Predictable History, Unpredictable Past: Fanatics Who'll Do Anything To Save The Euro

18 March 2013

Fanatics Who'll Do Anything To Save The Euro

Protesters take part a rally against the tax in front of the Cypriot parliament in Nicosia

By Daniel Hannan

Asked why he stole from banks, the American robber Slick Willie Sutton is supposed to have replied, ‘because that’s where the money is’.

Eurozone leaders have made the same calculation. Ever since the debt crisis struck, it was clear that, sooner or later, savers would be gouged.

Until now, this gouging has mainly happened through quantitative easing, inflation and record low interest rates. But, in Cyprus, such measures weren’t enough.

Tax on deposits: Economists say the seizure of cash is part of 'an ominous trend'

Angry Cypriots are asking why they are the first bailout (out of the five thus far) in which depositors have been scalped

The move, which could see up to ten per cent of bank deposits seized, sparked panic and violent protests. One disgruntled customer parked a bulldozer in front of a bank in the coastal town of Limassol in protest

Over a bank holiday weekend, the government suddenly announced that, in order to qualify for an £8.7billion EU bailout, it was confiscating 6.75 per cent of the value of all bank deposits, and 9.9 per cent of those of more than 100,000 euros.

Cypriots are, not unnaturally, furious. Theirs is the fifth eurozone bailout, after Greece, Portugal, Ireland and Spain. In none of these cases were depositors scalped. Why, angry crowds were demanding outside the presidential palace in Nicosia, should they have been singled out.

The official answer in Brussels is that Cyprus is unique because of the size of its banks as a proportion of its overall economy and the amount of overseas money in those banks.

It’s true, Eurocrats concede, that Cyprus’s economy is tiny, accounting for just 0.2 per cent of the eurozone. But the patience of the donor countries such as Germany is wearing thin.

Cyprus is seen by many Northern Europeans as a sunny place for shady people. As much as half the money in its banks is Russian.

A gathering storm: Banker Sebastien Galy said the move could be the 'trigger' for a new eurozone crisis

Rather than admit that the euro was a mistake, Eurocrats are prepared to pay a terrible price. Or, rather, they are prepared to inflict a terrible price

It is one thing to ask German MPs to cough up to save the euro; quite another to ask them to hand their constituents’ money to the oligarchs who frequent Cyprus with their bodyguards and peroxided molls.

The trouble is, of course, that there is no way to distinguish between the Russian ‘biznesmeni’ and everyone else.

Only last month, the President of the European Commission, Jose Manuel Barroso, declared that the euro crisis was over

Ordinary savers and pensioners – the people who did the right thing, the people who had provided for themselves so as not to have to look to the state – are being expropriated along with the gangsters.

A good number of British pensioners are among them: Cyprus is a Commonwealth country, and as many as 60,000 British savers may be affected by the toll.

Not everyone with more than 100,000 euros in the bank is a Russian money-launderer. One British restaurateur, who was in the middle of moving house, is reported to have lost 20,000 euros. He, like everyone else, can now put a precise figure on the price of propping up the euro.

Cypriot President Nicos Anastasiades is trying to rally support, but if he can't the country may crash out of the single currency

EU spokesmen are assuring anyone who will listen that Cyprus is a special case, that it sets no kind of a precedent.

But why should anyone believe them? If you had savings in a Greek, Spanish, Portuguese or even Italian bank, what would you now do?

Although there has been a gradual winding down of bank deposits in all those countries, with property in central London being snapped up and funds transferred to Switzerland, there has so far, surprisingly, been no bank run.

That may be about to change. No one really believes Eurocrats when they insist that Cyprus is a one-off.

People queue to use an ATM machine outside of a Laiki Bank branch in Larnaca, Cyprus on Saturday as it is revealed as many as 60,000 British savers may be affected by the toll

Morgan Stanley yesterday described the bailout as a ‘worrying precedent with potentially systemic consequences’. This is about as close as a bank will ever come to saying, ‘Panic! Panic!’

Eurocrats have lost all credibility on this subject. Every single bailout, including this one, was preceded by sonorous assurances that it wouldn’t happen.

The underlying financial situation, we kept being told, was strong. Only last month, the President of the European Commission, José Manuel Barroso, declared that the euro crisis was over.

Yet again, the ‘experts’ have been spectacularly wrong. Not only the Eurocrats, but the central bankers, the economics graduates who write for the Financial Times and all the other clever-clogs who backed the bailout-and-borrow racket have been awry in their predictions.

Meanwhile, the eccentrics who kept their money out of banks, the handful of Austrian School economists and the bearded survivalists who kept telling us to buy gold have been proved right.

Cyprus' Finance Minister Michalis Sarris defended the decision to accept the levy, saying it was either that or a complete economic meltdown

In Cyprus, the cost of the euro can now be tallied in precise figures. Elsewhere across the Mediterranean, it must be reckoned in unemployment, poverty and emigration.

Our masters in Brussels are prepared to immiserate the continent rather than allow an orderly unbundling of the euro.

Justifying the confiscation of savings in Cyprus, Joerg Asmussen of the European Central Bank explained that it was necessary to prevent ‘worries over the reversibility of the euro resurfacing’.

Got that? Rather than admit that the euro was a mistake, Eurocrats are prepared to pay a terrible price. Or, rather, they are prepared to inflict a terrible price – for, while savers and workers around Europe are being punished, they have ensured that their own pay and perks are secure.

What is the alternative? Cyprus, and the other afflicted states, should be allowed to default, decouple and devalue.

Imagine that every Cyprus beach resort suddenly became 40 per cent cheaper. Would that influence your holiday choice? Now imagine every business making a similar calculation when sourcing supplies.

The least bad option for a country in Cyprus’s condition is to price its way into the market and export its way back to growth. But that would mean giving up on the dream of a European federal state.

Do you remember that, when the euro was launched, we were told it would add 1 per cent to its members’ growth every year in perpetuity?

As recently as four years ago, when the credit crunch hit, the anti-British leader of the Euro-liberals, a former Belgian president called Guy Verhofstadt, was sneering that the UK would soon be begging for permission to join.

Now we see the truth. The dream of political union matters more to Europe’s governing caste than the well-being of the people they represent. Shame on them.

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18 March 2013

Fanatics Who'll Do Anything To Save The Euro

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