The genie is out of the bottle. Salvaging Cyprus, is an estimated €17 billion, a pittance compared to the champions of European bankruptcy. Yet something really scary happened: the government can take all your money ! We knew it could take most of it, but in this case it is all it can grasp.

The innovative part of the deal is that bank clients with deposits of more than €100,000 will see their accounts frozen, and eventually a significant part of their account seized to help salvage the banks, that were supposed to be a safe place to begin with. Over the next days it will be clarified how the frozen accounts will be treated: taxed, confiscated, or forced to invest into shares of the dying banks?

For banks, financial centers, tax havens this is a first. And remember, you can lose your virginity only once. Many of the large account holders are Russian “oligarchs”, hiding in what used to be an offshore haven. Some gleefully acknowledge that those Russian “magnates, oligarchs, gangsters” get really hurt. Their implication is that they deserve it, because their wealth must be ill-gotten wealth anyway.

If that is the case, there are processes to deal with ill-gotten wealth. Like first of all, for a bank not to accept suspicious funds. For the government of Cyprus, its role was to take legal action against those suspected beneficiary owners, and seize their account in due process. Even oligarchs have the right to defend themselves.

There is a lot of Schadenfreude (pleasure derived from someone else’s misfortune) going on. But the oligarchs are not going to sit still. And the consequences of this week’s decisions will come to haunt Europe. Cyprus will not see a foreign bank client anymore, the Euro Zone has lost its virginity in promoting a policy that violates the principle of safe banking and the integrity of personal property. Banks, banking centers, and certainly tax havens have become suspect. It is actually the beginning of the end of tax havens. None will be left in 5-10 years. None.

Tomorrow, any sane client of a Cyprus bank will withdraw all the cash possible, put it under the mattress, and sleep peacefully on top of the salvaged treasure.