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From Spain – 19th March March 26, 2013

Posted by WorldbyStorm in Economy, From Spain, The Left.

A week late, my fault entirely. Here’s ejh’s take on the events in Cyprus and their possible ramifications.

This is what’s wrong with the Cyprus nonsense. It’s not the complexities that matter here so much as the simplicities. A bank, for most of us, is simply where you put your money. There’s no “moral hazard”. You’re not seeking to get something for nothing. It’s a necessity. You can scarcely operate as a citizen, and not at all as a business, without one. You are not making a bet with it. You’re not buying shares with it. You’re not making any statement about the soundness or prospects of the bank, which you are simply not in a position to know about. It is not supposed to be an act which entails any responsibility. Making a bet with it is precisely what you are not doing.

There’s something that I think is often forgotten in all this…

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1. richotto - March 26, 2013

The thing is a depositer is making a bet on the ability of that bank to pay the money back with the agreed interest. A bank deposit is simply a loan to the bank. When over ten billion eu is blown away by Banks as it was in Cyprus it has to be paid for by someone. Bondholders lent only 2 billion eu in Cyprus. Is it really so much better to be expecting European taxpayers to be footing the entire rest of the bill with Cypriot taxpayers ultimately having to pay it back? I wish there could be some rule that a serious attempt at an alternative should be offered in return for indulgence in some easy criticism?


WorldbyStorm - March 26, 2013

richotto, the whole point of ejh’s piece is that for the individual depositor that’s simply not the case that they believe they’re making a bet and by the way, nor have banks presented themselves as such. That’s the central point ejh is making.


WorldbyStorm - March 26, 2013

And by the way this is the logic the eurozone ministers themselves cleaved to up until… Cyprus! That was what underpinned our own ‘bailout’ and saw the aversion to ‘burning bondholders’.

As to the idea of European taxpayers ‘footing the rest of the bill’, yes, of course, that’s the progressive approach in this, that this is a eurozone and that the benefits and responsibilities are shared across it, not that one sector wthin it should take a particular hit whether that is Greece, Ireland or Cyprus (and let’s not even get into the reprehensible evasion of responsibility by those who instituted the eurozone in terms of structures to ensure compliance with guidelines, the broader monetary fiscal strategy and so on).


CMK - March 26, 2013

‘Allied Irish Banks are actively seekings loans from potential small creditors. Are you thinking of that dream cruise after retirement? Why not lend us a small sum every month for the next twenty years and we’ll return that to you with interest when you decide to take that well deserved cruise. Thinking of that proverbial rainy day. Well, lending AIB money every month until that dreaded day arrives might be just the answer. Or, are you thinking of sending the kids to college? Again, why not consider lending us that money and become one of our valued small creditors. When the time comes for your kids to take that leap into adulthood you can call in your loan to us and we’ll return it to you with accumulated interest. Nothing could be simpler! So, don’t beat around the bush: call us now at our dedicated line for potential small creditors. You know it makes sense! Take that step towards securing your financial future: lend your money to AIB!’


RosencrantzisDead - March 26, 2013

I wish there could be some rule that a serious attempt at an alternative should be offered in return for indulgence in some easy criticism?

Why so, richotto? You don’t have any solutions, except perhaps your slavish commitment to the notion that whatever the EU are doing this week is the Best Fucking Idea Ever.

As WbS has said, ejh is making the rather salient point that the Eurogroup/Troika etc. are trying to dress up saving – formerly a trapping of virtuous – as being something malign or reckless. Further, the notion that “depositer is making a bet on the ability of that bank to pay the money back with the agreed interest” was hitherto not a notion accepted in Europe and hence why they had to be protected at all costs. It is a notion that most depositors would also bridle at, particularly those sub-100k depositors who were going to lose a chunk of their ‘guaranteed’ cash.

Stuff like this worries consumers, a class of society that the EU Treaties have committed member states and EU institutions to protecting. What Cyprus illustrates is that these ‘solutions’ for troubled Eurozone countries are devised to serve powerful interest groups rather than worked out on any rational or fair basis or with reference to law.


richotto - March 27, 2013

I suppose its an improvement from The Victor.


eamonncork - March 26, 2013

So people who have their wages put into the bank should actually be seen as investors who should factor in the risk that the bank mightn’t be able to give them their money back. It’s all a gamble at the end of the day like innit.
What a novel notion. Your Fine Gael worship is leading you into some strange if entertaining contortions.


ejh - March 27, 2013

I wish there could be some rule that a serious attempt at an alternative should be offered in return for indulgence in some easy criticism?

“Easy criticism”? What the hell was your posting then?


2. CL - March 26, 2013

This guy Dijsselbloem is probably being told to keep his mouth shut:

“the head of the Eurogroup of eurozone finance ministers suggested that the Cyprus model, which involves a tax on bank deposits, could form a template in any future bailout.”-(course now they’re denying its a tax, which is why it did not require approval by the Cypriot parliament)



3. richotto - March 26, 2013

It seems from a couple of the above analyses that rich savers getting high rates of interest from irresponsible Banks should be able rely on German taxpayers unlimited backing indefinitely as of right. Thats supposed to be socialism? Sounds more like the Mafia to me.


WorldbyStorm - March 26, 2013

It seems from a couple of the above analyses that rich savers getting high rates of interest from irresponsible Banks should be able rely on German taxpayers unlimited backing indefinitely as of right. Thats supposed to be socialism? Sounds more like the Mafia to me.

No, that’s not what people are saying in respect of either case – I can’t see any defence here of 100k plus deposit holders, though others may differ. I really understand that you see this differently, but I think your analysis is in this very particular instance askew.
As I noted elsewhere, I actually don’t have a problem with deposits being tackled as part of an inclusive property tax, and I’d be quite happy with sub-€100k amounts being liable if that were proportionate (i.e., perhaps 1-2% on sub 50, and so on upwards on a sliding scale – though it’s important to note that this would have to be finessed, for example, as was put to me by smiffy, say someone had the funds for a house purchase or something similar going through their account briefly, it would be utterly incorrect to tax that at an higher rate). But in this instance in any event the current agreement is that those depositors sub-100k aren’t being hit – which is fair enough given the guarantees that were made and by the way means that you are actually arguing in favour of measures which even the eurozone accepts went too far.
What’s important though is not what has been agreed the other day but the the line the eurozone was taking was that ordinary depositors could be penalised for the actions of their banks (though in the final deal that’s obviously changed). Now let’s be absolutely clear. There is zero recourse for me or for you or for them in regard to the approach of their financial institution. I can’t influence Bank of Ireland in the slightest, or Haven. Nothing, nada, so the idea that somehow I as a depositor, or any ordinary depositor, is somehow responsible for the irresponsibility of banks or mortgage providers is wrong.
And that being the case therefore it was/is unreasonable that I as a depositor, or those in Cyprus, should have to shoulder the costs disproportionately of the eurozone bailout because also be clear, the bailout is done for the benefit of Cyprus but for the eurozone as a whole. If there were an easy way to show Cyprus the exit door do you think that the Ministers would hesitate for a moment in saying to the Cypriots, ‘here’s your hat, what’s your hurry?’.
And that being the case then your localisation of the issue, not just to Cypriot banks, but to ordinary Cypriot bank users who had no hand or part in the activities of their banks is wide of the mark.
Let’s also note that the current structure of the deal is such that it leads as a state part of its terms to privatizations, ‘fiscal consolidations’ and ‘structural reforms’ few of which are going to spell good news for ordinary Cypriot citizens.
I still don’t think you’re factoring in the broader context of Eurozone responsibility. This is meant to be a currency union and that means that all members of that union have an equal responsibility to underwrite it and ensure its stability. Now that clearly is not what is happening in this instance.
There’s also the point that you and others are eliding nation states and financial institutions as if they are one and the same thing and as if the debts of one are the debts of the other. That’s untenable and deeply unfair. That’s the antithesis of any social solidarity. It makes no sense for Irish taxpayers, or Cypriot taxpayers, to bail out financial institutions that are not their responsibility. There may be an argument that individual state governments that were remiss in oversight of their financial sectors should perhaps be penalised in some way – perhaps a financial penalty across time – but that in my opinion would have to be applied in a way which was not prejudicial to citizens of those states either individually or collectively. Yet even that argument doesn’t hold up because the international monitors, in the Irish and other cases from eurozone authorities, the ECB, the EU itself, OECD, IMF, etc all applauded almost without exception the policies pursued by all these states during the 1990s and into the 2000s. Right up to the crash.
Finally in that respect let’s also note that the rationale for eurozone minister’s actions in all this up until Cyprus is quite different to the one being presented to Cyprus. In other words all that stuff about stability, and the sanctity of depositors and/or bondholders, was just expedient rhetoric. There’s no basic guiding principles. The policies twist and turn and the supposed logic contradicts itself (By the way, perish the thought that this is a ‘left’ analysis alone, Cliff Taylor said much the same last week in the SBP).
But let’s return to your Cypriot/German taxpayer point. My strong belief is that it is unreasonable that a Cypriot taxpayer should pay more than a German taxpayer for faults with private institutions which they have no hand or part influence over or connection with (even if they themselves are individual depositors in those institutions). Those debts exist, they have to be dealt with. But German and French and Dutch taxpayers are equally liable because they benefit from the eurozone. They can’t just take the benefits and evade the negatives (and granted all this demands a tighter framework within which financial entities operate, though it’s fascinating to see the push back against that from the orthodoxy now that the first flush of the crisis is fading into the past).
That’s the basis of socialism, not some divide and conquer approach where some taxpayers simply by dint of geographical location have the burden of it pushed onto them whereas others escape entirely -which by the way surely much better fits the bill of Mafia like activities, but one where all taxpayers across an area bear some of the weight in order to avoid it crushing one particular group.


4. 6to5against - March 26, 2013

Part of the farce here is that the EU are insisting that the main Cypriot banks haven’t collapsed. In such a scenario, it does seem outrageous that any money at all should be taken from accounts.

On the same logic, of course, Anglo Irish never collapsed, and the guarantee was never called in.

It seems to me that the truth is this. The banks have collapsed – as a result not of Cypriot overspending but due to the Greek collapse. As such all investors should lose heavily, starting with the bondholders and then savers. But savers with deposits under 100k should be protected.

The outrage is not that large deposit holders are losing some of their deposits but that the snr bondholders have again been protected, (Do I really have that right?) and the losses to jnr bondholders and large savers are being limited. Who is paying? Well, that’s where the other 10bn ‘loans’ to Cyprus come in with the attendant austerity measures.

Nobody argued in Ireland that property investors should be protected from the property bust, but we are nonetheless protecting large deposits in a comparable scenario.


5. richotto - March 26, 2013

From the media coverage I’ve looked at, BBC and Guardian junior and senior bondholders have been hit in Bank of Cyprus and wiped out in Laiki Bank. Also as Banks in Cyprus have comparitively minor amounts lent by Bonderholders the depositors are in effect the Bank. I read that the Greek collapse cost the Cypriot banks four billion but it was always likley that they would have invested in Greek bonds even when they had their own currency. Yes, the 10 billion pays for two thirds the cost of the bailout and budget deficit. The other 7 billion comes from the tax on accounts starting at 100k and up and Cypriot govt. It was limited to 10 billion from the EU because the Cyprus debt to GDP ratio would have been 120% at that level which is considered the maximum sustainable debt.


6. Gewerkschaftler - March 26, 2013

This week has been very instructive in an appalling kind of way:

Here, in shorthand, is some of what I’ve learned from the handling of the crisis in Cyprus:

1) Do any of technocrats and politicians who have any input into Troika policy (there aren’t many of them, with the ECB and IMF, both of who principally represent private financial interests, having the most influence) have any interest in the cohesion of the EU? If they do they are have demonstrated astounding levels of incompetence on all fronts. If they don’t, and have a (probably delusional) cunning plan for a ‘Core Europe’, then they furthered their ends significantly this week.

2) Cyprus will, probably even more rapidly than Greece, join the ranks of the socially and economically collapsing periphery. Their only political future is in joining coordinated European anti-austerity political forces. Otherwise an entire generation will be lost in yet another country.

3) There is no common currency in the Eurozone any more, but ‘Cypriot Euros’ and the other Euro, with capital controls between the two.

4) Whether depositors and bond-holders get burned is dependent entirely on whether their number include significant numbers of German or French banks / individuals. Luxembourg will never be given the Cypriot treatment.

5) The expropriation of small depositors seems to have touched a raw political nerve across the board in the way that a steady erosion of social wealth and security has not, and can this can be used to generalise support against new powers by debt-slaver governments.

6) The chances of the EU collapsing under the pressure of German neo-mercantalism and counter-factual economic theology have increased significantly.


WorldbyStorm - March 26, 2013

That’s a great summation, and point No.5 is particularly troubling because you’re dead right. It has hit a nerve in a way that other measures taken – ie austerity etc, haven’t.


CL - March 26, 2013

Much madness, and reports of serious disagreements between the EU commission and the IMF. Those whom the gods wish to destroy…..


LeftAtTheCross - March 26, 2013

(5) is indeed a good point. It’s a bit like the frog in the pot of warming water, people can acclimatise to a steady ramping of austerity, or at least a lot people can ignore it with grumbles here and there but no serious resistance, whereas having the heat turned up instantaneously by having one’s savings stolen is something people can’t and won’t ignore.

Or, maybe it’s just the usual media attention to ‘middle class’ concerns. The media ignores austerity by and large and dampens popular resistance, but when the ‘middle class’ is directly threatened then it becomes acceptable to agitate to protect those class interests.


Anonist - March 26, 2013

Actually, isn’t it that it hits directly at the founding myth of trickledown capitalism, that we all can have a bit of accumulation? People have been trained into a deep emotional investment in that, rather than in solidarity and collective wealth / potential.


richotto - March 26, 2013

Can the sweeping rhetoric be made with supporting facts please and with just a little thought for practical alternatives or is preaching to the converted being elevated to an art form?


WorldbyStorm - March 26, 2013

It would be very helpful richotto if instead of constructing straw men of supposed non-practical alternatives or a lack of supporting facts you actually engaged with the substance of what is being said on this thread. For example, the response to your #3.


richotto - March 26, 2013

My apologies WBS. I had’nt read that contribution earlier. My judgement of how responsability and burdensharing is to be applied is just different. Countries and individuals directly involved should be the first point of reference.
Depositors may not make the policy of Banks but they still choose freely to put their money in institutions just as they would be buying property. The first 100k should be guaranteed as the general saver can’t be expected to have an in depth knowledge of high finance. But those who are investing over 100k do have a duty of care and should not expect automatic insurance. The interest rate on deposits in Bank of Cyprus for example was at an unaffordable 4.5% while in general European banks 1% or even less is the norm. I believe big depositors at least should have been aware of the risk they were
taking here and are duly responsible.
When nation states entered the Euro they were also made aware of their responsabilities but some such as ours indulged in short term greedy economic policies and ignored that. The benefits of joining a hard German backed currency were clear enough after about thirty years of currency instability previous to that. Countries like ourselves and Cyprus wanted all the benefits of a hard currency and none of the economic discipline that the northern European countries practiced to make their individual currencies so reliable in the
past. So the idea that certain countries can behave irresponsibly by creating bubble economies and then when it ends in tears expect those who behaved in a restrained way to pay extra taxes to wipe the slate clean makes no sense to me.
Again apologies for not reading your previous lenghty contribution.


WorldbyStorm - March 26, 2013

No problem at all richotto, I think I jumped the gun a bit too, but I have to take issue with your point that depositors ‘freely’ put money in institutions, . Depositors have no choice in the general in terms of using such institutions, it’s necessary for getting wages disbursed efficiently, paying off utilities, or for getting loans or a multiplicity of other reasons, mortgages etc. In the contemporary period it is very very difficult to work around that and most people don’t have the time or information to do so even if alternatives are available.

You admit it yourself, “because the general saver can’t be expected” . And you’re right.

I’m not as convinced either that sub-100k deposits can’t be looked at for tax if necessary, but that’s a different days work and subject to the caveats I noted above. But to be honest if we’re broadly in agreement then what is our dispute?

It seems to focus on the necessity for Germany et al to step up as much as Ireland. You suggest that Ireland indulged but that is only half the picture. Ireland was allowed to indulge by… yes… Germany et al because it was expedient for them to do so. They can’t resile from their responsibilities any more than Ireland can from its.

And remember, it’s not just about the stability of the deutschmark transferred into euro clothing. Other economies were big enough hitters and without them the eurozone would be naught. Nor is entirely clear that the ‘Northern European’ countries practiced the sort of discipline you propose. Or if they did it was as I noted in the preceding paragraph, they did when it suited them but gave little thought to the consequences of what might be happening on their watch.

But again in a currency union all should carry the weight because the true inequality here is pushing this back onto those who cannot carry it and have no responsibility. You suggest sub-100k deposits shouldn’t be touched, but what about the raft of austerity measures introduced here that impact on those on low middle and no incomes, people who were normal folk who never played the system in the way the banks did. Why should they have to pay disproportinately more than a German citizen whose state you suggest was more disciplined but yet never made any effort to rein in other states (and whose own financial institutions were more than happy to loan monies left right and centre as they saw fit)?

Again, as much my fault for jumping the gun and not giving you time to respond.


richotto - March 26, 2013

I met a German midwife recently and she said that she is earning one third more here than back home even after the paycuts. I think in that kind of way they stepped up long ago in their responsabilities. They have far less rate of house ownership for example whereas the majority here seem to have a sense of absolute entitlement to own the home you live in. They don’t use credit cards. When they were making cuts in real wages to make their industry more compeditive we were awarding ourselves benchmarking, special pay awards 10% over
inflation or increasing the cost of childrens allowance from 600 million eu in 2000 to 2.2 billion in 2008. They have advanced us the money to avoid the kind of breakdown that Russia would have had under the “shock therepy” of the early 90s. Thats
what real austerity is not the slogan the we use for effect while we’re still living way beyond our means.
These are just random thoughts to be honest. I think if it were any other country besides Germany we were depending on we’d be much worse off but the main point I’d make is that its entirely our responsability for choosing the type of economy we did. Its not a question of German expediency that the situation was allowed to develop. Theres no evidence that they behave in that kind of underhand opportunism, thats more our style. Why should they resort to those kind of tactics when they made a success of themselves in a straight honest way in manufacturing and engineering, and with very highly socially responsible government parties of right and left in comparisson to ours?


richotto - March 26, 2013

On one further point I believe Germany allowed countries to look after their own economies to the point of ruination because of their respect (and overestimation) for the agreements made, other countries integrity and their committment to the European project. For instance when we were remorselessly robbing investment and undercutting Germany among others with our corportation tax rate that was treated with great forbearence in my opinion.


CL - March 27, 2013

The reason for deposit insurance,-guaranteeing deposits up to a certain amount-is to prevent bank runs.
80 years ago Roosevelt created the Federal Deposit Insurance Corporation.
and ‘Since the FDIC went into operation, bank runs no longer constitute a threat to the banking industry.’


The initial bailout plan for Cyprus violated this rule by putting a levy on all deposits,-those guaranteed as well as those not guaranteed. This stupid proposal received universal condemnation. Outrage and public protest in Cyprus reversed the proposal.
In the U.S., before the FDIC, banks were large, imposing edifices built and designed to give reassurance to customers. After the FDIC was created bank architecture changed and bank buildings came to look just like normal office buildings.


RosencrantzisDead - March 27, 2013

Piece from Der Spiegel:


The drama over Cyprus has made clear that the euro-zone crisis is developing into a struggle over German hegemony in Europe. On the surface, Merkel and Schäuble seem to be working to stabilize the economy. In actuality, they’re binding other nations with the shackles of debt.

A slightly less moralising view of how the Eurozone crisis is playing out.


WorldbyStorm - March 27, 2013

richotto, got to take issue with that. It was the ECB, eurozone members – including Germany, the IMF and OECD which cheerled Irish fiscal policy in the 2000s. I genuinely do not understand why you think Germany can be let off the hook there.

Not assuming a responsibility in the way you outline – which I’d strongly contest because Germany has its own selfish interests like all states – is the same as shirking them. But Germany knew that other states weren’t aligning with supposed eurozone norms and ignored it – the French situation, IIRC, being the most obvious case in hand.

How individual Irish voters are to blame for this escapes me. The limits of what Irish voters are culpable for is another issue again. I didn’t vote for FF/PD once. Or FF/GP. And this concept that we’re somehow uniquely desperate and awful is a bit self-indulgent isn’t it?

These were market nostrums across decades, low or no regulation of financial sectors (we even had a cabinet sub-committee on same, only wound uip a year into the crisis), ‘I’lll spend it when I have it’, etc, etc. That was the orthodoxy richotto, not some wild deviation from same.


ejh - March 27, 2013

Cyprus wanted all the benefits of a hard currency and none of the economic discipline that the northern European countries practiced to make their individual currencies so reliable in the past.

This is exactly the sort of thing that annoys me. The policies followed by the Cypriot government, and banks, were cery well-known to the german government, the EU and the ECB at the time when Cyprus joined the Euro, at the point when the banks passed streets tests” and at the point where Cypriot banks took huge and ultimately disastrous losses, at the troika’s insistence, in Greece.

This was rather well put by the Russian minister who observed the other day that it wasn’t just in the last week that Cyrpus was known to be a tax haven. But always when the crisis strikes, there’s this pretence that

(a) it’s all just the fault of the indiidual government and its irresponsibility, which is bullshit; and

(b) German taxpayers are being asked to pay for it, (which is bullshit unless you think your bank, and not you, pays your mortgage).

And then there begins this mad spiral into penury and destruction, all of which is then blamed on the people who suffer it and not at all on the people who have insisted on it.

What it actually is is a process whereby people who have power are able to impose costs and responsibility on people who do not. That’s all it is.


Ed - March 27, 2013

“For instance when we were remorselessly robbing investment and undercutting Germany among others with our corportation tax rate that was treated with great forbearence in my opinion.”

By the same logic, ‘Germany’ – or rather German capital – was robbing the peripheral Eurozone states by keeping wage growth below zero over the decade leading up to the crisis, thus making their industries uncompetitive (in fact this had far more to do with the predicament we’re in now than corporation tax in Ireland). The argument in both cases was the same – the Irish elite said we have to keep corporation tax low or companies would move abroad; the German elite said wages had to be frozen and workers had to do longer hours, or companies would move abroad. Two sides of the same coin really.


Gewerkschaftler - March 27, 2013

Richotto – let me respectfully suggest you read Varoufakis’ “The Global Minatour (2nd ed.)” which is really quite cheap, especially in the Kindle edition, to get some handle of the recent economic history of Germany in a global context. It really is very readable and intended for a general audience willing to make a bit of effort to understand complex historical processes.

I quote from the last chapter:

For two years now, the German public has become convinced that Germany has escaped the worst of the crisis because of because of the German people’s virtuous embracing of thriftiness and hard work; in contrast to the fickle Southerners, who, like the fickle grasshopper, made no provision for when the winds of finance would turn cold and nasty. This mindset goes hand in hand with a moral righteousness which plants in good people’s minds a penchant for exacting punishment on the grasshoppers…

Essentially the German surplus was attained by:

a) An seemingly infinitely growing US deficit which debt-financed (through Wall St.) the purchase of (German) consumer and capital goods while locking the world in the maintaining the value of US Treasury bonds.
b) A radical suppression of domestic wages and labour conditions while public spending went into the costs of reunification.
c) Membership of the Euro which conveniently kept the price of German exports on the low in international terms due to the laming of peripheral economies.

a) is now broken and as a consequence, as Varoufakis puts it:

… the European common currency area would either enter be redesigned, or enter a long, painful period of disintegration. The unwillingness of the surplus countries to accept that … surplus recycling is necessary… is the reason why Europe is looking like alchemy in reverse…

One of the myths of German neo-mercantilism is that, if other countries would only get a grip, and become more ‘efficient’, they could also enjoy the Holy Grail of export surpluses. Which if you think about it for a moment is absurd. There is only room for one Germany in the Euro zone.

Another feature of German economic mythology to which you refer is the notion of ‘sound money’ and the refusal to accept the idea that private banks create and destroy money. For a recent historical analysis of the reproduction by economists and politicians of this hegemonic meme see Härings recent paper The veil of deception over money in the Journal of Real World Economics which is also very readable for the layperson.

With this thoroughgoing self-mystification, comes (at best) an instinctive paternalism, with other members of the EU being seen as children who ‘must do their homework’.


7. Anonist - March 26, 2013

For me the realpolitik between the Troika and Russia was also grimly fascinating. What does the desire, particularly by Schäuble, to burn Russion oligarchs, and Putin’s refusal / inability to step in an protect them say about

a) Putin’s relationship with the oligarchs concerned
b) The assesment of Putin’s willingness to use the fossil fuel supply weapon, to which Germany in particularly is vulnerable during this extended, probably climate change related, winter?

I read somewhere that the really really rich had been tipped off and moved their money into Latvia. I’m in no position to judge if that is true or not.


Gewerkschaftler - March 27, 2013

Yep – looks like the big boys were tipped off early and got the money out.

Handlesblatt article entitled “The Money is Somewhere Else”.

I assume that there won’t be enough money left on deposit to cover the terms of the agreement and Cyprus will need yet another bailout. Which will only be available at the price of further immiseration of the Cypriots, if at all.

Clusterfuck as per normal.


8. CL - March 27, 2013

Next up, Slovenia maybe.

“Misconceived defense of ‘national interests,’ including the reluctance to sell assets to foreigners, burdens the budget and unduly prolongs the corporate and financial sector distress. A prominent privatization could convey a powerful signal to international investors.”-IMF



ejh - March 27, 2013

I like “distress” in that.


CL - March 28, 2013

a ‘pathetic fallacy’, yes. But quite apart from the figurative meaning, ‘pathetic’ and ‘fallacious’ are apt descriptions of the IMF’s approach to the crisis.


ejh - March 28, 2013

Talking of the IMF, who was the last head of that organisation not to be under investigation for a serious offence?


Gewerkschaftler - March 28, 2013

Good question. But then again having personal experience of both sides of the borders of legality is probably a requirement for the job.


9. 6to5against - March 27, 2013

The concept that Germany are currently in a strong position due to moral strength while the periphery owe their difficulties to their own fecklessness and Ill-discipline doesn’t stand up to any scrutiny.

If the Germans have such moral strength, why did they always insist -both before and after the euro – on interest rates being set to maintain low inflation? Why not rely on their moral strength to avoid over spending?

And why should they have expected anybody else to go against all economic history and to curtail spending while interest rates were falling?

The answer of course is that they didn’t. This was always entirely predictable and its hard not to believe that some people were ready to move as soon as the predictable chaos unfolded.


10. richotto - March 28, 2013

Who mentioned moral strength? The words I used were responsible and restrained and those are qualities which they demonstrably showed in examples I gave such as culturally an aversion to credit and less intense ambition for the owning of property and translating into a sustainable non bubble type economy and public policy.
The issue of being on the periphery while there to some extent has always been used here in a self serving and exaggerated way. You’d think we were in outer mongolia sometimes. Western Europe is a small area in world terms and we are pretty close to the centre of the biggest consumer area in the world. Countries the other side of the world doing very well do not seem to be bothered much about that. The likes of Finland and Sweden could argue that they are in an even more marginal position yet they don’t. Also consider that we have benefitted in tens if not hundereds of billions in todays money since we joined the EU in regional aid and agricultural subsidies with Germany and the Benelux countries as the main
paymasters. And yet for all our supposed disadvantage we still manage to pay our public and private sector professional class considerably more than in the countries who are paying for our bubble economy and budget deficit.


ejh - March 28, 2013

the countries who are paying for our bubble economy and budget deficit

This is a crock.


11. Gewerkschaftler - March 28, 2013

“centre of the biggest consumer area in the world.”

Richotto, if by this you mean the US, it currently has a total debt of over $15 Trillion. The US gave up trying to reduce it’s deficit in 1970 and we have all been ‘paying for it’ since by buying US government debt conveniently denominated in US dollars.

And internally, rich states in the US have ‘paid for’ poorer states for a good while in that benighted union.

Down with this kind of thing! Presumably, following your logic, both processes should stop immediately.


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