it will instill fear into the hearts of everyone with a savings account and undermine the credibility of the entire banking system. That’s far from idle speculation. European markets have tumbled on the news which has also impacted Russia, Japan and elsewhere. Cyprus may be an island but it’s not an island unto itself. And if it’s permitted to get away with such a move what’s to prevent other severely cash-strapped countries from following suit with terrible repercussions for the rest, struggling to stave off recession.
Even more disturbing is that the EU and the IMF are the engines behind this theft, benignly termed a one-off “levy” — one of the preconditions for a 10 billion Euro bank bailout. Can you believe that the German Chancellor, Angela Merkel, has actually blessed this so-called levy? “I think it’s a good step which will certainly make it easier for us to approve the help for Cyprus,” she said. Yes, sure, that’s okay for tiny Cyprus. Who cares about the pain inflicted on Cypriots, not to mention expatriates who have settled there or chosen that Mediterranean haven to live out their retirement! Would Berlin ever resort to such a brainless measure if Germany were ever in trouble? I think not.
According to the BBC’s Mark Lowen, the negotiators of the bailout in Brussels drastically underestimated the reaction in Cyprus. What a lot of nonsense! You don’t need a crystal ball to predict how Cypriots would react. They’ve reacted like a householder who wakes up to discover a burglar had made off with the family jewels. On second thoughts, this case is worse than that because the government that’s supposed to protect its citizens and their assets is the sneak thief.
A “levy” sounds legit but when savers didn’t sign up to it when they first opened their accounts and have had no opportunity to make withdrawals because banks have shut up shop, this levy would be more accurately termed theft. This is a democratically-elected government dipping its hand in the till. It’s worse than a bank robbery because at least then a bank’s customers wouldn’t directly suffer.
President Nicos Anastasiades is currently crying crocodile tears saying: “I fully share the unhappiness caused by a difficult and painful decision.” I doubt that somehow when as the Cyprus Mail disclosed in January this year, the personal assets of the President and his wife amount to more than 2.3 million euros.
He calls this the worst crisis since the 1974 Turkish invasion of Cyprus. Then why on earth did he sign-up to it? He maintains that in his country is in danger of being kicked-out of the European club if it can’t put its house in order. So what! If that club and its buddies in the IMF behave like a protectionist mafia, Cyprus might be better off out of it.
Let’s face it, how beneficial has EU membership been to Greek Cyprus verging on bankruptcy or to its big brother Greece, where growing numbers of professionals queue outside soup kitchens, for that matter? Here, it’s worth recalling Turkey’s financial crises, which Ankara successfully battled to become an economic giant with a GDP that is the 17th highest on the planet. As master of its own destiny, Turkey was free to make any reforms it deemed necessary and was able to attract investors with mega high interest rates on its own currency.
Which geniuses came up with this? One-off or not, it’s wrong in principle and Cypriot banks will require a lot more than 10 billion to prop them up in the future. Who’s going to trust those banks again, especially since depositors had been reassured that such a draconian measure would never be taken? You don’t have to be an economist to know that Cyprus has set itself up for a major flight of currency and investments and it will take decades to restore people’s trust, if ever. Moreover, the reputation that Cyprus has built as a safe and stable haven for sun-seeking European expats and retirees has been damaged which could negatively affect its housing market down the road.
It’s the little guys I feel the most sorry for; those who have worked hard and scrimped all their lives to buy homes or a good education for their kids or to ensure a comfortable old age. People who put money away for a rainy day used to be respected as solid citizens while those who frittered away their income on frivolous material goods were seen as irresponsible. Since the 2008 global downturn, caused by greedy banks and institutions, that view has been turned on its head. Savers have been pummeled by ridiculously low interest rates while governments encourage consumerist spending to fuel dwindling economies.
As far as I’m concerned, this is one of the EU’s darkest days. The pressure being heaped on Cyprus is contemptible and highly unethical. Raising purchase taxes is one thing because people are given a choice to buy or not to buy; reneging on firm promises to loot bank accounts is quite another. If this signals a new and despicable trend, Ankara should count its blessings that until now it hasn’t been welcomed into what Turkey’s Prime Minister Recep Tayyip Erdogan has termed “a Christian Club”.
As I write, the “levy” is being debated by the Cypriot parliament; it could be voted down, watered-down or pushed through. Whatever is finally decided-upon won’t eradicate the emotional harm that’s been done and will do little to restore confidence in a sovereign authority open to being browbeaten by Brussels for a fistful of euros.
