With banks opening on Cyprus, many entrepreneurs realized they had been wrecked overnight by their government’s dishonesty. The so-called bank bailout was in reality a death sentence for many small businesses, who saw their operating capital confiscated to save the government’s face. This move will create an inevitable uncertainty throughout the Eurozone: who will dare put their operating capital in a bank in a troubled country, when politicians keep saying everything is fine – until one day, the money is just gone?
In a post this morning in the Bitcoin forums, user zeroday complains that 700,000 Euros were robbed by the European Commission. They’re not some Russian oligarch, the user writes, but a typical medium-size European IT business, and the result of this is that the entire Cypriot workforce will have to be laid off. The screenshot from the bank speaks a thousand words:
Thousands of other companies based in Cyprus are in the same situation, zeroday writes. This is not just problematic, but catastrophic on so many levels.
First, the ability for a troubled government to just go in and take money wherever it damn well pleases goes counter to pretty much every crucial principle of law – that laws need to be predictable, equal, proportional, and its rules known in advance. In this case, neither applied.
Second, the problem here isn’t so much that somebody who invests in a troubled bank goes bust with the bank. That wouldn’t be a problem in itself. The problem is that this happens despite governmental guarantees to the contrary. If governments published bank data openly so every small business in the Eurozone would be able to judge the solvency of their banking partner and make proper risk assessments, this would be proper, and it would be tough but just if a bank went insolvent and its accounts were closed to cover the losses.