Dealing with the financial crisis in light of developments in Cyprus: Europeanisation or Germanisation?

The latest proposal of the Eurogroup, regarding the bail out of Cyprus has caused unprecedented unrest that has not been limited at the national or even the European level. The essence of the proposal is for Cyprus to contribute a third of the overall financial assistance required via a haircut in depositors’ money, including even the average account holder whose deposits do not exceed 100,000 euros (i.e. deposits otherwise fully guaranteed). In the last Eurogroup meeting, German finance minister with the backing of his northern allies and with the blessing of countries possibly envying Cyprus’s success as an international financial centre, cold-bloodedly blackmailed Cypriot officials with a ‘take or leave it’ deal. Cyprus had to accept the principle of haircutting deposits (a red line for Cypriot negotiators, even considered to be a ‘stupid idea’ by the Finance Minister) otherwise the island’s second largest commercial bank would be instantly refused further emergency liquidity assistance and essentially be left to collapse, possibly taking down with it the whole economy.