"European Pirates Raid Cyprus"

foto: Petros Karadijias/AP

«Over the weekend, E.U. negotiators announced their demand that Greek Cypriots with bank savings part with some of their deposits by way of a onetime tax, in order to support a transnational bank bailout. (Cypriot banks have been on the verge of collapse for months because, among other things, they held too many Greek sovereign bonds.) The initial version of the proposal would have culled Cypriot bank accounts holding a hundred thousand euros or less by 6.7 per cent, and accounts with deposits over a hundred thousand would have been drained at a rate of 9.9 per cent.

As an act of piracy, the E.U. proposal, reportedly conceived by German and Finnish negotiators, was unabashed. As public policy, it was an unconscionable repudiation of legal guarantees made to small Cypriot savers, whose accounts are supposedly insured under E.U. regulations up to a hundred thousand euros, in a scheme similar to that provided by the Federal Deposit Insurance Corporation in the United States.

By midweek, a revolt in the Cypriot Parliament, hostile editorial opinion across Europe, and market turmoil had led the proposal’s authors to reconsider its terms. Yet the E.U. has continued to play tough in the negotiations, and the final outcome remains uncertain.

In its foolishness, the proposal exposed in plain light a strain of ugly discrimination—is it too much to call it racism?—that continues to run through German, Finnish, and other northern-European attitudes toward the Union’s southern debtors.
(...)

As the American economy chugs and sputters toward recovery, Europe’s interlocking crises of governance, austerity, and recession in the south of the continent are holding the world economy back. Liberal American economists like Paul Krugman have become influential in Europe because of their accurate forecasts that fiscal tightening in the midst of a recession would fail, as it has in Britain. What is required now is a different sort of American pressure on European leaders, to shake them out of their bankers’ negotiating poses and to help them craft a vision of social and economic inclusion. The Cyprus bank tax was so badly conceived that it has to be understood as a warning of the northern-European élite’s self-defeating indifference to the hardship and anger they are fuelling to their south. Pirates may be great fun on a Saturday night, but they are lousy neighbors.»

by Steve Coll, 'New Yorker'