Whatever it takes to save the euro?

This interview with Athanasios Orphanides will ring a few bells in Dublin. I remember in the autumn of 2010, when the ECB in a similar fashion threatened to pull the plug on the Irish banking system, thinking that this was not a credible threat, since such action would de facto mean expelling Ireland from the Eurozone. Would an unelected bunch of central bankers really be willing to do something so political?

I can understand why Irish policymakers were not willing to test this logic at the time, even though I was very angry with them for giving in to ECB pressure not to burn the Irish banking system’s creditors, and still think they shouldn’t have done so.

One thing seems certain however. The ECB cannot have it both ways. It cannot simultaneously threaten to expel a member state from the Eurozone, and also expect us to believe that it will do “whatever it takes” to save the euro.

What investors (and, to be honest, I) have forgotten is that Draghi qualified his pledge: the ECB would do whatever it takes “within its mandate”. It isn’t clear that investors will continue to believe that “it will be enough”.

80 thoughts on “Whatever it takes to save the euro?”

  1. @ KOR

    You are straining to get some contradiction in the ECB position. There is nothing contradictory at all in maintaining a credible Euro and cutting loose any country who sees it as a printing machine. It won’t happen but if Cyprus does commit economic suicide and propels itself out of the currency, watch the euro rise.

    As to whether the Nuclear threat is credible, the modern world hinges on such tensions. Would Kennedy really have started WWIII? Would the ECB really have let Ireland sink? Would it let Cyprus sink? The fact is that in this game of brinkmanship the weaker entity is in the worst position. The collateral threat of suicide can only be played so far.

  2. The mandate in question does not include giving continued liquidity assistance to insolvent banks.

    http://www.ecb.int/press/pr/date/2013/html/pr130321.en.html

    The bank’s legal legitimacy flows from the treaties, not from an imagined one that can only be based on an electoral mandate. (If there is an example anywhere of an elected membership of a central bank, it would be useful to have it.)

    The argument that you advance could equally well be turned on its head. In making this decision, the ECB is making clear to a participating country the obligations that flow from membership. The consequences of failing to meet them are intrinsic to the system. This could be read as “doing everything that it takes” to save the euro.

    Investors can make their own decisions. For the moment, at least, none seem to have hit the panic button.

  3. @ Brian Woods II

    I agree except, perhaps, in relation to your take on the credibility of the ECB decision. The FT put it this way in its editorial some days ago.

    “It would be unwise to think this is the latest bluff in the high-stakes poker game Cyprus is playing with international lenders. Were the ECB to blink, it would undermine the credibility of the conditions attached to any future rescue.”

  4. “the modern world hinges on such tensions.”

    To claim ‘the modern world hinges on such tensions’ would require more evidence than the Cuban missile crisis, then a jump to 50 years later and Cyprus and Ireland being pressured by the ECB. This is hardly ‘the modern world’ being dependant ‘on such tensions.’ These are 3 examples, chosen arbitrarily, to make some nonsense point

  5. “The bank’s legal legitimacy flows from the treaties,”

    You mean the treaties that now have been broken? So much for no capital controls in Europe!

  6. I have no doubt Draghi is committed to the Euro. But that very commitment means certain countries can definitely be expelled. They can only stay if they are so poor that they keep the Euros value down thus benefitting Germany.
    It’s the politics that will get them. All those pesky people with their hopes and dreams!!!

  7. @ DOCM

    Actually we are in agreement. I think Kennedy would have had to deliver and I think the ECB will have to deliver on this occasion, however in both cases I believe the threat will achieve its objectives.

    @ rf

    I was making the point that it is a very dangerous game to play to offer up your own destruction in the hope that the collateral impact will make the other party back down.

  8. @DOCM

    Thanks for the link.

    Ah yes, the old: “in the interests of national security” trump card.

    Rock, paper, scissors, water …….

  9. @ BW II

    You are almost certainly right. However, the problem of the inevitable associated collateral damage must also be addressed. I am no great admirer of Merkel whose talent appears to be solely those of an opportunist and as a political tactician. Some reassurance for the ordinary citizens of Cyprus will be called for. She can either play to her domestic audience, as in speaking in a triumphalist way of the end of the Cypriot economic model, in an increasingly fraught electoral situation, or do the right – statesmanlike – thing. We will see!

  10. @BWII

    “it is a very dangerous game to play to offer up your own destruction in the hope that the collateral impact will make the other party back down”

    That’s a very interesting way of putting it. It’s hard to see though that a smaller SPIT (southern peripherals in trouble) can cause Germany enough damage.

  11. “We both alike know that into the discussion of human affairs the question of justice only enters where the pressure of necessity is equal, and that the powerful exact what they can, and the weak grant what they must.”

  12. The whole story is very byzantine. The orthodox always got a raw deal from western christendom and ecb hq is very close to the old seat of the Holy Roman Empire. Some things never change. 1453 was the year Constantinople fell. Maybe it could have been bailed out a few centuries before but the crusaders ransacked it instead. Geopolitics is a tough game. Hungary and Serbia were left behind the iron curtain. Austria wasn’t.

  13. @ Prof Lucey

    Ahh Jayz Brian! I told you not to mention the war!

    For those interested, De Paper sees a linkage from the Venetian-Ottoman war of 1571 through Sarajevo in 1914, through the annexation by the Ns of Czechoslovakia to the current “Teutonic hegemonic” bullying of innocent little Cyprus by the latter day Ns.

    “Hegemonic”?, never heard of the word till last week but the Prof has used it about a dozen times since!

  14. @ seafood

    I see great possibilities in a collaborative effort between yourself and Prof Lucey which would encapsulate for us the geopolitical historic forces at work here.

  15. @PR Guy…..

    fair play to you “SPIT (southern peripherals in trouble)”

    I googled, and could only find this site, spoken like a true PR guy!!!

    Will it come into usage, who knows??

    I hope so…maybe with some little addition, SPIFT??

    CyPIIGS is so awkward, and includes RoIreland…..

    what about SPIT, we are after all Southern Ireland, so all’s OK!!!

  16. @ KD

    “Hegemony” is of course common high school lingo. “Hegemonic” is not even in most dictionaries yet it seems to be the Prof’s flavour of the month.

  17. ‘Hegemonic’ is pretty central to theory in international relation, int political economy, history.. BL hasnt exactly invented a new concept here..your ignorance of it says more than his use of the term

  18. Bw2 seems to be suffering from a bad case of either monomania or namesake envy. While Cyprus is looted he has managed to derail a thread on an ad hom display of self professed ignorance. Now, if that ain’t trollin I never seen it….

    Meanwhile, back in the shadow of the hegemon (thats an allusion or metaphor mr woodie) what will this day bring?

  19. I think the general absence.of ez growth will be more relevant medium term than whatever deal on deposits over 100k is cooked up for cyprus this weekend.

  20. @What Goes Up ..
    Orpheus’s Underworld is a bit too sunny for my liking.
    More becoming under the current circumstances:

    Apocalypse Now/Ride of the Valkyries

  21. So the ECB bullied Ireland into taking a bailout but maybe it should have forced Cyprus to take one some years ago given the economic links with Greece. So when a haircut of Greek sovereign bondholders was proposed for approval at a summit of EU leaders in 2011, Demetris Christofias, the president of the Republic of Cyprus, did not veto it to put pressure for an exemption, as his country’s banks would incur losses in the range €3.5bn-€4.5bn.

    Kevin O’Rourke cites Orphanides, the last governor of the central bank, but what is his record as a regulator?

    Christofias who is not an impartial party, said: “Mr. Orphanides’ responsibilities for the Cypriot banks’ exposure to Greek bonds is overwhelming.”

    Laura Noonan, the Irish journalist has an interesting story on the years leading to the crisis here:

    http://www.reuters.com/article/2013/03/22/us-cyprus-banks-idUSBRE92L0CQ20130322

    While the recent events show that several parties merit blame, Panicos Demetriades, current governor said in the FT in January in respect of his own country:

    “Cyprus is not blameless. Past decisions have contributed to this situation, and we now face a number of challenges. This is acknowledged across the political spectrum.”

    As for this ‘hegemonic’ nonsense (this lexicon is a relic of the Mao Zedong era and it was often coupled with the term ‘running dogs’ – – a particularly vicious insult in China), the Germans did not want the euro while among the big western countries the most enthusiastic backer of German unification was the American president. Margaret Thatcher opposed it and François Mitterrand, who had been for a time a supporter of the wartime pro-German Vichy government in France, feared it.

    In the early 1990s, both the French president and French head of the European Commission, were strong advocates of European integration.
    Der Spiegel has said:

    “European monetary union may not have come about had it not been for Germany’s reunification,” says former Bundesbank President Karl Otto Pöhl. “Kohl knew that he had to promote European interests in order to make reunification acceptable,” says former Mitterrand advisor Hubert Védrine. Bernd Pfaffenbach, then a high-ranking Chancellery official under Kohl, adds, “The German position had previously been that European political union must precede monetary union. But the German government sacrificed that position in the course of the negotiations.”

  22. @ GtfawayHolymoley: I was keeping clear of this thread – its gone toxic. However, donning my pol sci mortarboard (and pseudonym)

    “Hegemon and Realism are close allied, a thin partition doth their bounds divide” – with apologies to the original poet.

    – and KD (above) has a quote that neatly sums up the predicament of the Cypriot pols. They could indeed ‘stand up’ to the EU/ECB/IMF hegemon and there would be ‘costs’ for both; (social, political and economic for the Cypriots – financial and face for the hegemon).

    My guess is that Cypriot politicians will endeavour to save their own asses first, citizens second. The balance being that those who will lose the least will be PR’d as being ‘saved’. Should be good for a few votes! That’s the theory anyways. But will it work in practice? The folk on the other side of that UN Buffer Zone must be rightly amused.

    On a sourer note. I am putting away my childish belief that my saving deposits are safe and secure. They really trashed that one. That’s a Pandora’s Box denizen on the loose. Now if I were Phil Protect-Our-Water Hogan I’d loot all Irish account holders for all those nice water, property and waste levies. And as for car registration tax, compulsory third-party insurance, etc., etc: – Jesus! the mind boggles!

    Long live Hegonomic Realism!

  23. “I was keeping clear of this thread – its gone toxic”

    I apologise for my role in adding to the toxicity..I’ll try and be a more reasonable poster..

  24. @ all

    My references to the Prof are really a continuation of a harmless banter we were engaging in on a thread which had become a million miles long so apologies for taking this oblique opportunity to continue it here.

    The Prof had flagged his contribution in De Paper (would I really buy it otherwise?) and recommended it to me over a cup of cocoa by the fire.

  25. Seeing as how people are feeling so musical today, I’d like to propose the following as an anthem for Cyprus amidst this crisis:

  26. The interview with Athanasios Orphanides to which Professor O’Rourke refers is behind the FT’s paywall, but it can be found here at Orphanides’s own website:

    http://www.athanasiosorphanides.com/fileadmin/documents/interviews/INTG_GOVINTERVIEW_161209.pdf

    It is on the whole the kind of conventional langue de bois one expects of sassy bureaucrats who don’t let plain speaking get in the way of their career trajectory (I fully expect that the Greek government will take the necessary actions … I am confident that the Greek government will resolve the difficulties … I am confident the debt of every euro area country will be honoured … I would say now that we have been very successful in steering monetary policy in the right way … I welcome the signs of the recovery that we have in the euro area. … we are not yet out of the woods … It is always a good time to buy a house in Cyprus … I am cautiously optimistic that we might have positive developments … Economic and monetary union can enhance peaceful coexistence between people …. We all share the
    common goal, which is the advancement of the dreams and the welfare of the people of the EU, respecting the diversity that we have … The rules of the economic and monetary union within the euro area must be adhered to and can serve as a catalyst for progress.
    )

    I did not find anything like ‘frankly we all know that the euro sucks’, or ‘frankly the euro was a disaster from the word go’ or ‘frankly I’m just another empty suit with a stellar academic career and I’m certainly not going to rock the boat’, or ‘frankly for all I care the Cypriot people can take it or leave it’.

    Ten pages of smooth-operator, scripted replies to innocuous, nice-guy questions — certainly not the sort of literature you would like to be stranded with on a desert island.

    Waste of time. Opportunity costs and all that.

  27. “As for this ‘hegemonic’ nonsense (this lexicon is a relic of the Mao Zedong era and it was often coupled with the term ‘running dogs’ – – a particularly vicious insult in China)”

    Michael, with respect, it is pretty relevant. One example among many of its relevance is Kindlebergers hegemonic stabilty theory. This from wiki on:

    “Charles P. Kindleberger is one of the scholars most closely associated with HST, and is even regarded by some as the father of HST.[5] Kindleberger argued, in his 1973 book The World in Depression: 1929-1939, that the economic chaos between World War I and World War II that led to the Great Depression, can be blamed in part on the lack of a world leader with a dominant economy. The theory is about more than economics though: the central idea behind HST is that the stability of the global system, in terms of politics, international law, and so on, relies on the hegemon to develop and enforce the rules of the system.[6]”

    Interesting. Relevant. Nein?

  28. @Brian I got it….was almost inclined to have a bit of fun over promoting it and websites in general,as I remember an exchange along those lines,with another contributor.
    The prior exchange was terrific…..there was a reference to simples.com I got redirected to bleedinghearts.com….mind the fire Brian !

  29. Why did the Cypriot banks not hit the SMP bid before the Greek PSI? The they would not have needed as much capital. Why was the ECB allowed avoid hair cutting its Greek holding? That way the hair cut was bigger for every body else.

    Why were the Irish not allowed burn the Bondholders. Was it because German banks and insurance companies were the holders? Why were the Cypriots told to burn the depositors? No German money?

  30. @ MH et ALL

    I noted an interview with the French finance minister on RTE. He was most trenchantly insistent that Cyprus comply with the Troika’s demands. Aren’t those hegemoniacs (bet that’s a new word for you all) rather overplaying the Teutonophobia (another new word, I’m spoiling yuz)

  31. @rf
    @Michael Hennigan

    Rf, it is clear from the context of Michael Hennigan’s comment that he is not really contending that the concept of hegemony itself is nonsensical. His argument is that Germany is not as all-powerful as its critics claim.

    It is a verifiable, empirical fact that ‘the Germans’ as such were not particularly keen on the introduction of the euro – — though its leaders, i.e. Germany as a nation state, certainly were. But not necessarily as an instantiation of the ‘will to power’.

    Michael’s argument that Germany traded in the beloved Deutschmark for the bloodless euro and got in return the go-ahead for unification is a view shared by many international relations experts and contemporary historians. It cannot be dismissed off hand.
    It is certainly more convincing than the conspiracy theory slant — all that Teutonic plotting and conniving to ensnare the rest of Europe in Germany’s grasp. Good guys, bad guys. Light and Darkness. Day and Night.

    No, it’s not as simple as that.

  32. @BWII

    Before you go adding more jargon to the already jargon-laden theory of international relations, you should be aware that there is a term for what the French finance minister is doing: it’s called bandwagoning. Far from refuting the idea that Germany is a hegemon, the fact that she can induce weaker powers to do this, actually supports that idea. There was a time when France could hope to contain Germany with a bit of help from Britain and Russia. Those days are gone, hence the behaviour you observe.

    http://en.wikipedia.org/wiki/Bandwagoning

  33. I was thinking of “a town called malice” for Cyprus

    Do you want to cut back on beer or on the kids’ new gear
    It’s a big decision…

  34. ‘Within its [ECB; Lisbon Treaty_123] mandate.’

    Deconstructed: it is OK to directly screw sovereigns with financial system debt but it is NOT OK to directly support sovereigns in times of crisis.

  35. The ‘Aesthetic Turn’ on this thread appears to be in the direction of ‘Farce’

    Probably appropriate as an interpretation of EZ handling of the little Cypriot affair.

    Links:

    BTW did you hear the joke about the Irish and the ‘dead bank’? For the wake they decided to earn/borrow 30 Billion, give it back to themselves, place it in the dead wood coffin, and then cremated it, just like that! … dat’s a bad joke, roight?

    Try: Paul O’Connell Conversion: Ronan O’Gara

    The Mount Anville Gurls are out lookin for Tull

    BWII and the ‘affair’ with McWilliams, tbc.

    DOCM 😆

    zzzzzzzzzz

  36. NakedCapitalism.com

    •Cyprus Capitulates to Eurozone (Updated)

    •Repeat After Me, Cyprus Is (Was) Not a Tax Haven

    Links

    More Cyprus:

    Cyprus: A poor diagnosis, a bitter pill Financial Times. A detailed discussion of the negotiations, with emphasis on the bad assumptions within the Troika

    Why Russian Oligarchs Are Laughing Off The Cyprus Haircut Clusterstock

    If capital controls are introduced in Cyprus, it is the end of the single currency in all but name Telegraph

    Angela Merkel reportedly outraged over Cyprus’s behaviour Guardian. I hope she comes back as a chicken in a factory farm.

    Plunderball – The new Euro banking game Golem XIV

    EU rescue may tilt Cyprus from Moscow in regional power shift Reuters. Will there be anything left to shift?

    ‘Banco de Mattress’ looms for Cypriots John Dizard, Financial Times

    Luxembourg Has A Very Serious Case Of ‘Money Center Debt Syndrome’ Bruce Krasting

    How the Cyprus bank closure is crippling business on the island The Journal.ie/AFP.

    Asselborn warns Germany of hurtful tone towards smaller EU nations Wort.lu via @faisalislam: Germany’s tax haven freaks out about Cyprus. One suspect there’s nothing much to worry about, boys.

    Cyprus: The Operation Was a Success. Shame the Patient Died Snapshot of “progress”. Take particular note of the conclusions about the Cyprus economy post bailout.

    http://www.nakedcapitalism.com/2013/03/links-32313.html

  37. John Gallagher,
    Cyprus tried a bit of shoe banging this week. What did that achieve. A bullet form a lugar in the head!

  38. I’m sorry Carolus Galviensis I don’t see that in Michaels post. (A reference to Mao and the history of why Gemany joined the euro is neither here nor there – I’m not disputing it, Im just saying its irrelevant) It has nothing to do with any solution to the crisis, and germanys role in resolving the crisis as the preeminent power in europe.
    Michael might not like conspiracy theories about German intent, neither do I. Once again, neither here nor there
    I guess there’s just to much ground between us, Michael thinks we can resolve the crisis by cutting spending in louth county council and removing tarrifs on italian shoes..I aint so sure

  39. @KD: “Before you go adding more jargon to the already jargon-laden theory of international relations, …”

    What is it about IR theorists that they have this obsession with terminology? There have created enough isms to fill a dictionary. Tomcats p*ssing on their corners?

    My take on this unfortunate Cyprus affair is that although the local politicians could issue a credible threat – they could refuse, the consequence would be very bad for them, and not so bad (initially) for the Hegemon. Had the Cypriots buckled the first time I suspect that the Ivans would have bided their time – and inflicted a nasty gaz price shock on western Europe. That would have been an anal sphincture puckering event! Might, could happen! This bizarre event still has legs.

    Now, in Ireland’s case not only would the threat have been credible, but had our pols told the Hegemon to s*d-off – the resulting collateral damage would have been severe for both parties. That realization should have created a new equilibrium position, with a new round of threats. Do we experienced Game Theorists in the House? The worst that might have happened to us is that were ‘invited’ to leave the EZ.

    The whole thing is a classic John Le Cárre plot: where’s George Smiley when you need him? Though Len Deighton’s Bernard Samson seems more apt. He was an adopted Berliner afterall.

  40. @Tull,M.A.D.-aka mutually assured destruction,in London.
    Chap up the road rumored have a few bob over there …just eh like died!!!!!!
    FYI Tull may have English version of z bill shortly RE capital controls,it’s out and about in Greek.

  41. Acetic Andwhatever..
    If this is a spy novel it’s closer to Get Smart than The Circus.

  42. JG,
    Neighbour of yours died? Very sad. Behind this disaster life’s, businesses and fortunes are lost.

  43. On January 25th 2013 a Philip Lane linked to the WSJ, an article well worth reading in the light of subsequent events. It seems all the main participants knew whet was at stake and their positions are well laid out.

    http://online.wsj.com/article/SB10001424127887323854904578261932445646620.html?mod=WSJEurope_hpp_LEFTTopStories

    Thread
    http://www.irisheconomy.ie/index.php/2013/01/25/euimf-policies-for-troubled-banking-systems/

    There are probably no prizes for stating the obvious
    http://www.irisheconomy.ie/index.php/2013/01/25/euimf-policies-for-troubled-banking-systems/#comment-374095

  44. @john Gallaher

    Thanks for the link. Here’s the summary, which I’ve copied over for the convenience of those who don’t enjoy toggling (sometimes a bit dicey if you are using an iPad):
    [in the event of a state of emergency the Finance Minister or Governor of the BoC may, after consulting the European Commission etc etc impose]
    Restrictions in daily withdrawals
    Ban on premature termination of time savings deposits
    Compulsory renewal of all time savings deposits upon maturity
    Conversion of current accounts to time deposits
    Ban or restrictions on non cash transactions
    Restrictions on use of debit, credit or prepaid debit cards
    Ban or restriction on cashing in cheques
    Restrictions on domestic interbank transfers or transfers within the same bank
    Restrictions on the interactions/transactions of the public with credit institutions
    Restrictions on movements of capital, payments, transfers
    Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety
    .
    [emphasis mine – CG]

    The last subparagraph is truly draconian. ‘Any other measure’ would even include 100% confiscation of all deposits, or opting out of the euro and converting existing accounts into thte new Cypriot lira, I reckon.

    It’s still a bill at this writing, though, not yet the law of the land.

  45. Then: ‘Whatever it takes to save the euro’
    Now: Whatever it takes to save Cyprus FROM the euro.

  46. Interesting to see a former ECB Council members take on the carry on in Cyprus…
    http://www.cyprus-mail.com/central-bank/orphanides-predicts-end-european-project/20130323

    “The former governor also had some choice words for his former colleagues at the European Central Bank (ECB) as well as for the European Commission. 
    “I would have expected them to support the European project. I would have expected them to protect the citizens of the smallest and weakest member states against discrimination. We have seen a cavalier attitude towards the expropriation of property and the bullying of a people.”
    Orphanides added that the week’s events had made “a mockery” of EU treaties, indicating that “in Europe not all people are equal under the law”. 

    Equal? Reports that 20% of deposits in one bank are to be expropriated and a mere 4% from the other bank makes one wonder how this could stack up legally.

  47. And Draghi came down from the mountain with two tablets of stone.

    (1) Thou shall love the god of the market. Thou shall have no other god before it.
    (2) Thou shall have no other engraved image except the Euro. There shall be no other image on thy coin, for I run a jealous central bank
    (3) Thou shall not take the name of the Euro in vain or speak slightingly thereof, for those who seek to destroy confidence will not be held guiltless.
    (4) Thou shall work all of the days, excepting none, for this is the will of the free market. And you shall remember that you are a debt slave as you once were in Egypt.
    (5) Honour Germany and France and the contract they made in their betrothal at the altar of the European Coal and Steel Community: for these are your mother and father to whom you must be obedient.
    (6) Thou shalt not kill the bondholders.
    (7) Thou shalt not commit adultery with other nations, neither the Russians nor the Chinese, nor any other nation against which we set our face.
    (8) Thou shalt not steal deposits with high interest, low tax or any other wiles against which we set our face.
    (9) Thou shalt not falsely accuse the ECB of running a tyranny, or threatening to implode your banks, being subservient to German interest, nor any other false witness against them.
    (10) Thou shalt not covet a living possessed by your neighbours, but rejoice in the purification of your impoverishment.

  48. The 20% and 4% levies on deposits are directly related to the losses at each bank. The original proposal was a flat levy across all Cypriot banks regardless of the loss levels. There was one Russian owned bank with no losses as well as small cooperative type banks also with no losses. Hell hath no fury like a depositor in a sound bank forced to pay for the profligates. Much like the Irish taxpayers paying for Anglo and the wreckage that succeeded it.

    It is a very serious matter for Cyprus but they are still in the EZ which is their ace in the hole in their dealings with Russia. There is still money to be made and the Cypriots and the Russians will make it. The business will take a short to medium term hit but it will build from there. The know how is there and nature abhors a vacuum.

    With regard to hegemony I recommend the New Statesman article on Germany. Again Germany is doing what it is doing because it can. Much like America invading Iraq and Afghanistan because it could as the risks were minor. I now await with bated breath the onslaught against Luxembourg and Malta. Spain and Italy could inflict real pain on Germany, even the Germans avoid pain. For the little guys any retaliation would have to be collective to be effective. The sack of fighting cats are unlikely to get their act in gear.

    Fate will unfold as it should unfortunately.

  49. @Mickey Hickey

    It is a very serious matter for Cyprus…

    It might be more interesting to ask who has had the current crisis benefited rather than who has it hurt, the list of countries and interest damaged by the way the Cyprus solution was implemented is a very long one after all.

    The coordinated attack on Cyprus has benefited the CDU/CSU’s electoral position and it has has cemented Deutsche bloc power over the institutions of EMU in a way that would not have been thought possible even two years ago. This is a very serious matter for everyone except Merkel and her bandwagoners.

    After five years of watching the crisis unfold in a way that is unrelentingly bad for the parts of the Eurozone not bordering Germany even the most Europhile observer has to acknowledge that the smaller countries find themselves with responsibilities under EMU but no powers and also in a situation where the dominant economic policy makers are gold standard fixated neoliberals with a record of serial failure.

    p.s. That New Statesman article on Germany is also underwhelming except in the parts it is flatly wrong – the attempt to portray Germany’s reluctance to get involved with Mikheil Saakashvili’s botched attack on South Ossetia as a sign of weakness or global disengagement boggles the mind. Then again the author of the article, Brendan Simms, is a signed up Tory and Iraq war hawk.

  50. @ rf

    I can understand the concept of the hegemon and for example the positive role of the United States in the decades after 1945 in promoting free trade that for the first time ever, enabled poor countries without natural resources to become rich via export miracles.

    I think the term is used in respect of modern Germany, together with references to the past, in a negative way.

    Even though France has become weak, German power is not without limits.

    In 2010, the 2 German representatives on the ECB’s governing council, were alone in opposing bond buying in the secondary markets. Last year the Bundesbank president ended up telling a story from Goethe’s Faust as a warning about Draghi’s OMT program.

    @ All

    Slovakia, which is not a rich country, opposed paying for the Greek bailout and it will have to contribute €80m towards the Cypriot bailout but it will demand that “the memorandum of agreement contains a provision on more active exchange of information between Cypriot and EU tax authorities,” according to Pravda, a daily newspaper. The government has been concerned about an increasing number of local companies (872 in March) that use Cyprus as a tax haven and for money laundering.
     
    Simerini, the conservative Cypriot daily, during the week argued that the anger against the Germans was unjustified. It may well be a minority view but similar points could apply to Ireland :

    “As a people we have no self-knowledge. We always see ourselves as the victims. … Schäuble has told a painful truth which our politicians refuse to confront. … Those who are still capable of rational thought know that the island’s political and economic model has been bankrupt for years. … This is the root and the source of our present plight. Why do we pin the blame for the mistakes, crimes, shortcomings and incompetence of our own leaders on foreigners? Why do we demonstrate outside the presidential palace and parliament? We should be demonstrating outside the parties’ headquarters, because this is where the country’s problems lie.”

    @ Gavin Kostick

    (10) Thou shalt not covet a living possessed by your neighbours, but rejoice in the purification of your impoverishment.

    Moses,

    The history since the first enlargement in 1973 when Ireland was admitted has been an open door to poorer countries.

    In the case of Italy for example, handouts will not solve its main problems.
    We don’t complain of course when an Irish or French cow gets a bigger subsidy than a Latvian one or even ostensibly to benefit the environment, when there is a prospect of farmers being paid twice by taxpayers for the same work if Europe’s farm ministers get their way over subsidies.

    @ seafóid / Brian Woods II

    Yes growth would do a world of good. However, short of a massive spending program, do professional economists do not appear to have any credible ideas.

    It’s also almost a year since François Hollande was seen by some as a New Moses with his growth agenda set to transform Europe. I didn’t expect the former office manager of the Parti Socialiste to change much but the gulf between aspiration and reality has been striking.

    Believe it or not, global growth this decade is expected to be higher than in the past three decades, thanks to emerging economies.

    All the blarney and claims that Dublin is “the Internet capital of Europe’ which was made this week by Enda Kenny, will not bring back full employment.

    In Ireland full-time employment in the internationally tradeable goods and services sectors (foreign and indigenous) at the end of 2012 was about 18,000 lower than it was in 2000 when the workforce (including the unemployed) was 320,000 people smaller.

    6,500 direct workers are responsible for 52% of annual services exports!

    Magic surely?

  51. ECB mandate has turned out to be a moving feast as muddling through is the order of the day. either it moves to price stability plus growth and employment or the game is up sooner or later.

  52. I think the notion of complete Merkel inspired hegemony is overdone. She changes her mind when it suits. She couldn’t convince her people to keep the nuclear industry going. Modern political management of the electorate is messy. Someone said of ex Barclays Chairman Agius’ dealings with Bob Diamond “it was as if he had been given a horse he was not trained to ride”.

  53. Morning all.

    It does look like it’s still all up in the air as of yet.

    Colm McCarthy:

    “Shocking treatment of Cyprus has exposed eurozone’s inherent flaws”

    http://www.independent.ie/opinion/analysis/shocking-treatment-of-cyprus-has-exposed-eurozones-inherent-flaws-29150368.html

    From the Cyprus mail, where it looks like the journalists are getting exhausted now:

    ‘Mad scramble to save Bank of Cyprus’

    Includes the snippet:

    ‘The EU’s Rehn said the bloc recognised the progress made by the Cypriot government, and warned of tough times ahead.

    ‘”Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available,” he said in a statement. “Today, there are only hard choices left.”‘

    http://www.cyprus-mail.com/bailout/mad-scramble-save-bank-cyprus/20130324

    I can’t see where the full statement for this, but it would be great to know what this “optimal solution” was that was available only a few days ago.

  54. Schaeuble: Nicosia did not want bank shareholders to shoulder lenders’ losses
    http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_24/03/2013_489622
    “While negotiations are ongoing, I cannot say with certainty whether the eurozone will accept to extend financial assistance to Cyprus. Only if the troika estimates there is a plan which offers a solution to Cyprus’s problems, and which adheres to the rules, will the Eurogroup be able to examine the problem,” said Schaeuble.

    “Cypriot officials should have told the truth to their citizens. Our proposal was never about the involvement of depositors [in the bailout]. The German position was identical to the IMF’s: If the two main banks do not have a sustainable model anymore, it is their shareholders who should shoulder the losses. But [Cypriot] officials did not even want to hear about that,” Schaeuble told Welt Am Sonntag.

    What is interesting is that the Schauble actually thinks the deal offers a solution to Cypriot situation. Im guessing that the austerity doesnt need to offer any concrete improvement and a Cypriot bailout in 2 years time will involve doubling down on the same failed policies. Like all true believes, theory trumps hard evidence and facts.

  55. Swedish tax-authorities made some comments on Cyprus:
    http://www.svd.se/naringsliv/elva-miljarder-kronor-goms-pa-cypern_8007086.svd

    The short:
    -It takes Cypriotic tax-authorities up to 2 years to reply to requests for information from Swedish tax-authorities.
    -The estimated amount of taxes that are due in Sweden but held in Cyprus for the period of 2007-2011 is 11bn SEK

    Sweden can, as not being member of the Euro-zone, decide to either lend money to Cyprus or not. Odds are that Sweden will offer Cyprus the same support as it offered and provided to Greece: Tax-collectors from Sweden to go there to help with tax-collection.

  56. not a jot out of Eoin Bond and not much (and what little irrelevant) from Brian Woods Part Deux…. if even they have given up….??

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