Two years ago, then Leader of the Opposition Joseph Muscat told us that Cyprus was the model our country should be copying. Last Tuesday, Finance Minister Edward Scicluna wrote in this newspaper about coming out of a “long night between Friday and early Saturday morning, locked in a meeting room in the Brussels-based EU Council building with 16 fellow finance ministers”.

This decision could create further distrust in the banking system

It was, he said, an eye-opener. No longer is Cyprus the model to be copied, however, but it was now “a lesson to be learnt”.

I sat on the same Council for more than eight years, and in the Euro Group since we joined the euro in 2008.

I was there when the 2008 financial crisis started and saw events unfold and, worse, its repercussions that are still being felt, with the latest casualty being Cyprus.

However, reflecting on Scicluna’s Talking Point, the last thing I would have said to describe my experience of those challenging years would be “lucky”.

I have sat beside the likes of Germany’s Finance Minister Wolfgang Schauble, the UK’s Chancellor George Osborne and its former Chancellor Gordon Brown, Luxembourg’s Prime Minister and former Eurogroup head Jean Claude Junker, Christine Lagarde both as French Finance Minister and as head of the IMF, Jean Claude Trichet and Mario Dragi, heads of the European Central Bank, and so many ministers of finance, including three Irish, two Portuguese and four or five Greek.

By the end of it, upon departing, I was the longest serving minister.

There were no text book solutions available. We were in uncharted territory. The decisions we took were huge and had critical implications. The task was massive and the lessons learnt cannot be forgotten, even though as politicians we tend to want to give the impression that the safety net we built cannot be lost.

The fundamental lesson: one or two mistakes and everything can so easily be lost.

It is good that at last the new Labour Government has decided to heed the lessons of Cyprus.

However, let us not fall into the trap of making a prima facie analysis of these events and simply excuse Cyprus’s woes on the supposition that the country was over-exposed to Greece.

Outgoing Finance Minister Vassos Shiarly is reported by the Cyprus Mail on March 21 as having emphasised that Cyprus ended up on the brink of bankruptcy because of two main issues: the unconditional support for a Greek debt haircut and the consecutive State budget deficits.

Cyprus Mail further quoted Shiarly as saying: “Certainly, you don’t reach a situation like this without mistakes having been made.

“If one sought to find the big mistakes committed for us to arrive where we are, they are essentially two: the excessive zeal to show solidarity beyond our capabilities to another eurozone country. The other (mistake) is that for consecutive years now we have created excessive public deficits, which have accumulated and reached the point where we can no longer take them.”

The Cyprus bailout (and bail-in) was described by Scicluna as a pistol to the head of the Cypriot Finance Minister, which amazingly enforced a cut on deposits, even of those of the smaller depositors in Cypriot banks, despite the risk of a wider run on savings.

Scicluna wrote: “So the package had to create the precedent of penalising the depositor rather than the taxpayer. Of course, like all attacks, the collateral damage to be suffered by the Cypriot people could not be avoided.”

This was indeed a dangerous precedent and in my opinion a very wrong decision. Firstly because the small depositors and the taxpayers were the same people and secondly because the Ecofin Council should not have accepted to reverse what should have been one of the three pillars of the so-called Financial Stability Mechanism.

The decision was both ethically and financially wrong. On the ethical front, normal citizens who paid their taxes, declared their incomes and saved money in banks were being asked to finance the excesses of Cyprus and of those other citizens who spent all they had, did not save or invested elsewhere such as in property, in equity, or outside Cyprus.

Financially, this decision could create further distrust in the banking system by savers and investors, compounding the liquidity problem being experienced in the European banking system.

Our Finance Minister should have disagreed with the move in our national interest and not merely passively approved it, feeling lucky to be in the meeting.

At the beginning of the crisis in late 2008, when a run on a number of EU banks had started following the Lehman Brothers collapse, as ministers of finance we had agreed that one of the key measures to bring back stability to the financial system was to increase the Deposit Compensation Scheme given by governments to all depositors holding below €25,000 in banks, and to increase this to cover all deposits below €100,000.

This was specifically done to avoid a run on all the European banks due to the magnitude of the financial crisis, which required several banks to be bailed out with public funds.

As part of the new Financial Stability Framework, along with the creation of a banking union and a resolution fund to intervene in banks facing difficulties, the third pillar is an EU-wide Deposit Guarantee Scheme to protect precisely these small investors (again under €100,000 in deposits).

Some Cypriot small depositors were, as our Minister of Finance put it so coldly, allowed to suffer “the collateral damage” – one of the three pillars intended to bring back stability was chopped off.

While one understands that, as in previous packages, be it for Greece, Ireland, Portugal and now Cyprus, the people also have to carry the burden of cutting deficit and debt levels through contributing more taxes and taking less benefits, attacking savings could once again bring into disrepute the whole EU system. The next State to be in difficulty cannot give any assurances to the public in order to stop a run on the banks. We would simply not be believed.

Labour’s U-turn was indeed amazing, as was our Finance Minister’s feeling of having been lucky to see a fellow small nation being bullied.