What went wrong with Cyprus?

The Cyprus bailout will cost a lot more than initially planned. That will sound familiar to anyone who followed the bailouts of Greece.

The principles for financial crisis are extremely simple: don't kick the can down the road and analyse potential trouble spots as soon as possible.

- So if a bank gets in trouble its shareholders and those who lent money to it should bear all or most of the burden. Instead we have seen repeatedly that the EU forced countries to take responsibility for those debts. The consequence was that those countries themselves got in trouble and had to pay more for their loans while having less economic growth. This greatly increased the damage to society as a whole. Unfortunately the EU states were only concerned with the fact that their own citizens might loose money.
- The Laiki Bank on Cyprus is a typical case of not anticipating trouble. Immediate detection that the Greek haircut would put it in trouble would have led to an intervention before there was a big crisis and a lot of capital flight. The big account holders might only have faced a cut of 10 to 20% instead of 60 to 80.

The level of insincerity and lies from the EU is also high:
- the Russians are not hit with losses because they are tax evaders or criminals. They are simply hit because they are no EU citizens and no EU country defends their interests. It is a classical case of unfairness.
- the attack of the EU on the status of Cyprus as a tax haven is a classical case of kicking a man when he is down. From the economic point of view it is downright stupid to force a country to a costly economic transformation when it is already facing a crisis.