TSCF blames EU for disastrous handling of Cyprus bailout

TSCF expresses its deep preoccupation in the face of the disastrous way EU leaders mismanaged the bailout of Cyprus in March 2013.

The first version of the Cyprus bailout plan included a deposit grab which set a bad precedent, imposing a 6.75 percent tax on insured (government guaranteed) deposits and of 9.9% on uninsured (non government guaranteed) deposits.

Citizens in the rest of the eurozone now know that, if push comes shove to, their savings shall be grabbed too. Confiscating savers’ money knocked confidence in the banks. Trust in government has also been hit, since Nicosia had guaranteed all deposits up to 100,000 euros. Finally, confidence in the EU institutions has been shaken, while the independence of the ECB, who  threatened Cyprus of liquidity shortage in a matter of days, appeared to be a myth.

The second bailout plan is no better than the first one. Savers above 100,000 euros, who lost up to 40% of their money, are savers too, and cannot be reputed to be laundering money in the absence of any solid evidence. In no way are savers responsible for the situation of the banks of Cyprus.

There has been an immediate collapse in output and a massive surge in unemployment. The impact on GDP, tax revenues, employment and public services has been devastating.

Cyprus had to be bailed out because the country is part of the eurozone and unable to devalue. It would have been better for Cyprus to stay away from the eurozone, as an offshore center with a strong tourism sector.

TSCF urges investors to be careful and avoid excessive confidence in governments and banks. It urges savers to discuss with banks their terms and conditions and to set firm contractual guarantees for their assets. Alternatively, they would need to withdraw their funds from the said banks and consider other forms of investment.