Long lines in front of ATMs in Cyprus at the weekend were the most visible sign of the gamble that the EU and IMF have taken in forcing a surprise haircut on bank depositors as the price of a €10bn bailout.
No one denies that the situation facing the Cypriot banks was critical. This is why, for all the fury on the streets, the Cypriot parliament is expected to swallow the terms. Without an imediate cash injection, some of the most over-extended banks, sitting on piles of now worthless loans to Greece, could collapse.
The German Chancellor, Angela Merkel – the driving force behind the levy – also has her reasons for insisting on special measures for Cyprus that she never sought in connection with earlier eurozone bailouts. Now in election year, she does not wish it said that she let German taxpayers underwrite the vast amounts of laundered Russian money that have flowed into Cyprus. Hence the one-off levy that targets the biggest – that is, Russian – depositors hardest, which is intended to claw back €5.8bn of the €10bn loan.
But this is high-wire act stuff. The anger of the 60,000 or so British residents on Cyprus – those not covered by the Chancellor’s pledge to guarantee the savings of military and government personnel – is only part of the problem. The real question is whether this unprecedented raid won’t trigger a run on banks elsewhere. If savers start to wonder whether deposits in any of the eurozone states that may require a bailout are safe, there could be runs in Greece – already in need of a second bailout – as well as in Italy and Spain. Why keep savings in a bank, when interest rates are so low, if one of the pillars of modern banking, the security of deposits, is no longer a given?
The EU will argue that Cyprus is a special case, and the President of Cyprus may say the loan has saved his country. But if the price of this is a blow to depositors’ confidence in the banking system throughout the Mediterranean, it won’t have been worth it.
After any number of feasibility studies, over the course of nearly a century, plans to generate electricity from the vast tidal range of the Severn Estuary are once again back on the agenda. And so they should be.
The case in favour of the Severn Barrage, always persuasive, is now more compelling than ever. Britain not only needs more green electricity and improved energy security, the ailing economy also needs a shot in the arm from large-scale building schemes. An 11 mile dam from Brean in England to Lavernock Point in Wales might not only produce 5 per cent of the’s UK power without emitting any carbon, it would also create 20,000 jobs in its construction and support another 30,000 over the long term.
The good news is that the latest plan has a real chance. Where it differs from its immediate predecessor – rejected in 2010 – is that it does not require public money, at least not directly. Instead, the £30bn investment is to come from the private sector, a significant slug of it from sovereign wealth funds. Some help is still required from the Government, namely support for legislation authorising the scheme and a guarantee that long-term power prices will not slip too low – but no upfront cash.
With the trickiest financial hurdle potentially cleared, the Prime Minister is taking a renewed interest. Quite right. True, there are lingering environmental issues. Even with the use of more “fish-friendly” turbine blades, there are concerns about the impact on the Estuary’s aquatic life, and birds too may suffer, not least from any erosion of nearby mudflats. But green groups acknowledge that much has been done to mitigate the impact on local wildlife, and any remaining issues cannot be allowed to be insurmountable.
With the economy in the doldrums, any number of Keynesian infrastructure schemes have been put forward. David Cameron has so far preferred an easy life – ducking the issue of airport capacity in the South East, for example. He should back the Severn Barrage project, and he should do it quickly, not least while the memory of the Olympics – on time and on budget – is still fresh.