Cypriot Savers and the EU: What is the moral position?

Nothing has brought the EU into the UK sitting room for some time quite like the recent Cyprus affair.

The decision taken by European finance ministers last weekend to impose a one-time levy on all Cypriot bank accounts in exchange for 10 billion euros will long be remembered, whatever the outcome.  Nothing advertises the turmoil of the Eurozone more than twitter jitters and television coverage of lines behind bank terminals.

There can’t be one person who didn’t think, is this going to happen here?

Raiding people’s savings accounts is morally repugnant to us. However, it does bring into sharp focus the tone of our economic situation.  Ordinary people sense they are in some sort of a war. It’s not one with blood and guts, but chillingly painful.

Plus stories of planes flying in loaded with euros so that British troops could buy food and pay bills had a `Berlin Airlift  ’48′ feel.

The Cyprus fiasco may well be a one off. The conditions imposed on the small Mediterranean island were a first. No other country receiving bailout money has been held to ransom like this. The move was probably designed to catch the wealthy Russian oligarchs who use the island for money-laundering or tax-evading, but as so often in these cases, it’s fall out was the ordinary guy.

The position is understandable to a degree. When someone asks you for money it is usual to expect some sort of deal in return. Why should, say, the German people who are going through their own fiscal restraint pay for fellow citizens in another party of Europe who are not prepared to do the same. It doesn’t pass the test of common sense.

However, Cyprus could be anywhere else next week.  Or any other national Government for that matter. The pitiful situation that responsible savers find themselves in today seems very, very wrong.  How on earth have we got this way that people who play by the rules are so poorly treated.

Apparently it was Cyprus President Nicos Anastasiades who insisted the tax be spread to all deposit holders, they say, because he was fearful that the Russian oligarchs would abandon the island if they had to bear the brunt of the cost.

However, no one is quite sure. As the Cyprus situation has had such a reaction and a bad one at that, no one wants to take responsibility for suggesting the idea in the first place. The fact is that all the finance ministers signed off on it.

Some say it was EU Economy Commissioner Olli Rehn who first put forward the idea, something never even suggested by Cyprus. But the Commission insists Rehn was in fact deeply against the idea and said the levy should apply only above €100,000.

One theory is that Anastasiades may have extended the tax to everyone as a gamble, reckoning that it would create such a massive backlash that the Eurogroup would be forced to come back to him with a new, more generous offer for the bailout. An interesting move for him, if it works. Not if it doesn’t.

It is hard to see how there will be any winners out of this. There is always the possibility that even if the EU denies the island a bail-out, Russia will then come to the rescue with a bail-out offer of its own. But if neither party comes forward with the money, Cyprus would be looking at expulsion from the euro and perhaps expulsion from the EU.

Whatever the outcome of the Cyprus bailout next week, the EU has taken a public relations battering. Scenes of Cypriots cheering as the conditions were knocked back were like mutineers on a ship. It was not a scene of unity and citizen togetherness.

That such a minor EU economy could cause such a major EU crisis is unsettling enough.  But worse of all, it will no doubt give rise to more extremist UKIP anxiety-fuelling propaganda through the letterboxes of London.

About Louise Burfitt-Dons

Writer and social critic
This entry was posted in politics, The EU and tagged , , , , , . Bookmark the permalink.

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