Agreeing with Mr Putin and The Economist

This is unfamiliar territory.

Mr Putin described the proposed bailout of Cypriot banks, where depositors holding over 100,000 euro would be charged a one time 'fee' of 9.9% as part of the agreed bailout package, as "unfair, unprofessional and dangerous".

The Economist described it as "unfair, short-sighted and self-defeating." (

I confess to agreeing with this unlikely concord.

By nature, I am mostly un-shockable but this 'agreement' has genuinely surprised me and my own adjectives would be mendacious, unjust, immoral and unbelievably stupid!

Immoral because it violates a much vaunted and now betrayed claim to trust on the part of the European Union. This is because it will effect people below the promised 100,000 euro threshold of depositor security with a proposed 'levy' of 6.25%. This 'levy' is now being negotiated downwards but the principle has been breached and the feeble claim that 'Cyprus is unique' is no protection against the perceived (and actual) betrayal of trust that this represents across the EU.

Unjust for two reasons (at least). The first because sovereign bondholders remain unscathed even though it is they, rather than depositors, who were the risk takers who ostensibly 'the market' should either reward or punish for the outcome of their risks. Second because officials are admitting that they felt emboldened to take this action because between quarter and a third of all deposits are held by Russians. The implication being that they are essentially perceived as 'money laundering thieves' who can afford it (and ought to be punished in any case). We (the good burghers of Europe) cannot be seen to be using 'our' money to bail out them!

Mendacious because those same officials, including today the German Finance minster, are calmly telling us that the deal is the work (and responsibility) of the Cypriot government, as if they thought it up all by themselves and are solely responsible. This is akin to suggesting that the bank manager who is forced to give the gang the safe code because the gang has kidnapped his children is solely responsible for the bank heist.

The stupidity is, of course, that such a deal (if imposed) undermines the whole credibility of the banking system especially, but not only, in other states troubled by debt crises; and, tells European citizens, loud and clear, that the trust that the German Foreign minister claimed that Europe had earned as a result of its response to the crisis (a dubious claim at the best of times) is utterly and completely misplaced.

The Cypriot President claimed that the only other alternative was to declare bankruptcy. This is probably true (given the obdurate idiocy of the European officials he is dealing with) - and, taking the leaf out of another small island with a bloated banking system, namely Iceland, it is probably the better way to go. But then Iceland neither belonged to the EU nor the Euro.

There maybe a lesson there somewhere that I expect the European officials who dreamt up this absurd plan hope no one notices... 


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