The Cyprus saver's tax

Europe seems to have taken a remarkably short-sighted view of its interests in imposing a tax on Cypriot savers. While it is tempting to coerce a contribution to a country's bail-out the effects of effectively taking money from insured savers should be fairly obvious. After all the insurance schema exists because governments fear the effect of bank runs and the harmonisation of the scheme across Europe was to stop the contagion of confidence from one bank to another.

It may seem pretty easy to impose a penalty on a small island nation but really this about shoring up confidence in the Spanish and Italian banks. It is already too late for Greece, why would anyone keep their money in a Greek bank?

The whole situation seems to be yet another effect of the creeping incrementalism that marks European solutions. I wouldn't be surprised if this part of the package is undone later but only after the damage to confidence in the system has been done.