WHERE the euro, international banking and democracy are concerned, we are down to cases.
Having obliged working people across Europe to settle the bills for the financiers in the name of austerity, straightforward theft is now sanctioned by the powerful. In fact, it is demanded.
It is hard to know which is worse, the elite's arrogance or their outstanding stupidity. An inability to do sums is one thing. An absolute ignorance of the history of banking, especially in a small, peripheral economy such as Cyprus, is actually shocking. What are they teaching in all those business schools?
It is not so long since the International Monetary Fund (IMF) was confessing to a few errors with the sums. Belatedly, its experts – the word is still heard – admitted that the multiplier effects of austerity are just a bit more catastrophically severe than they had guessed. They were sorry about that.
Their counterparts at the European Commission and the European Central Bank have meanwhile spent the entire crisis repeating the magic word, confidence. Billions of euros might have to flow to prop up the eurozone stragglers and keep the currency alive, but once confidence began to flow again, all would be well.
So what's the best way to destroy confidence, breed mistrust for a single currency, and undermine faith in the institutions of the European Union? Simple: tell people their money isn't safe in the bank. Tell them, moreover, that virtuous savers, those who have avoided the temptations of debt, are to be penalised because banking has run into another little problem. The genius solution: start a bank run.
You can call it a "levy". You can inform depositors, as Cypriots have been informed, that little people will lose less than rich people. When the uproar commences, you can even tell the middling sort that anyone holding less than 20,000 euros – the latest plan – will not be robbed. But you will not once voice the slightest doubt about your right, ethical or political, to do these things.
Having come up with this brilliant wheeze, the IMF and European officials made the heroic assumption that any conclusions drawn, and any controversy engendered, would be confined to little Cyprus and some Russian holders of euros. Would any saver in Portugal, Spain, Greece or Italy start to wonder about the safety of their money? The learned conclusion, the collective wisdom of the experts, was "of course not". Bank runs never spread like wildfire.
Brussels and the IMF would deny that there is anything undemocratic about their behaviour. The fund is, in any case, long accustomed to dealing with such charges. Cyprus wanted a bail-out to preserve its two main banks. A loan was forthcoming, but it would have to do be paid for. So why shouldn't customers, who clearly have money, be made to share the pain?
The Russians are outraged, obviously. They have billions of euros in Cyprus – perhaps 25 billion of the 68 billion held by Cypriot banks – and face paying 9.9%. But exactly why do Russian interests have that kind of money salted away on an island in the Med? And why was the topic not examined, at least as a measure of Cypriot vulnerability, when Cyprus was joining the EU only five years ago? You could as well ask why London is so very popular with rich Russians.
For the eurozone, the latest manoeuvre is bottom-of-the-barrel stuff. It exposes the tensions between north and south, with resentments on either side. Germans are tired of aiding broken economies and Mediterranean peoples detect economic imperialism.
The stunt is also a symbol of all that the "financial crisis" has come to mean in Europe. Savers, by definition, do not cause debt crises, yet savers denied proper democracy have no say in the matter. It will not go unnoticed.
The trick until now has been to insult the peoples of Europe. Those shiftless tax-dodging Greeks brought it on themselves. Britain's undeserving poor have had it too easy for too long at the expense of "strivers". The Irish have no-one but themselves to blame for accepting cheap credit (German credit, as it happens). Ignore the rottenness of the financial system, ran the tale. Society itself is "unaffordable".
The fraud in Cyprus destroys that nonsense. No doubt Angela Merkel and her government will be satisfied if the island ceases to be a haven for hot Russian money. Attaching the status of accessories to ordinary savers, treating them as if they have co-signed a dodgy loan when they were simply doing the right thing – and performing an essential function within traditional banking – breaks all bonds.
Speaking of bonds, the news from Nicosia is not all bad. London's hedge funds have been buying up Cypriot debt in the expectation of a bail-out. Their concerns for ordinary depositors will not be conspicuous. They will not care how the government of Cyprus raises the 5.8 billion euros it is supposed to extract from savers. For international finance, life goes on. If that life is sustained by ordinary people, their taxes and their savings, so much the better.
Those ordinary people are entitled to wonder, however, whether the euro is worth saving if a scam is what it takes. The Cypriot economy, like the economies of Greece, Spain, Portugal and perhaps others besides, is liable to be ruined for a generation to come. It would be preferable by far for such countries to default and tell bondholders and hedge fund managers how next to adopt their "positions". If enough countries followed that course, there is little organised finance could do about it.
Liberating the developing world from debt bondage has been a noble cause in recent years. The system presided over by the IMF, the World Bank and the debt vultures has amounted to a conspiracy against humanity. Perhaps Europeans will now realise that the same pernicious schemes are being operated closer to home.
The euro would not survive such a reaction, of course. That begins to look like a price worth paying.
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