The crisis in Cyprus: The gall of the European Union

It is an utter outrage that European Union and the IMF, amongst other authorities, have pushed Cyprus to impose a levy on bank deposits of more than 100,000 euros in order to raise 5.8bn euros to qualify for a 10bn euro bailout.

The levy has yet to be decided, according to officials who struck a deal late last night, but it could be up to 40 per cent

Let’s just take a moment to reflect on the scale of that.  It is two-fifths of a person’s savings snatched overnight.  Two-fifths.  Snatched.  Overnight.

This measure, to my mind, represents little more than state-sanctioned theft as no legitimate government has the authority to cross the line between bona fide taxation and this confiscatory move that is being demanded by the EU.

The powers that be in the EU are, essentially, forcing the Cypriot government to take this huge ‘levy’ from personal accounts – which in itself will cause untold damage to economic confidence in the country in the longer term – for the sake of 5.8bn euros.  Staggeringly, they are prepared to let it get to this stage for what is, in EU terms, a relatively paltry figure.  Greece, for instance, was bailed out to the tune of 110bn euros.

‘The EU’s sheer audacity’

What I, and many others, find particularly galling is the sheer audacity of the EU to drive through this move of demanding the seizure of a significant proportion of deposit holders’ funds, yet it’s an institution which is rarely subjected to any direct public accountability (even though it acts on behalf of more than 500 million people).

Clearly, this is an institution, a hugely expensive and many would argue a recklessly wasteful one, which has made a catalogue of monumental mistakes since the financial crisis broke in 2008 – and indeed a long before – a crisis which was at first viewed by the EU as something of an anglo-saxon dilemma, but which has since engulfed huge swathes of the eurozone and overshadowed the original banking crisis in the US.

Indeed, over the last few days, Jeroen Dijsselbloem, the new chairman of the Eurogroup of finance ministers, has admitted a series of errors have been committed in the handling of the situation in Cyprus.

However, despite all frequent false-steps, faux pas and fluffs, or as the officials might call it ‘maladministration’, the system, and those behind it, are almost never scrutinised either independently or publicly.  And if an EU official is dismissed for incompetence, for instance, they are given 2,100 euros a month for up to a year as compensation

No business would or could operate in this way. Indeed, there have been a string of recent high-profile firings from top firms for practices which are absolutely routine within the EU.

Business leaders, for example from banks, energy companies and online retailers, are often called to account by independent committees and regulators – and always, quite rightly, by their shareholders.  And if they make mistakes, or fail to accomplish what they set out to do, they are forced out.

Perhaps it is time for the EU to learn lessons from the business world’s ‘modus operandi’?  And until they do, they should, many would argue, not allow themselves to raid people’s savings to protect bondholders’ interests.

After all, the action sets a distressing precedent.  If they can get away with it in Cyprus, who knows where they’ll try and impose such an action next?

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