Posts Tagged ‘timothy garton ash’

March 2013

Cyprus deposit grab is fiscal Magnitsky bill for Russia


The decision by the Cypriot government to grab up to 9.9% of deposits in its banking system is the financial equivalent of the Magnitsky bill as far as the Kremlin is concerned.

“The decision is unfair, unprofessional and dangerous,” Russian President Vladimir Putin said of the deal struck between the German-dominated EU finance ministers meeting and Cyprus over the weekend in Berlin.

The deal has been widely condemned by commentators, as it undermines the very foundations of the European banking system. All European deposits are supposed to be protected by a deposit insurance scheme that guarantees the safety of deposits irrespective of what happens to the bank holding it.

The reason why Europe has contemplated such an unorthodox solution is the political problems that Germany has with using its taxpayer money – as the bulk of the EU money will come from Germany – to bail out Russian oligarchs and gangsters hiding money abroad.

“The driver for the latest attempt to bail-in depositors appears to be German politics, and concern therein that German tax-payers’ money was likely being used to bail-out the weight of Russian deposits in the Cypriot banking system,” Timothy Ash, a strategist at Standard Bank, wrote in an emailed note. “German politicians seem to have adopted a very moralistic approach to the Cypriot bail-out, which may well now reflect ‘bail-out’ fatigue more than anything, plus the close proximity now of Bundestag elections [due in September].

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