I remember when in the peak of Greek debt crisis a lot of people wondered at why world’s markets suffer from problems of so small country. Now it is a time to wonder again: markets suffer from problems of microscopic Republic of Cyprus.
Problems of Cyprus trouble us because governments of euro zone started a very dangerous game. On the agenda is so called “only once tax” on deposits, placed in the banks of the island. In reality, in order to solve the problem of the country’s banking system there is proposed motion to confiscate (expropriate, take away – you can call it as you want) part of depositors’ savings. Government of Cyprus closed all banks in the island and started to discuss in Brussels how much money to write off. What is more, amount of confiscated money discussed is not small – around annual interest or even more.
When Greek was rescued, we observed similar “cutting”, but it concerned only state bonds of problem country. And this unpopular solutions preceded long discussions, which prepared the ground for implementation of measures. Then nobody encroached upon deposits. Comparing these two cases, you feel that such decision to encroach on depositors’ money was made without hesitation.
The first attempt to get a decision about “only once tax» accepted in the government of Cyprus. But even if the idea «to rob depositors’ purses” is not accepted, the fact of this discussion itself inflicts serious casualties to euro zone reputation. European officials showed that they consider such extraordinary measure as quite admissible, all right, in in the last resort. And in euro zone there are other countries, which are still in morass. And what if later Greek or Spain banks will try to do the same with deposits?
To this moment it is difficult to imagine that an expropriation of deposits will be in European Union. I think that government of Great Britain and Switzerland allow such methods of fight the crisis in their own countries. And in euro zone it is already possible…