Gold Magazine April - May 2013, Issue 25 | Seite 19

public debt to 140% of GDP. The eurozone and the IMF insisted that the bailout
be kept limited to 100% of the island’s
GDP and this, in turn, led to the – so far
– unique and controversial raid on bank
deposits, once the initial idea of taxing protected deposits under €100,000 had been
dropped.
Many observers are of the opinion that
the “medicine” administered by the Eurogroup to solve Cyprus’ huge financial
problem, on the recommendation of the
IMF and the ECB, was designed to finish
off rather than cure the patient.
Cyprus’ eurozone partners – especially
Germany, Finland and the Netherlands,
but also France – together with the IMF,
appear to have decided that the island’s
economic model, which relied on a large
banking sector, should be killed off. Indicative of the prevailing attitude towards
Cyprus’ economy is the German Finance
Minister’s statement on 5 April: “We don’t
like this business model [i.e. a big bank-

ing sector with large foreign deposits] and
we hope it is not successful and when it
becomes insolvent, as in Cyprus, they can’t
expect it to keep being financed…When
a euro member’s banks become insolvent,
they can’t expect other countries to make
their banks solvent again”.
Illustrative of the French stance towards
the Cyprus bail-out/bail-in package is the
French Finance Minister’s statement to Canal
Plus TV on 24 March: “To all those who
say that we are strangling an entire people...
Cyprus is a casino economy that was on the
brink of bankruptcy.”
European leaders seem to have forgotten what really went wrong with Cyprus’
banks. Last year, they suffered heavy losses
when the eurozone forced a restructuring
of Greece’s sovereign debt, wiping around
€4.5 billion off the balance sheets. Of course,
Cyprus had “taken this hit for the team”, in
the sense it had been encouraged to support
Greek bonds to counter the debt crisis. And