Cyprus pulled back from the brink of Euro collapse last night, as a deal was struck which is likely to see the breaking up of one her biggest banks and a massive levy, of up to 40%, on bank accounts with over €100k.
The pain will be long lasting for Cyprus.
Laiki, the country’s second largest bank, employs 10,000 people and despite the accounts under €100k being guaranteed, there is still likely to be a run on the banks when they fully reopen.
I think the pain unleashed on common working people in various parts of Europe in order to save a doomed common currency is immoral. I would rather see countries do what they are there for – defending their citizens.
In principle though, charging those who have benefited most from the country’s former wealth seems a lot fairer than what has happened in Britain, where the pain has landed largely on the shoulders of welfare claimants and public service users.
Up to 40% of money held in Cypriot banks comes from non-residents, mostly Russians.
Some Russian company bank accounts are registered in Cyprus so that companies can disguise their owners and sometimes to avoid tax.
Because of this practice, tiny Cyprus is officially the largest overseas investor in Russian.
If someone has to hurt then these accounts and those of other wealthy Cypriots seem like a fairly fair target.
Pain though, unlike wealth, has a habit of trickling down and I fear there will be more upheavals in Cyprus and other fragile Eurozone economies.