Burning of Cypriot depositors sets dangerous precedent across euro zone including Ireland – McGrath

The burning of depositors as part of Cyprus’ bailout deal sets a dangerous precedent across the euro zone and makes a mockery of plans for an EU wide banking union, according to Fianna Fáil Finance Spokesperson Michael McGrath.

Deputy McGrath stated: “The imposition of a so called ‘tax’ of up to 9.9% on deposits as part of the Cypriot bailout deal sends a clear signal that ordinary depositors are now in the firing line. Despite the comments from senior EU officials that Cyprus is a unique case, this move will undermine the confidence of investors in the euro zone and cause alarm to savers across Europe.

“Spanish savers will now ask whether they will have to take losses if billions more euros have to pumped into Spanish banks. Irish depositors will legitimately ask how safe their money is if it transpires that Irish banks need more money to absorb losses on mortgages and business loans. The reality is a Rubicon has been crossed in the Cypriot deal which could have consequences in other euro zone countries. The fact is that senior bond holders in Cyprus are being protected ahead of depositors.

“The hard line stance taken by the EU towards Cyprus seems to be more to do with satisfying the domestic German audience in an election year than about applying a consistent policy across the euro zone when countries need financial assistance. This is a rotten deal not just for people with savings in Cypriot banks but for anyone with savings in the euro zone who have been put on notice that their savings are no longer sacrosanct when crises emerge.”