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NEW YORK ( TheStreet) -- The drama of Cyprus so far would have humbled Shakespeare. First, the troika wanted to rob the rich Russian depositors in Cyprus, by proposing a tax on deposits over 100,000 euros. Cypriot President Nicos Anastasiades took one for the Russian compatriots by insisting on smaller depositors sharing the pain.
Perhaps the troika thought, "Ok, it's your skin so cook it your way," and agreed to the Grand Cypriot Bank Robbery, thoroughly embarrassing themselves. The ensuing delay and chaos may have bought crucial time for some to pull some money out of Cyprus.
With such great achievement, Anastasiades was probably quite optimistic when he approached Moscow for financing, possibly throwing the off-shore natural gas field, albeit with contested ownership, into the mix. Alas, Russians weren't the least bit interested. With the troika in disgrace, the Eurogroup stepped in, picked up the troika idea of targeting big depositors, called it "not tax" and, voila, the problem is magically solved.
This is where the audience heaves a sigh of collective relief. And this is where Shakespeare taps out and reality gets one up.
Shortly after the U.S. markets opened in celebration mode, current president of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem, held a joint interview with
Reuters and the
Financial Times. Beaming with confidence, made more spectacular by the epic failure of the troika, Dijsselbloem claimed that it "represents a new template for resolving eurozone banking problems,"
as reported by Reuters.
There was a great disturbance in the force, as if six billion souls cried out and then went silent. Dijsselbloem tried to undo the damage hours later. But what's heard cannot be unheard. His words had already sent fear into the heart of every eurozone depositor and market participant worldwide. Risk-off ensued and prevailed.
Politically, Mr. Dijsselbloem's "template" remark is most inept. The first rule of banking is you never talk about loss to deposits. The emperor may not have any clothes, but you don't talk about it.
The audacity also highlights the refreshing honesty. This is why it stuck. The simple reality is the latest Cyprus model is a much fairer and more sensible approach to solving banking crisis than the bail-outs that have become the norm in U.S. and Europe.