Saturday

19th Oct 2019

Opinion

The Cyprus bailout is a disaster for the EU

  • 'If the Euozone were a bank, it would now be in court for mis-selling' (Photo: *Bitch Cakes*)

Cyprus has been forced to apply a levy on ordinary bank deposits of the type that fall under the €100,000 deposit guarantee that is required by a European Directive. This is an upper limit for guarantees, taking away the rights of countries to have a higher one or indeed to have only a 90% guarantee as the UK did in order to keep investors on their toes. This harmonisation was done to keep a level playing field so that depositor money would not flow from country to country at times of scares and cause bank runs.

So the promise was, the first €100,000 is guaranteed. In every bank in the EU. If the Eurozone were a bank it would now be in court for mis-selling.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

When reaching agreement on the Directive in December 2008 the Council said the Directive was "aimed at tightening up the rules on bank deposit guarantee schemes in order to improve confidence in the banking sector". It further stated the Directive sought "to ensure better protection for savers" and "to prevent panic reactions by savers if a bank is experiencing difficulties or loses public confidence".

The Euro Area conditionality imposed on Cyprus makes a mockery of EU directives and of the principles solemnly proclaimed by the Council. There is no longer equal protection for savers and confidence in the banking sector in the euro zone has received a body blow.

The lesson here is that the EU's single market rules will be flouted when the Eurozone, ECB and IMF say so. At a time when many are greatly concerned that the creation of the 'Banking Union', giving the ECB unprecedented power, will demote the priorities of the single market, we see it here in action.

What else will be blown apart when convenient - the capital requirements we have slaved over, or the new recovery and resolution rules? What does this mean for confidence in cross-border banking and resolution and preventing the fragmentation of the banking sector?

When the dust has settled on this deal, which I hope it never does, we will see that the single market has been sold down the river. Nothing can ever be trusted again.

It did not have to be this way. The uninsured allegedly 'money laundered' deposits could have taken a bigger hit. Bonds, even if few, could have been slashed. That is the moral order of things. The rules of pooled sovereignty could have been kept. But the decision on Cyprus creates many more problems than it solves.

Ministers should think again.

Sharon Bowles is a Liberal Democrat politician and chairs the European Parliament Committee on Economic and Monetary Affairs. This piece first appeared in British Influence, a new independent advocacy campaign that wants Britain to lead in Europe

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Cyprus heading for bank run after bailout deal

The Cyprus bailout deal on losses for all bank savers - from pensioners to Russian oligarchs - is turning into a bank run, with dangerous implications for other crisis-hit countries.

Cyprus rejects bailout deal

The eurozone plunged into uncertainty on Tuesday after the Cypriot parliament rejected its EU bailout plan by an overwhelming majority.

Europe's empty fortress

It is too easy only to criticise the rightists and their fixation with barbed wire, Trump for his wall on the border with Mexico, Orban for his xenophobia.

News in Brief

  1. Macron: Nato's inability to react to Turkey a 'mistake'
  2. EU: US can expect counter measures after tariff move
  3. Almost 7,500 people forcibly returned to Libya in 2019
  4. Puigdemont released after responding to arrest warrant
  5. Commission: Facebook's Libra needs international approach
  6. Italian PM: denial of accession talks a 'historic mistake'
  7. Catalan president blames clashes on 'infiltrators'
  8. US imposes €6.7bn new tariffs on European products

Defending the defenders: ombudsmen need support

Ombudsmen are often coming under attack or facing different kinds of challenges. These can include threats, legal action, reprisals, budget cuts or a limitation of their mandate.

Column

The benefits of being unpopular

Paradoxically, the lack of popularity may be part of the strength of the European project. Citizens may not be super-enthusiastic about the EU, but when emotions run too high in politics, hotheads may take over.

Stakeholders' Highlights

  1. Nordic Council of MinistersBrussels welcomes Nordic culture
  2. UNESDAUNESDA appoints Nicholas Hodac as Director General
  3. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  4. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  5. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  6. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  7. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  8. Nordic Council of MinistersNo evidence that social media are harmful to young people
  9. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  10. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  11. Nordic Council of MinistersEducation gets refugees into work
  12. Counter BalanceSign the petition to help reform the EU’s Bank

Join EUobserver

Support quality EU news

Join us