fr en de

Cyprus or a few lessons from Aphrodite...*

More time will be needed to measure all the effects of the Cyprian crisis and of the decisions taken to deal with it. But a few lessons can already be learned.

The degree of integration towards which the eurozone is moving will not be able to put up with economic models that are too marginal, without endangering the whole structure.

The exaggerated banking system, which has made Cyprus insolvent by attracting enormous amounts of capital with unrealistic levels of taxation and interest rates, resembles that of a tax haven. The amount owed by bankrupt banks is close to € 130 billion, in a country where annual GDP is less than 20 billion. 

In this respect, the policies of enlarging both the eurozone and the European Union have failed. They must be corrected. Compliance with simple formal criteria cannot replace a political and strategic agreement on the Union's objectives and a vision of its economic and social model, which must be clearly shared and be the real reason for joining.

A common currency also demands a safe system of payments and the guarantee that it will work whatever happens. Such is the condition for ensuring the confidence of economic stakeholders. The control of capital movements, which Cyprus has been urgently forced to implement is counter to the monetary Union and the rules of the internal market. A Cypriot euro now no longer has the same value as an ordinary euro. The guarantee covering deposits up to 100 000 euros is a rule that must be applied everywhere. In this case, by seeking to safeguard its attractive model for foreign investors, the Cypriot government was despoiling small scale savers and it was the whole of Europe which, in the eyes of its citizens, bore the burden of this error, now fortunately abandoned.  

But in this crisis, the principle was ignored when faced with urgent necessity; violation will not be without consequence. The European Union cannot keep on like this, moving from exception to exception, from mini-crisis to systemic panic. It must head resolutely towards more complete economic and financial integration, not only in terms of rules but also in terms of how the rules are applied. There cannot be several decision-makers in matters that are so serious for the whole of the Union. There must be a single, common authority with all the necessary decision-making powers. Clearly this requires political re-foundation of the Union, where Member States and their populations must accept this new sharing of sovereignty. Such is the condition for solidity of the euro and solidity within the Union which, in counterpart, must be more automatic, for the greater benefit of all citizens.

It is high time to open the political debate; yes, the debate will be difficult, but those who refuse it lay themselves open to yet more crises.  

* In mythology the goddess of Love, born of the sea's foam, was washed up on the coast of Cyprus, where she is one of the symbols.