Panic for savers as Eurocrats break their golden rule
Ever since the eurozone bailouts began three years ago, the authorities in Brussels, Berlin and Frankfurt have stuck to a golden rule: never impose losses on those who lent to the continent's banks.
The thinking was straightforward. European policymakers judged that if creditors to Europe's banks (who include ordinary savers) were forced to shoulder losses, then there would be a risk of general panic. People might think their money was unsafe and would withdraw it en masse.
Eurocrats have been happy to impose severe pain on ordinary taxpayers through austerity programmes, but they have always shied away from punishment for bank creditors. Until now, that is.
European leaders said they would only bail out Cyprus's banks as long as the depositors to those banks picked up some of the bill – hence the 6pc to 10pc tax on all savings accounts that has caused such alarm.
The danger is now that ordinary savers in Spain, Portugal and Italy will look at Cyprus and think: "Maybe I'm next."
The cascade of bank runs might begin and all the old nightmares of the Eurocrats could come true. Europe has taken a step back into the danger zone. (© Independ-ent News Service)