In a blog post dedicated to the Cyprus problem, the CEO of SAXO Bank tries to prove that the European politicians are guilty of creating the conditions for the crisis. In his view “the one thing that went wrong for Cyprus was its bankers expecting that Euro zone politicians could be trusted to pay back their loans”.
The European press and politicians have tried to frame the Cyprus issue in such a way that ordinary European citizens are tricked into believing that the Cypriot bankers were guilty of every conceivable sin and that the Cypriot banking system was a den of money launderers and financial criminals. Lars Seier Christensen offers a different take on the problem: “Cyprus had respectable numbers both for growth, public debt and finances – certainly compared with many other countries in the region. Cyprus successfully built a strong financial services sector, as the island has little industry or agriculture to live from. Cyprus has a well-functioning, English-speaking workforce and has based itself on British law.” What went wrong for Cyprus? The bankers relied on the rulers of the Eurozone to save the Greek economy and avoid imposing a “haircut” on the holder of the Greek debt. They were misguided and put too much of their clients’ money into Greek bonds but it is the exact thing the European Union wanted them to do. The Cypriot believed that the EU bureaucrats meant well and suffered because of this misguided belief. First, the EU imposed a haircut on their holdings of Greek bonds and then the Troika “cut” the accounts of the banks’ clients. Who is the villain in this story? SAXO Bank CEO recalls his discussions with high-ranking Cypriot bankers and at least one of them clearly stated that “ not insignificant political pressure was placed on at least those banks operating in Greece to buy the local bonds ”. So, the European politicians had forced the Cypriot banks to buy Greek bonds and then forced the Cypriot banks into bankruptcy while expropriating the money held by their clients. This is a heist and the real reason behind the Cypriot crisis is the desire of the European politicians to save the failed European monetary union. Cyprus is a template for other countries. Slovenia, Portugal or bigger countries will be soon forced to follow in Cyprus’ footsteps.
The European Union has broken several taboos. Now, expropriations and capital controls are “the new normal”. The European economy can no longer be described as a functioning capitalism. Lars Seier Christensen believes that “ the real problem lies in the framework that is created by politicians, preventing free markets to deal with excesses in the way capitalism always does. ” His conclusion is pessimistic: “ The problem is not Cyprus. The problem is the Euro. ”