Monday, 18 March 2013
Cyprus; the penny drops
In a fatally flawed move the EU is trying to get Cyrpus to pay for 50% of its own bailout directly from its tax payers. No doubt this will be very popular in Germany and the Nordic states, who want to see less of their own money wasted in pointless bailouts and more 'input' from the locals.
But this weekend's decision shows up some many of the difficult and complex realities of a single Euro system. Firstly, the foreigners who have invested in Cyprus are hit hard, even the British armed forces are. Plus if you have not voted for the current Government or the past ones you are having your money expropriated without much in the way of personal legitimacy.
Perhaps the EU thinks people should leave badly run states to avoid the consequences? This could have interesting consequences for Portugal and Spain in the near future. The few people who have survived with money are now fully incentivised to take it off shore or indeed leave the Country themselves.
As much as the EU says this is a special one-off measure, it sets a precedent - something in the UK we take very seriously as it is the basis of our legal system.
Even more deeply, it may tip the Euro-scepticism debate in further away from being pro-Euro. If the Northern states don't want to underwrite transfers, then they should not allow the Southern states in. If the Southern states want to run inflationary basket case economies, then they too should not join a single monetary system.
But overall, way to go EU, just as you had calmed the crisis, back it comes for the sake of a few couple of billion euro's! I thought they were meant to be all-powerfully intellectual supreme beings.....