News Commentaries

Cyprus president defends bailout

deal amid public anger

Comment

In every country on earth there is only one occasion on which people lose the money they deposit in a bank; that is only when the bank goes burst.  Even with all its shortcomings, Robert Mugabe’s Zimbabwe did not quite stoop as low as what we are seeing unfold in Cyprus today. 

We have seen governments in the past impose various types of restrictions on both Banks and depositors, like - temporary restrictions on; the size of withdrawals, the size of cash people can take out of the country in order to discourage capital flight and in rare cases a punitive tax on excessive deposits, but even then the government gives adequate notice and allows investors the option to take away their money.  But for a government to go overnight and seize the money we keep in our bank accounts is breaking a taboo.

At a time when it was beginning to look like the worst of the Eurozone’s worst days are over, this bank raid reignites all those old fears and doubts with a possible contagion effect on Greece, Portugal, and Spain and even further beyond.  The question in the mind of investors now will be; who will be next?  The UK could now be the unwitting recipient of huge inflows of cash in the next few months from depositors fleeing Cyprus-like money grabs across the Eurozone jurisdiction.

As Chancellor Osborne presents his budget for the next 12 months tomorrow, what is happening in Cyprus should strike fear in those people who have consistently opposed his policy of fiscal restraint in the past 2½ years; all that the PM and the Chancellor have been doing is to save us from a similar fate.

Do not be complacent; our economy is not too far from the same troubles blighting Greece and Spain.  About 4 months ago the Bank of England warned of the fragile state of our banks and that they would need more than £60 billion of emergency funding to protect against future loses.  Further, with 4 in every 10 businesses that started since 2008 folding up, and the BoE confirming that 1/3 of the remaining firms are so weak and unprofitable that they exist only as ‘Zombie businesses’, we must support the government in its effort to steer us clear.

What President Nicos Anastasiades, his Eurozone partners and the IMF should have done, according to experts, was to raise that money through a new tax on landed-Assets; that would at least have removed the unsavoury appearance of this broad-day-light ‘bank robbery’.  We just hope that this unfortunate precedence does not signal the beginning of the end of the Eurozone.