Conclusion

Eurozone leaders are finding it more difficult with each bailout rescue to balance their economic decisions with the political implications they create. In spite of its small size, Cyprus has been no exception to this trend — despite being sold as something different, unique, and irrelevant to the wider scheme of things. Brussels demanded that the bailout for Cypriot banks be partly paid for by the deposits of those banks — to the tune of €7 billion of the €17 billion the rescue package required. That demand essentially violated the social contract upon which the sanctity of bank deposits is founded. Since the Great Depression, advanced industrial nations had operated on the fundamental principle that deposits in banks were utterly secure — the money did not truly belong to the bank, who held it on behalf of the depositor as a trustee. Deposits were regarded as the one truly riskless placements of money — guaranteed by the insurance policies of the bank, and at last resort by the state. They were not regarded as investment bonds paying fixed amounts of interest, whose value would disappear if the bank failed. The only threat to their value was inflation.