James Meek reports from Cyprus
Before I went to Cyprus, before I met Panikos Demetriou, it seemed to me that ordinary people hadn’t done too badly in the rescue of the Cypriot financial system. Ordinary people with up to 100,000 euros in the two biggest banks, Laiki and Bank of Cyprus, got to keep their money; surely only the rich would suffer when the government confiscated the rest? Surely only rich people – and, in the case of those two banks, rather foolish rich people – would have more than €100,000 lying in a bank account? It was bitter medicine to swallow. But given that someone had to pay to save the country, wasn’t it better that it should be those with a lot, rather than those with a little, as in previous bailouts? Once in Cyprus I saw that I hadn’t, in fact, been thinking about ordinary people. I’d been thinking about a mythological individual, the hero of modern democracy, Ordinary Person. Sometimes known as Ordinary Hard-Working Person, he is the opponent to mythological villains like Fat Cat Banker, Workshy Scrounger and Faceless Bureaucrat. He obeys the law, pays taxes, puts money by and raises a family. He’s one of us. The trouble is that in real life you don’t meet ordinary people. Who’s one of us? I know I’m not.HT: Longform
Panikos Demetriou had more than €100,000 in Laiki Bank – €178,000, to be precise. He has just €100,000 now. But even when the banks were working normally, even when the government hadn’t yet come along and, as Demetriou put it, dipped into his pocket for €78,000 of his money, it wouldn’t have been fair to call him rich. He lived, as he still lives, with his second wife in a small, comfortable apartment in a block on the outskirts of Larnaca, amid hundreds of other, similar modern blocks. I got lost trying to find the place among the loops and malls of Larnaca’s hot-money residential bloat and he came out in his car to show the way, a slim, handsome 58-year-old British Cypriot with a full head of neatly trimmed grey hair and an immaculate polo shirt. His expression of incredulous, wide-eyed pain at what had happened contrasted with his swagger and loud, assertive speech. He was born in Nicosia and moved to England with his family in 1962 when they went looking to escape poverty at home. After leaving school he ran his brother’s dress factory in London, married, had two sons, and bought a house in Enfield. When his first wife died the life insurance payout allowed him to clear the mortgage and in 2005 he sold the house, left his sons settled in Britain with half the proceeds, took the other half and retired to Cyprus, where he already owned a flat. He was fifty.
The thing about €178,000 is that it’s a lot of money if you can spend it. It’s not so much if you’re 58 and trying to live on it for the rest of your life. Unlike Britain or the United States, where middle-class retirees tend to boost their state pension either with a pension paid for by their employer or a privately invested fund designed, by tax law, to be eked out till death, it became common in Cyprus to retire with a large, tax-free lump sum with which you could do what you liked. For Cypriot workers, it was the norm. Many would stick it in the bank and live off the interest, which was hefty.
In 2008, interest rates in the Eurozone as a whole and interest rates in Cyprus began to diverge. For the past five years, even though they’ve been subject to the same base interest rate set by the European Central Bank in Frankfurt, savers with deposits in Cypriot banks like Laiki and Bank of Cyprus have been getting rates two whole percentage points higher than their counterparts in Helsinki or Amsterdam or Paris. Right up to the moment of its destruction, Laiki Bank was running ads for its Step Up account, which promised to give loyal savers an interest increase every month, up to 5.6 per cent. Ads on Cypriot TV showed an attractive young man in a suit jacket over an open-collared, untucked white shirt, smiling with seductive sincerity through his beard as he rode up an escalator. With a funky bass line playing in the background, he looked into the camera and said, in Greek:
It’s good taking the next step – but only if it’s going up. My deposits are on a high thanks to Laiki Bank’s Step Up plan. They’ve got it all! Returns? Interest rates that keep rising, and rising, and rising. Flexibility? If I want to withdraw, I just withdraw. And security! Over and above everything else.Demetriou’s wife brings home a civil servant’s salary, and Laiki was giving him a return of 4.5 per cent on his savings – enough for an annual income of about €8000. ‘I didn’t need a lot of money,’ he said. ‘That 4.5 per cent was good enough for me.’...MORE
