The raid on Cypriot bank deposits, held in the name of ordinary people, businesses, institutions, communities, and prudent savers, breaks one of the fundamental trust-based relationships that has sustained western societies for centuries.
It means, too, that the link between property and material security is weakened for all Europeans living in societies with a weak economy.
The €10bn Cypriot bailout agreed with the EU and IMF demanded that all bank customers pay a one-off levy — a rate of 12.5% has been suggested for deposits over €100,000. Unsurprisingly, this has led to heavy cash withdrawals — so much so that the island’s banks will not reopen until Thursday. It sets a precedent that will reverberate across Europe and find particular resonance in other supplicant countries dependent on external finance to sustain state services.
The comparison is obvious — if bank deposits can be raided by a government in one bankrupt eurozone country, then why not in another? As Spain has requested a €40bn bailout for its banks, can Spanish depositors be certain or even confident, that they will not face similar demands?
It is of great concern too that the levy flies in the face of one of the great, sustaining principles of the EU — solidarity.
From an Irish perspective, this is worrying, as our current, unsustainable debt arrangements cannot be revised further without the support of nearly all of the EU’s most influential governments.
It indicates, too, a hardening of attitudes, as four other eurozone countries — including Ireland — were granted bailouts without this kind of demand.
A Cypriot parliament vote to ratify the deal is expected but not certain today but that parliament, like our own, can only tweak details of the package. It may decide rate thresholds but only if they deliver the required return. The kindness of strangers indeed.
Our Government welcomed the deal describing it as a “positive development for Cyprus, the eurozone as a whole, and Ireland”. It might not have been so positive if our financiers had forced it to raid Irish bank accounts to sustain a toppling system.
It is more likely that, in those circumstances, our Government would echo the sentiments of Cypriot president Nikos Anastasiades, who sought to assuage popular anger by urging Cypriots to support the deal, insisting that the alternative was instant bankruptcy of the island’s two main banks and the banking sector, with the loss of 8,000 jobs and economic collapse.
Anastasiades’ appeal — “the solution we concluded is not what we wanted, but is the least painful under the circumstances” — has a sobering ring of familiarity about it too.
It is possible to over react to this deal but it would be very foolish not to try to understand what it might mean for Ireland if the growing confidence in our economy fails to translate into a recovery no matter how slow or moderate, what might happen if we do not better balance our income and expenditure.
In those circumstances, we might need a second bailout and before that possibility is dismissed, we should remember that not so very long ago, this was considered more a probability than a possibility.
The queues at Cypriot banks have shown us what we might expect in those circumstances.
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