At one bank in the Limassol district, a frustrated man parked his bulldozer outside and threatened to break in. Angry mob of customers outside banks shouted: "This is robbery and we must get the EU to stop this". And the vice president of the Cyprus Institute of Certified Public Accountants, Marios Skandalis, warned: "There is a very high risk that this could be the end of Cyprus as a strong and reliable financial centre."
But what happened behind the scene? The "Troika" officials decided that it would be a great time to blackmail the government of a small republic. It is always easy for the bureaucrats to be liberal when spending another's money, especially if it belongs to foreign investors. The meeting with Cypriot officials was contentious, Reuters reports. Germany's Schaeuble, Dutch Finance Minister Jeroen Dijsselbloem and negotiators for the ECB, EU and International Monetary Fund broke off several times to talk separately with the Cypriots. Other ministers hung around in the corridors, playing games on their mobile phones.
On March, 18, Cypriot President Nicos Anastasiades decided to fight back against the eurocrats. He held a telephone conversation with European Economic and Monetary Affairs Commissioner Olli Rehn to inform him that there might not be enough parliamentary support for a deposit tax on the island. According to Mega TV, Anastasiades is reported to have said to Rehn and Brok: "When I warned you that there would not be a parliamentary majority to pass the agreement, you didn't want to listen. Give my regards to Mrs Merkel."
What could be the possible results of this short-sighted EU measure, inspired by the worst examples of communist seizures? A failing attempt to "punish" a small island nation can cause devastating repercussions. Banking systems of Greece, Spain and Portugal may collapse like a house of cards in the nearest future, because of a large-scale bank run. It has provoked a massive capital outflow from weak Eurozone countries and the euro hit its lowest point since December, 2012.
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"The spirit of protecting deposits has been completely sidestepped. Hitting depositors is no longer hypothetical," one anonymous official from a euro zone country admitted. "The Cypriot government was keener to protect its banking model, which has turned out to be a disastrous political mistake."
Trust in the European financial institutions is undermined, and it is now unclear who will take enormous effort to rebuild. Even worse, the "Troika" has weakened deposit insurance, the principal pillar supporting modern banking system, Forbes wrote on March, 19.