The week is not over. Cyprus still struggles, the ECB is pushing, Russia is somehow involved (or not) and the rest of Europe remains silent saying it is time for Cyprus to come up with the solution. This is because the parliament in Nicosia refused on Tuesday to accept the deal negotiated in Brussels the weekend before to safe Cypriot banks and hence the state itself. The critical part was and still is that the European Council agreed on a package in with every bank account in Cyprus would be affected. Normal citizens would lose some of their savings to rescue the banks and the country. Is this the normal European struggle about the correct way to solve the problem?
Deposits insurance schemes and more…
Already the plan to rescue the island via putting a levy on all bank accounts was kind of crazy. It was written the last days in many papers that the plan was correct when it comes to considerations of whether this approach is juridically okay or not. Within the European Union there is a saving limit of up to 100.000 Euros. They are only safe if a bank goes bankrupt. The levy on Cypriot deposits would be a levy to prevent banks from bankruptcy thus the levy is not covered by Directive 97/9/EC. You can argue for both perspectives but what is more crucial is that the Heads of States and Governments and the Finance Ministers have totally misjudged the political impact of their decision. Even with such a small country and economy like Cyprus every representative last weekend must have known what the consequences will look like. They just tried whether this would be accepted by the people. And: they not only got a bloody nose but they also destroyed much credibility of the European Union although the “real” European institutions were not involved in the back-room meetings.
Two councils go crazy
Who was responsible? The Germans who pushed too hard, the Cypriot government who did the proposal in the first place? Instead of finding a good solution and to cooperate and show the people of the 27 member states that their representatives are willing to overcome the current crisis the ministers blame each other for the joint agreement. What nonsense!
Sooner or later the 27 have to accept that they can only solve the crisis when they stay together no matter what happens. And this means also to take ones’ very own money in the hand. Especially Germany has to accept this which is hard for Mrs. Merkel with a general election on the horizon. Again the representatives of the national governments risk the stability of the EU for national interest. This is short-term thinking which should not be the guidelinie for a government.
The economic differences within Europe have to be reduced in general. And this is only possible with more economic integration and a joint fiscal policy in the long run. Even if there will be a solution for Cyprus the next step of the crisis will come sooner or later if the government do not understand that they are just fighting symptoms and not the disease.