Robbing the savers

A bailout plan to stop Cyprus’ financial system collapsing threatens a raid on small depositors’ savings, a precedent that may worry other countries, writes Hugo Dixon

CYPRUS’ deposit grab sets a bad precedent. Money had to be found to prevent its financial system collapsing. But imposing a tax on insured deposits — at any level — is a type of legalised bank robbery. Cyprus should instead impose a bigger tax on uninsured deposits and not touch small savers.

Confiscating savers’ money will knock confidence in the banks. Trust in the government will also take a hit, since Nicosia had theoretically guaranteed all deposits up to €100,000. Small savers should be encouraged, not penalised. They are the quiet heroes of the financial system, who squirrel away their savings, not those who drag it down by engaging in borrowing binges.