The E.U. and Germany Are Right to Bully Cyprus

With the parliament in Nicosia about to vote on a revised bailout plan that could see one or two of Cyprus’s biggest banks broken up, the introduction of strict limits on cash withdrawals, and some depositors suffering losses of up to forty per cent, it’s easy to feel sympathy for the Cypriots. Ever since the European Central bank, at the behest of Germany and other big countries in the European Union, threatened to cut off emergency funding for the Cypriot financial system, the tiny island has been faced with Hobson’s choice: either it accepts the harsh measures imposed by the E.U., or it crashes out of the euro and watches its banking system collapse.

In this story of David and Goliath, though, there is a twist. To a large extent, Goliath is in the right. Now that it has dropped a proposal to impose losses on small depositors—an idea reportedly put forward by the Cypriot government because it didn’t want all of the burden to fall on the owners of large deposits (including many Russians)—the demands from the E.U. are tough but reasonable. Like Ireland and Greece before it, Cyprus is suffering from circumstances beyond its control—the economic problems of its neighbor Greece, and the wider European debt crisis—but it also played a significant role in its own downfall.

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