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Monday, March 18, 2013

On the Ethics of the E.U. (or Germany) Making Large Cypriot Bank Depositors Pay

After an initial assessment of Cyprus’s bank shortfall of around €17.5 billion in January 2013, the matter of a bailout came to a head two months later. The sticking point was whether depositors in Cyprian banks would be charged a one-time levy as the Cypriot part of the bailout. The E.U. and the European Central Bank, backed up internationally by the IMF, insisted that the bailout be limited to €10 billion, with the remainder of the shortfall’s bailout, over €5 billion, being necessarily supplied by Cyprus through a levy on depositors. Not having been culpable in the Cypriot bankers’ decisions to buy Greek bonds, the depositors spontaneously rose in protest. For a time, that seemed to work. The Cypriot legislature initially rejected the troika’s proposal. In the end, the Cypriot legislature narrowly approved the loan agreement 29 to 27 in late April, 2013. The question I address here is whether the obligations assumed on the Cyprus side are ethical or unethical.

Cypriots protesting a proposed levy on all bank accounts.  CNN

The full essay is at Essays on the E.U. Political Economy, available at Amazon.