For many years a major focus of EU activity has been to ensure that the banking system was robust and safe with strong capital requirements and regulatory supervision, and that a depositor protection scheme was in place to guarantee that citizens in any member state would not lose their money, up to £85k, if their bank failed. Suddenly the promises look hollow and the politicians appear tarnished as they find weasel words to avoid the right to use the scheme to compensate for financial losses resulting from the levy.
So, blameless Cypriots find themselves threatened with an unavoidable penalty and furthermore currently unable to access their funds as the crisis escalates. The excuse for this extreme step is that it is to target Russian money-launderers, but it is the innocent who will suffer, and meanwhile millions of bank account holders all over Europe will be wondering if a similar levy could be imposed on them. Even if, at the last minute, the plan is not approved, a precedent has been set by the very idea, agreed as it has been in the heart of the EU. What next, where next?
The insistence on austerity and hardship for all the countries with fragile economies is resulting in huge resentment from the men, women and children who witness or feel intense suffering in their home land without apparent help; they blame the EU as well as their own politicians for their problems, and the Cyprus levy will increase unease and mistrust. As Cypriots face a choice between the levy or the collapse of their banks, it is very possible that they will try to withdraw their funds urgently, creating financial chaos and instability, and it may be customers in other vulnerable states will follow suit exposing the latent flaws in the Eurozone. People want their money safe, not exposed to unilateral levies when governments feel like taking what is not theirs. I wonder how many withdrawals and for how much need to occur before the cash runs out?
The core principles of simplicity, integrity and kindness have been ignored as the dinosaur which is the Eurozone faces the prospect of extinction, and it is unsurprising that the EU is in the predicament she is - far from the original ideal of a mutually beneficial, non-controlling trading union. Will we ever learn?]]>