It’s not just rich Russian that will share Cyprus’ pain

In their second attempt to clean the Augean stables of Cyprus’s banking system without jeopardising the integrity of the euro, bailout negotiators seem to have heeded most of my advice from last week. After the 36-0 rejection by the Cypriot parliament of a first set of terms that included a levy on all bank deposits, large and small, the new €10 billion deal reached in the early hours of Monday protected depositors with holdings of less than €100,000 while letting the weakest of the island’s big banks, Laiki, go under in an orderly way.

Laiki’s unprotected larger depositors will lose most, while those of Bank of Cyprus (which will absorb what’s left of Laiki) take a haircut of up to 35 per cent. And a large proportion of the money thus creamed off for Cyprus’s contribution to its own -bailout, alongside loans from the EU and the IMF, will come from Russian depositors — who had placed money on the island either to avoid Russian tax or to gain the advantages of channelling money back into Russia as though it were genuine foreign investment.