A WEEK rarely passes by without the leader of the Laiki Bank depositors (Sykala), who lost their uninsured deposits when the bank went into resolution, and the head of the association of bank bondholders, who lost all their money in the two major banks, appearing in the news demanding compensation from the state.
With the presidential elections now approaching, the frequency of their appearances is increasing. Both groups believe they can extract promises of state compensation from candidates.
Nicolas Papadopoulos has made the compensation of the bondholders – people who invested in bank bonds because of their high yield claiming they were not aware of the risk involved – one of his election pledges, without saying where the money would come from.
He was following the example set by Nicos Anastasiades before the 2013 elections, making a promise he knew he cannot keep. In his 2013 election manifesto, one of Anastasiades’ 100+1 proposals was the exchange of the worthless bonds with interest-bearing government bonds. The exchange never took place to the relief of the taxpayer because further increasing the public debt was out of the question.
In this election, Anastasiades has avoided making detailed promises. During the announcement of his candidacy on Saturday, he said he would tackle “effectively and pragmatically” the problems faced by all those “that were called, through personal sacrifice, to save the economy and the state, such as the depositors and bank bondholders.”
“I am not making promises bereft of content so as to be liked through populism,” he said, repeating that “only through pragmatism could problems be tackled.”
He offered hope to these groups, saying that through fiscal discipline, economic growth and the potential of energy policy, “in the near future”, we would be able to tackle their problems.
It is interesting how the real issue is avoided by everyone for fear of upsetting these groups. The truth is that the state has no moral or legal obligation to compensate them with the taxpayer’s money.
The people who bought bank bonds because of the high interest rate offered should accept they made a bad investment. If they feel they were deceived by the banks that sold them the bonds, they should sue the banks, instead of demanding the state to pick up the bill for their greed. Why has not a single politician dared to make this clear to bondholders?
The same applies to Laiki’s depositors. They lost their uninsured deposits because the bank went bankrupt and not because of the haircut as they were claiming.
It was unfortunate, but these things happen in a market economy. In what country were people who had deposits in a bank which went under compensated for their losses by the state? We feel sympathy for these people because they lost their savings through no fault of their own, but why should the taxpayer compensate them?
The state has no obligation to compensate anyone, and if we had honest politicians, this would have been made clear from day one to Sykala and the bondholders.