George Koumoullis in his article on the financial crisis on October 22, suggests that “there was no way the haircut on Cyprus banks could have been avoided”.
Of course, there was a way. A bail-out, instead of a bail-in, would have avoided it as it did in other similar crisis in Greece and elsewhere. Cyprus was the only country subject to a bail-in, hence the haircut.
He also suggests that the earlier first proposal for a milder haircut would not have been preferable since it would have impacted consumer spending. I disagree, the actual later and much heavier haircut on deposits with the resulting partial shut-down of the banks and long lines of Cypriots at ATM’s trying to get their money severely damaged consumer confidence and spending.
It also inflicted long term damage on the island’s banking system and its reputation, contributing to the island’s number one economic problem today, the high level of non-performing loans.
Dr Jim Leontiades, Nicosia