‘No justice where might is right’

 

Head of the European Parliament Martin Schulz visiting Nicosia yesterday

CYPRUS has been an unwilling guinea-pig for a possible policy of enforcing a haircut on banks’ deposits, President Nicos Anastasiades told his European Union partners yesterday.
He was speaking at the Nicosia-based conference of EU parliament speakers in the presence of members of the European Parliament, which comprises of voted representatives from all 27 member states.
“Cyprus was treated as an experimental guinea–pig for testing the economic theory of enforcing a haircut on bank deposits and the consequent repercussions which were to follow,” Anastasiades said yesterday, on the first day of a two-day conference.
Anastasiades conceded there was “reckless management by the banks affected” and lax supervision of the banking system, but he said that Cyprus’ treatment took place “irrespective” of those facts.
He summed up the aftermath of a decision to raid deposits made during a meeting of the eurozone’s finance ministers on a Cyprus bailout as an unjust decision made by more powerful EU-partners, a dig at paymaster Germany whose policy dominated the March 16 Eurogroup decision to impose an unprecedented haircut across all deposits - even the insured ones - across all Cyprus-based banks.
As Plato said, “‘Do not expect justice where might is right,” Anastasiades said.
Although Cyprus’ parliament rejected the first bailout proposal, Cyprus was later to agree to a bailout that impacted uninsured depositors - mostly Cypriots - in the island’s major banks whose deposits are subject to significant haircuts.
But Anastasiades said that he had extensive meetings with his EU counterparts and high-level EU officials to convey “a clear message: Cyprus is not asking for a special treatment, but expects a just and fair treatment, based on the same terms and conditions applied to all other EU countries”.
The message was that Cyprus was a partner in need, requesting solidarity but that “fundamental EU principle was not respected”, Anastasiades said.
“On the contrary, decisions reached beforehand by the interested parties were coercively imposed.
“I sincerely hope that this precedent in relation to Cyprus is not going to be applied elsewhere in Europe,” Anastasiades said.
“Although, as is well known, the main raison d’être of a precedent is that it can serve the purpose of establishing norms and guidelines to be repeatedly and universally applied.”
Anastasiades’ statement is bound to resonate with some of his EU partners.
High-level stakeholders have been quick to state that the terms of Cyprus’ bailout was a one-off, but suspicion continues to grow that future bailouts may follow similar lines. Slovenia is believed to be next in line to need a bailout, and there are already other EU member-states in financial trouble, such as Italy and Spain.
Meanwhile, German Chancellor Angela Merkel said yesterday in Berlin that eurozone members must be prepared to cede control over some policy areas in order to overcome the debt crisis.
“We need to be ready to accept that Europe has the last word in certain areas. Otherwise, we won’t be able to continue to build Europe,” Merkel said at a Deutsche Bank event. Polish Prime Minister Donald Tusk who was also present at the event said that it would be “dangerous” if the impression was given that Germany was imposing its own economic model, which Merkel denied.
And the European Council’s head, Herman Van Rompuy, said in Brussels that Cyprus had demonstrated the need “to break the vicious circle between sovereigns and banks that has haunted us since the beginning of the crisis.”
“We are working on this next phase already, with Commission proposals for a single resolution mechanism. We can't afford to have a half-built system,” he said.
“Single supervision and single resolution go together, you can't have one without the other. We can build both within our current treaty. Which is good, since we do not have the luxury of time,” Rompuy said.
“The broader work towards a genuine Economic and Monetary Union must continue,” he said at the Brussels Think Tank Dialogue.
But Anastasiades yesterday called for the principle of solidarity to be safeguarded for all “irrespective of their size and economic strength”.
He said that inter-parliamentary cooperation between national legislatures and the European parliament could lessen “the EU’s democratic deficit”.
Following the decision to raid deposits in the island’s two biggest banks - resolving the one and restructuring the other in the process - the government was now “wholly devoted to alleviate, to the greatest extent possible” the impact for those affected, the economy and the banking system, Anastasiades said.
Head of the European Parliament Martin Schulz, who attended the Nicosia conference, said he would do what he could to help Cyprus and try to find a way to help small and medium-sized enterprises.
He said that he would propose a European Investment Bank programme to fund smaller businesses
“This is a difficult situation but there are solutions,” he said.
What is urgently needed is to relaunch economic activity, Shulz said.
“We can debate the restructuring of the banking system and about long term projects but in the short term people need hope and activity,” he added.
“I just walked in Makarios Avenue and the biggest problem is that people have no trust in their own future,” Schulz said, referring to the Nicosia street which was once the capital’s main shopping centre. In recent years, many of the shops have been forced to close down.