Newly elected Cypriot President Nicos Anastasiades has warned that he doesn't have the votes to push through a compulsory one-time levy on bank deposits demanded by European finance ministers, the International Monetary Fund and the European Central Bank in exchange for a €10-billion ($12.95-billion U.S.) bailout.
But whether that changes in the next day or so, he has already come up with an unusual ploy to prevent the bank run that is now guaranteed, no matter what the politicians decide.
Depositors who commit to keeping their money in the country's banks for at least two years would receive securities tied to future government income from potentially large but unproven natural gas reserves. The only hitch is that no gas from the undersea deposits is expected to flow until 2020 at the earliest, and no one knows what, if anything, the government's share would be worth.
It means telling the most safety-conscious of people – those who diligently plow their money into insured savings accounts – to accept a high-risk bet that won't pay off for maybe a decade, if at all. As one analyst told the Guardian newspaper: "It would take between seven and 10 years to have the first revenues from gas exploitation, so you can't guarantee anything in two years; otherwise you give people shares in something that doesn't exist."
And that's if Cyprus can fend off rival claims to the assets – Egypt will have something to say about it – and then manage to get the gas to market.
The boiler-room types must be applauding in admiration of this pig-in-a-poke scheme.
Still, it's hard to argue with Mr. Anastasiades's argument for the confiscation, er, tax on savings. "I chose the least painful option, and I bear the political cost for this, in order to limit as much as possible the consequences for the economy and for our fellow Cypriots."
The appeal to Europe's exhausted crisis wranglers is certainly obvious: No messy bond restructuring and no demands on Germany's furious taxpayers to prop up another spendthrift country and its insolvent banks. Then there's the added bonus of clipping all those high-powered Russian oligarchs and officials who have been using Cypriot banks for years to, ahem, shelter income.
Cyprus can't really afford to antagonize the Russians, who account for fully half of all deposits in Cypriot banks. Russian President Vladimir Putin, who is purported to have a few rubles in Cypriot branches, called the proposed levy "unfair, unprofessional and dangerous." His sidekick, Prime Minister Dmitry Medvedev, ominously declared that Russia would have to "correct" its relationship with Cyprus, to which it is a major lender.
But once they get over their initial anger at having to fork over 9.9 per cent on deposits over €100,000, the Russians are bound to agree that it's preferable to losing everything in the collapse of the banking system.
Still, they won't be eager to stick around to cash in on those natural gas bonds. They've got more than enough of their own.