In 2013, the European Union announced that they would take approximately 40% of people’s savings in the 2 major banks – Bank of Cyprus & Laiki. Some of the remainder was to be converted into worthless bank shares (the shareholders and bondholders were also wiped out due to the scale of the problem.)

There are striking similarities here between this crisis and the one that unfolded in the UK, the main difference being that the financial services sector in Cyprus was bloated and multiple times the size of the real economy. Also, more importantly, the Cypriot government had zero ability to borrow anything – even at junk bond status, despite their worthless promises that they would guarantee everyone’s savings – something that even the UK could not do without huge national indebtedness, massive interest and the loss of their AAA credit rating (A measure that is arguably somewhat arbitrary in the 1st place).

This percentage rose to 60% within days due to the fast revealing scale of the problem, but also due to the lack of the European Union doing any due diligence before giving a final Billion Euro “Emergency Liquidity Assistance” loan on the back of figures from the Central Bank of Cyprus, that were not honest.

The more fundamental problem however, is the huge amounts of Russian funds that were held in the local Cypriot banks that were lent out to Greece and also local developers in order to build thousands of brand new homes that are now mostly empty, especially in villages. This was all encouraged by the EU with the now laughable slant of free funds flow and the notion that one should lend money to one’s European partners.

As far as the Russian deposits were concerned, of course a percentage of it would have been made up of somewhat dubious funds. However, the European Union never seemed to have an issue with any of this when times were good.

The result of this was that local Cypriot Nationals lost the majority of their life savings, from fireman, teachers and taxi drivers who were saving for their daughters’ education in England. The list goes on. I happened to know someone personally who sold her house for €1 million around that time. The funds belonging to her were received by the law firm just before the weekend shutdown. Because the law firm’s bank account was with Laiki bank, she personally lost 900,000 Euros in 1 weekend; her entire life’s savings. Even if she had used a UK bank account to receive the funds, she would still have been caught.

The great irony here is that Cyprus’s capital problems came as a direct result of lending money to Greek government bonds and the like. Greece was saved but Cyprus was not. The underlying reason was that Angela Merkel could not go back and tell her voters that they, the voters were going to bail out the Russians, despite the fact that she could have found the €10 billion required down the back of her mattress. The media swallowed the institutional line of ” it’s all Russian laundered money anyway so let’s just use it for the good of everyone.”

The real bank deposits figure was 100% in most cases – a reality that was never reported after the mainstream media sensationalism of the Easter weekend raid of people’s life savings.

The people here continue to survive, as they are used to doing. This family oriented Greek Orthodox island has already had a hard time after being invaded by Turkey in 1974 and being stripped down the middle while the international community stood by and did nothing – well unlike now. Selective interventionism indeed.

The Cyprus Banking Crisis was forgotten by most people in a matter of weeks. It should however serve as a warning of the dangers of putting trust in institutions. The biggest mistake the Cypriots made was to trust their own government.

This article can also be seen on the Eurasia Future website