Javier Solana is "surprised" about Cyprus' tax on individual bank deposits

Barcelona (ACN).- The former leader of the European Union diplomacy and Secretary General of the European Council, Javier Solana, stated that he is “surprised” by the Eurogroup’s decision to make Cyprus adopt a tax on individual bank deposits in order to reduce the bailout amount. In addition, Solana, who is now an International Relations professor at the Barcelona-based ESADE business school, stated on Monday in an event for ESADE alumni that “it is an unprecedented decision to make all depositors pay” such a tax. According to the President of EsadeGeo Centre for Global Economy and Geopolitics, this decision could create “insecurity” and it is “an unfair decision for honest money savers”, despite the measure targeting those who have manipulated Cyprus’ financial system. In addition, Solana stated that it is “difficult” to believe that such a measure could be implemented in Spain or Italy. Other experts present at the event, such as Jan-Egbert Sturm, Director of the Swiss Economics Institute KOF, shared Solana’s views but also stated that Spain and Italy “should take note” of the decision.

John Drifill, Professor at the Birkbeck College University of London, was also as “surprised” as Solana about the decision taken by the Troika, made up of the European Commission, the International Monetary Fund and the European Central Bank. Drifill, who is also one of the authors of the EEAG report on European economics that was presented on Monday, stated that, in order to be “fair”, the decision should have been adopted gradually. Firstly to the “bank bonds holders, then to the deposits of more than €100,000, and finally to the minor money savers”.

Juan Ignacio Sanz, Banking Professor at ESADE’s Law School, stated that the troika’s decision “does away with the safety of small money savers”. According to Sanz, the decision breaks the guarantee on bank deposits lower than €50,000, which for many EU countries including Spain is extended up to €100,000. Sanz foresaw that the decision will increase the tensions in the financial market and could provoke a flow of capital abandoning South European countries, such as Italy and Spain, as happened a year ago.