The Cypriot banking crisis was big news back in March. As the island’s biggest banks teetered on the brink of collapse, an emergency bail-out package was agreed with the EU, the IMF and the ECB – but only at the cost of bailing-in the banks' depositors, including those with savings of up to €100,000 that were supposedly guaranteed by the state.
The breaching of the guarantee caused national and international outrage – such a betrayal of trust of in one member state would have dire consequences across the Eurozone, it was said. Meanwhile, the bank accounts of British servicemen and women stationed in Cyprus were caught up in the crisis, emergency supplies of cash were flown out to British bases and questions were asked in the House.
But then it all went away. The bail-out deal was hastily renegotiated, leaving deposits of less than €100,000 untouched; the world’s media went home and, outside Cyprus, the story dropped out of the headlines.
So, what happened next? Nothing much good, according to an in-depth report by James Meek in the London Review of Books:
That’s right, Laiki depositors lost everything over over €100,000. Contrary to the impression given in some quarters, the victims weren’t just a bunch of Russian billionaire tax exiles, but many ordinary savers too:
Meek tells the stories of several such pensioners, including one who’d “stashed his €350,000 pension fund in Laiki and lost a quarter of a million euros”:
What we have here, therefore, is the effective confiscation of pensions – something that the EU authorities appear to have no problem with. Worth bearing in mind for the future, wouldn’t you say?
But hang on, what responsibility does the EU have for any of this? Isn’t this mess of Cyprus’s own making?
Obviously, there’s no excusing the actions of previous Cypriot governments (and James Meek gives a hair-raising account of just some of the dodgy dealing that went on). But it’s also the case that the European Central Bank lent money to the Cypriot banking system while Laiki and Bank of Cyprus were busily buying-up that well-known copper-bottomed investment, Greek government debt:
Surely, while all this was going on, the Eurozone authorities had a duty of care to ordinary people entrusting their life savings to Eurozone banks?