The draconian move by European Union (EU) bureaucrats, in effect,
to confiscate a portion of every bank account in Cyprus is one more
sign that the economic crisis in Europe is approaching a point of
Even these head-in-the-clouds EU officials (or are their heads,
more accurately, in the sand?) had to know that this move would
send shock waves throughout the European banking system and
alarm among those with bank accounts on the whole continent.
The implication that might be fairly derived from this action is
that EU officials are running out of alternative solutions to the
The kick-the-problem-down-the-road approach to solving the
European economic crisis has been given new meaning and
extremity by European Union leaders in recent years, but
previous actions were each loftily rationalized, followed by
relieved acceptance by markets, media and institutions. This
time, however, there has not only been panic by those banking
in Cyprus, but red flags waved at all the EU member states in
economic trouble, including Greece, Portugal. Spain and Italy.
While it is true that there are some very large bank accounts in
Cyprus held by Russians and other foreign nationals (clearly
intending to avoid taxes in other EU states), the EU demand
would penalize every bank account, large and small.
The Cypriote parliament has rejected this bank confiscation
plan, and this was no surprise. No EU member nation government
could okay such a demand and survive. EU officials are persisting
that Cyprus pay their price, and it is possible that Cyprus will
ultimately remove itself from the European economic organization.
It was easy to pick on little Cyprus; most other EU member states
are much larger. The “trial balloon” failed, but the crisis remains.
Attempts by larger EU nations at “austerity’ are also in much
difficulty because working and middle class citizens have become
so dependent on the many entitlements that welfare state Europe
has provided for so many years. As democratic nations, the member
states’ governments must win elections. By procrastinating in facing
their problems of debt, these governments have made their own
ability to fashion solutions almost impossible politically.
Criticizing the EU demand on Cyprus is the easy part. It was a
very big mistake, but the real lesson here is what it tell us about
the state of the European crisis, a crisis which inevitably, as it
deteriorates further, affects the economies of the rest of the world.
Copyright (c) 2013 by Barry Casselman. All rights reserved.