The banking crisis in Cyprus is a reminder that the euro crisis is far from over.
Can new bank grab rescue Cyprus?
'We might not have banks next week," is how one Cypriot explained his - and his countrymen's - panic-buying, as Cyprus lurches through its greatest political crisis for a generation.
Today is the crunch day for the 1.1 million Cypriots: their government must raise €5.8bn (Dh27.7bn) to qualify for a €10bn EU bailout. If a deal cannot be reached, the European Central Bank has said it will cut off emergency funding from today. That would be catastrophic: the island's entire banking system could collapse and Cyprus would probably have to leave the European single currency. The weekend's panic-buying of household staples would be as nothing compared to the consequences of that.
That officials from the European Union, the European Central Bank and the IMF are even allowing such a scenario to be contemplated is a measure of how seriously the waves of financial crisis have buffeted Europe. Germany, now cast in the role of Europe's banker, appears determined to make an example of Cyprus. Angela Merkel, the German chancellor, with a resentful electorate to face in September, is in no mood for compromise or for the perception that Germany is being taken advantage of. If there is a last-minute deal, as there probably will be, it is likely to be on Germany's terms.
Ordinary Cypriots bridled last week at a proposal to take 6.75 per cent from the bank balances of small savers and 9.9 per cent from those with larger deposits. The new version, on the table over the weekend, has been calibrated to be more politically acceptable: 20 per cent on deposits above €100,000 in the largest bank, the Bank of Cyprus, and 4 per cent at other banks; smaller bank balances would not be touched.
In Cyprus "large balances" is a euphemism for Russian and other foreign money, much of it thought to be dirty, that has flooded the overgrown banking system; many Cypriots will find this deal easy to swallow after last week's version. But this is no way to make tax policy.
However this plays out, the Rubicon of raiding individuals' savings has now been attempted, if not crossed, with implications that will rattle the banking systems in other EU countries.
Indeed this drama on a tiny island reminds us that the whole euro crisis, with its roots in sovereign debt and reckless banks, is far from over.