IN THE END, the twice-postponed debate on the bills for the levy on bank deposits was finally held yesterday evening and the House of Representatives overwhelmingly rejected it. Not even President Anastasiades’ party, DISY, supported it, its 19 deputies abstaining. The defeat of the bills was expected as all the political parties, apart from DISY had taken a stand against the idea of the haircut on deposits.
It was immaterial that the government had yesterday morning presented a revised bill that left deposits under €20,000 untouched. No matter how the levy was raised, the political parties would have voted against it because they are opposed to it on principle as it would destroy the Cyprus economic model as a provider of financial services to foreign businesses. Any levy on bank deposits would drive away foreign businesses, spark an exodus of Russian capital from Cypriot banks and drastically contract the economy.
While this was a correct evaluation, as were the repeated references to the lack of EU solidarity and the harshness of the measure, we heard nothing about how the party leaders proposed to proceed. Fiery and defiant speeches are all very good when they are about the Cyprus problem and there is always the status quo to fall back on. But in the case of a bankrupt economy desperate for financial assistance, heroic negativity carries a very high cost that deputies would have done well to contemplate.
Nobody told us what happens now? Will the banks be kept closed for another week until our political parties realise the alternative to a haircut is total collapse of the economy and the impoverishment of everyone? Perhaps they would prefer to leave the euro and return to the Cyprus pound, as TV economists have been demanding, rather than suffer the ‘indignity’ of a deposits haircut.
Without a bailout the haircut of deposits would be much greater – in the region of 60 to 70 per cent - than what had been agreed by the Eurogroup because the two largest banks would be bankrupt and probably take with them the smaller banks as well. A return to the Cyprus pound would be followed by a devaluation and super-inflation destroying living standards and causing widespread poverty. As for the Russian bank deposits, which deputies thought they were protecting by voting against the bill, these would be wiped out in a banking collapse - a certainty if there is no bailout. Did deputies ask Russian businessmen if they would prefer a 10 per cent or 60 per cent haircut of their bank deposits?
The truth is that with or without a deposits’ haircut Cyprus is finished as an international business centre. We could salvage something from the economic ruins left behind by the Christofias government by agreeing to the Eurogroup bailout because the consequences of its rejection are too frightening to think about.
All those against: deputies voting against the new proposals last night