The Cypriot parliament has rejected the EU/IMF bailout for the country’s banks.
Support for the deal, which would have involved a one-off charge on all deposit accounts in the country, ebbed away almost as soon as it was announced on Saturday at the Eurogroup meeting.
Before rejecting the package Cypriot MPs had already decided to exempt any savers with 20,000 euros or less in their accounts, but this was not enough to gain support.
The Eurogroup said the charge was justified because Cyprus has allowed its banking sector to mushroom, Iceland style, into a monster that is more than twice the size of the rest of the economy, and has sucked in so much foreign money, much of it Russian, that foreign deposits account for 37% of all savings in Cyprus.
The Cypriots countered by saying they have a right to build up a services sector which they accuse Germany of wanting to destroy, and that they are being targeted because of ongoing disagreements with Moscow that the EU should work out elsewhere.
The European public has not failed to notice the one big fact to emerge from this latest crisis in the Eurozone. That is, no-one’s money appears safe any more, unless its stuffed under the mattress. The implications for the EU’s already hard-pressed banking system are obvious. A collapse in confidence at this stage of the game could prove fatal for the entire European project.
Yet although the Cypriot “no” vote appears to have struck a blow for ordinary people it plunges the country into a deeper crisis, one that could have serious repercussions for the rest of Europe.