The fateful Eurozone finance ministers meeting which signed off on the plan to haircut guaranteed depositors in Cyprus convened at 17.00 hours on Friday the 15th, the Ides of March, in Brussels. The meeting was attended by the seventeen finance ministers but also by Mario Draghi and Jorg Asmussen of the ECB and Christine Lagarde from the IMF with Reza Moghadam, the head of the European division at the Fund. Cypriot president Anastasiades left the meeting with, he clearly believed, the consent of those present for the since-abandoned scheme to haircut guaranteed depositors (accounts below €100,000) in all Cypriot banks, including some that were solvent.
The Cypriot parliament threw out the plan and guaranteed depositors were spared. The substitute Plan B sees very large write-downs for unguaranteed depositors in the bust banks as well as write-offs for shareholders and bondholders. But deposits in Cypriot banks were frozen and could not be used, beyond low thresholds, for withdrawals, or for external payments. Remarkably, internal payments within Cyprus were also restricted. The thresholds have since been increased but the suspension of internal convertibility for the Cypriot Euro was an astonishing event, going beyond the re-introduction of exchange controls and the inability to transfer funds abroad. The Nicosia business was effectively told ‘you may not use your money to purchase dollars, or Euro deposits outside Cyprus’ (exchange controls) but also told ‘you may not pay a bill over a specified amount owed to a business in Limassol either’ (suspension of internal convertibility).
On March 25th the ECB issued a statement which included the following (after Plan B had been cobbled together and insured depositors spared the threatened haircut):
‘Today, the Governing Council decided not to object to the request for provision of Emergency Liquidity Assistance (ELA) by the Central Bank of Cyprus, in accordance with the prevailing rules. It will continue to monitor the situation closely.’
The Purpose of Plan B was to resolve the Cypriot banks, through creditor haircuts and other re-capitalisation measures. Banks which have been resolved are solvent – their liabilities have been reduced to the point where their (written down) assets exceed their liabilities. If they face a depositor run when they re-open, a proper central bank will provide them with liquidity without limit, since the run is unjustified. With the bank’s assets now written down to realistic values, there is no question mark over collateral quality.
What appears to have happened in Cyprus is the following:
1. prior to the rescue deal, the ECB deemed the main Cypriot banks to be insolvent, and declined to approve ELA through the Bank of Cyprus.
2. The deal (Plan B) was done. The Cypriot authorities, fearing a run, froze deposits, creating internal as well as external, inconvertibility.
3. The ECB must have interpreted the ‘prevailing rules’ referred to in its March 25th statement as forbidding ELA for the (supposedly now solvent) Cypriot banks.
If this interpretation is correct, the Eurozone now has a de facto bank resolution scheme with the following feature: the day the resolved bank re-opens, with creditor haircuts to whatever degree is needed to make the bank solvent, the lender of last resort will go missing. Deposits will be frozen (up to some limit) and the domestic economy can get by on cash, trade credit and barter. At a recent press conference, Mario Draghi was asked about the ECB’s role in the Cyprus debacle and responded thus:
‘Cyprus is not a template; Cyprus is not a turning point in euro area policy. We have said many times that our resolution – and I said the very same thing when I was Chairman of the Financial Stability Board – is to resolve banks without using taxpayers’ money and without disrupting the payment system. That is why we have to have a resolution framework in place. So, it is not a turning point. That is exactly the resolution framework that all other countries have and the euro area will have.’
Sorry Mario – you did disrupt the payment system, you closed it down. Does the ECB president intend that ‘…the resolution framework that all other countries have and the euro area will have’ will include the refusal by the lender of last resort to stop deposit runs on solvent banks? On further questioning, he elaborated: ‘On Cyprus – I expect many more questions on Cyprus, so that I will only respond to your question narrowly, the fine question as to what the position of the ECB was. The ECB had presented a proposal that did not foresee any bail-in of insured depositors. And let me also tell you that this was exactly the same for all the other proposals – the proposals by the Commission and the IMF had exactly the same feature. Then there were prolonged negotiations with the Cypriot authorities, represented at that meeting, the outcome of which was what you know, namely a levy also on insured depositors. That was not smart, to say the least, and it was quickly corrected in a Eurogroup teleconference on the next day. But that is what is past.’
Everyone is entitled to their own version of history. Here’s mine: it was the Cypriot parliament on the following Tuesday evening, and not some teleconference on the Sunday, which scuppered the Anastasiades plan to haircut insured depositors. The ECB, the European Commission and the IMF allowed the Cypriots to leave a meeting at 3 am on Saturday morning with a plan to haircut insured deposits and to freeze accounts in banks supposedly resolved.
It would be nice to hear the IMF’s version of what they think happened at the meeting on the Ides of March.
71 replies on “Beware the Ides of March”
Is it not that they still have to work out exactly what to take from uninsured deposits? Whilst they are still unsure it is perfectly understandable that there would be restrictions, both external and internal, on transactions involving uninsured deposits.
Whenever they have bottomed out the issues, are satisfied that they have fully resolved the banks and are in a position to lift restrictions on transactions, then by definition they are in a position to restore LOLR.
Cyprus IS a special situation. Its average household has net wealth exceeding 10 times that of the average German household. No way was a soft bail out politically acceptable either to Germans or anybody else in the EZ. The current hiatus with its seemingly inconsistent features is purely a function of the practical logistics in satisfactorily addressing all the issues.
As it is becoming a meme that it was the Cypriot side that introduced the idea of hitting deposits of under 100k, this is not the version presented by Peter Spiegel in the FT, March 19th.
“The Cyprus bailout blame game begins”
‘By their own admission, the first organisation to raise the prospect of taxing small depositors at the Friday night meeting was the European Commission. But the proposal made at the outset of talks by Olli Rehn, the Commission’s economic chief, was not motivated by a desire to plunder old ladies’ bank accounts just for the sake of it. It was because the alternatives seemed even worse.
‘“If Germany and its allies had not taken such a tough line…the Commission would never have had to resort to making any compromise proposal,” said one official sympathetic to the Cypriots. “There would have been other ways to achieve €7bn,” the official added, referring to the amount Berlin wanted to cut from the bailout’s €17bn price tag.
‘Rehn put on the table a plan for a relatively benign levy on smaller savers: 3 per cent for all deposits under €100,000, with it rising to 5 per cent for those with €100,000 to €500,000, and 7 per cent above that threshold.’
It doesnt matter who introduced the idea. They ALL signed off on the idea of hitting uninsured and insured depositors. They are thus all exposed to blame. All. And our lads? they “Welcomed” it the following morning. egad….
Another “personal” history lesson:
In the past year:
– An Italian bank needed €4 Billion to plug a derivatives and fraud scandal.
– An American bank needed $6.2 Billion to cover losses in London.
– A British bank was fined for trading with a foreign enemy state.
– Banks in both America and the UK were handed multi-billion euro fines for laundering drug money for the Mexican drug cartels.
– A global cartel of banks are openly implicated in the LIBOR manipulation, costing Trillions of euros.
All of which involved no one going to jail, no one losing their job and no one having their country’s business model blown to bits.
But now there is a new template!
It was necessary to put Cyprus to the sword because of Russian hot money.
I look forward to seeing how this gets implemented in the future.
The Cyprus bailout is extremely strange – also the fact that Laiki branch clients in London will get paid in full. How is that possible???
If the ECB does not guarantee payment system working, this is a fundamental breach of ECB charter. In that case the country involved can see it as a major failure by the ECB, and start printing its own euros, let’s on paper first, without consulting the ECB.
In addition to the FT link above, there is useful processology in the WSJ —
At around 10 p.m. Mr. Sarris went to brief Mr. Anastasiades, who approved a more limited levy: 3.5% on deposits below €100,000 and 7% on bigger accounts. At that moment, Cypriot officials took an unprecedented step: They decided to freeze all electronic transactions from the island’s banks to prevent a last-minute pullout in case the deal was leaked. But when Mr. Sarris returned to the fifth floor to presented that proposal, he found few takers. After another round of discussions, in which Mr. Schäuble demanded a tax of as much as 18%, Mr. Sarris was ready to accept a levy of 12.5% on deposits above €100,000 and 7.5% for smaller deposits.
He went back up to brief the president and Mr. Anastasiades rejected the deal, threatening to leave. At that point, around 1 a.m. a small group—including Ms. Lagarde, Mr. Rehn, Mr. Sarris, Mr. Schäuble, France’s Pierre Moscovici, Mr. Asmussen and Mr. Dijsselbloem broke off into a separate room. It was then—as other ministers snoozed or played on their iPads— that Mr. Asmussen told Mr. Anastasiades that without a deal, Cyprus’s two big banks faced insolvency, since they would have no prospect of European funds to repair their battered capital buffers, said people who were present. In that case, the ECB would no longer be willing to fund the banks with central-bank emergency liquidity, Mr. Asmussen said, these people said. The implication: The island’s biggest banks might be unable to reopen after Monday’s bank holiday.
Mr. Asmussen backed up the warning by calling ECB President Mario Draghi and letting him know the central bank might have to deal with the collapse of Cyprus’s banks.
The ultimatum carried echoes of the ECB’s threat to cut off emergency liquidity for Irish banks in late 2010, which forced a reluctant Irish government to accept a euro-zone bailout.
Mr. Anastasiades gave in, but insisted that no deposit be taxed at more than 10%. In a final round of talks, Mr. Sarris hashed out a compromise with the ECB’s Mr. Asmussen, the IMF’s Ms. Lagarde, Eurogroup head Mr. Dijsselbloem and the Commission’s Mr. Rehn.The levies were settled upon, but levels were under discussion Sunday night in Nicosia, with the likelihood the rate for smaller depositors would be cut and those for larger ones raised.
I understand Brian Lucey’s point that everyone signed off on the general parameters of the clever plan to pastolarlize Cyrpus – it was concocted by at least one of the institutions of the European Union and agreed on by all of them. However there is still a hierarchy of influence here – the countries currently labouring under the idiot mercies of the Troika have effectively no choice but to salute the majority opinion and doff their caps submissively (though Ireland’s current coalition government has a lot of form in saluting their new masters).
The implementation of the (non) resolution of the banking sector in Cyprus was an error of the very serious people at the very top of European Union institutions and the largest countries and we can expect no resolution to the crisis until the positions of the actual players are revealed. We have an absurd situation where decisions affecting everyone in the European Union are now being made at late night meetings under a veil of secrecy. European governance has been recast as post war diplomacy between the victors and the conquered.
One more thing for the finance specialists here: Was the 100K depositors insurance gentleman’s agreement not always a scheme that was destined to undermine itself through a filleting of deposits to guarantee insurance coverage eventually leading to a multiplication of banks without a reduction in systemic risk?
The idea that you can some how reduce systemic risk by changing the scale of the system should have died with CDOs. In certain circumstances either depositors need to take a hit or money needs to be printed.
BWII: I cannot go along with you on this: the purpose of the meeting was to (i) finance the government and (ii) resolve the banks. Both outcomes were duly trumpeted on the Saturday – deal done. And re-trumpeted when Plan B came along. Small point: restrictions were imposed on insured as well as uninsured deposits.
The denial by Draghi in my quote (that any of the troika proposed haircutting guaranteed depositors) rings true for the ECB and the Fund, but it has been widely and credibly reported (see Frank Galton’s quote from the WSJ above) that the Commission was co-promoter with the Cypriots of Plan A.
At 5 pm on Fridays, finance ministers and troika officials should head for the pub, like normal people.
@ Brian Lucey
You have cut to the core of the matter but have drawn the wrong conclusion. It is not a question of blame. The representative of the state involved in the negotiation is the one deciding the extent to which the state is committed. Others may have made a mistake of appreciation in not doing enough to dissuade the Cypriot representative from a disastrous last minute attempt to retain some element of the Cypriot financial model. However, they must have reasoned (i) he knows what he is doing and (ii) if he does not, the consequences lie solely with him. Unfortunately, they did not. But the existential problems that remain are those of Cyprus, not the Euro Area.
Negotiation and its outcome are a messy business; a trial of strength. We have an example currently under way in relation to CPII domestically and no one blinks an eye. It beats me why a cold eye is cast on the domestic version but a moralising one on the international.
I had posted the above before I read your reply to BWII. To be blunt about it, European politics is not going to adapt to the social habits of those involved in essentially administrative tasks, be they in banking or whatever. Negotiators emerge bleary eyed in the dawn because that is the nature of the business in which they are involved; taking things down to the wire, as the saying goes.
Sorry, im busy cooking a roast pork here but your saying : poor ole IMF/ECB/EC were bullied into it by Cyprus? ba
Look up the difference between involved and committed. Eggs and Bacon.
Cyprus was bullied, hectored, and Hacha’d into oblivion. A shameful day for those that did it as much as those that agreed it. And more shame to those that celebrate, excuse or minimise it. Like you.
CP2 : 300m as a % of GDP vs 25b or whatever the latest is for Cy vs their GDP. Apples, and small small pips of citrus fruit unknown to man.
Hard to know what is exactly going on. If within a matter of months full access to all deposits together with LOLR is not restored, then I agree something very fishy. As to the Ides of March I have noted before on this blog that come next St Patricks Weekend my humble little pot is for under the mattress.
@ Brian Lucey
Enjoy the pork! I am saying what I have written and not what you are saying I am saying.
As it appears to me, the ECB has never given a blanket guarantee of liquidity support to any of the programme countries, even after the programmes were in place. (Prior to the programmes, their loose lips caused bank runs). In fact, in each case, the ECB is trying to quickly retrieve (Target 2) cash from banks in programme countries. The innovation in Cyprus is that they stopped caring how they did it. (There are stories of Draghi saying he was fed up and might return to the private sector).
Colm rightly highlights (in his Sindo article) that the IMF cannot draw up sustainable programmes in such circumstances. But I cannot believe that a banking union is on the way either. We are stuck between a rock and Herr Sinn.
You just got slimed – it is harmless but annoying.
It is interesting The patterns of European debate seem to be self similar in nature regardless of the forum (fractally fecked). At whatever level you view the pattern it is denial, disingenuousness and strong determination.
Whether it is on a large scale or a small one the people who have have constantly failed to predict the consequences of policy decisions are the ones convinced that everyone else misunderstands the conditions under which those policies were decided.
Neoliberalism with European Union characteristics is beyond parody (though not contempt) and it mystifies me why these serial failures and intellectual midgets (blaming Cyprus for the circumstances of the forced bail in is not a new low, the standard was already rock bottom) are not first ostracized and then removed from positions on influence.
Until the deneoliberalization of the EU has begun things will continue to get worse.
All the Troika members signed off on the original deal and institutions involved are not going to drag out the story for obvious reasons.
Not all 3 may have the same level of culpability – – Madame Lagarde may have been snoozing through the talks for all we know — and from their interests what purpose would be served in having a public argument?
Late night panic talks are not to be recommended.
Beyond, recent history, here are some other developments on the economic growth side:
1. Wolfgang Schäuble, German finance minister, said in Washington DC on Friday that an ageing society and the time needed to work through its debt crisis will keep growth in Europe subdued for years to come. “No one should expect that Europe will deliver high growth rates for years,” he said.
2. “Asia’s growth near 6% to 7% seems to be the new normal,” said Changyong Rhee, chief economist at the Asian Development Bank. “We shouldn’t expect higher than that.”
3. South Korea’s government unveiled a $15.44 billion “extra budget,” its first fiscal stimulus in four years, showing the headwinds Asian economies are facing. While GDP has tripled in 20 years, real wages have grown by less than half the rate. More than half middle-income households are paying out more than they earn. Divorce rates have jumped; fertility rates have fallen to the fourth-lowest among advanced nations and the suicide rate is the highest of all 34 mainly developed countries that are members of the OECD. A quarter of SK’s workforce are temps according to the OECD.
4. In the past decade, the rise in commodity prices have undone the decline of the previous century, rising to levels not seen since the early 1900s. Despite current declines, research shows that demand for energy, food, metals, and water should rise inexorably as 3bn new middle-class consumers emerge in the next two decades. However, in the medium-term, slowing Chinese demand will hit activity in several countries.
5. Mexico’s hourly wages are about a fifth lower than China’s – – a huge reversal from a decade ago when they were nearly three times higher.
6. Europe has become the world’s largest recipient of foreign investment by Chinese firms.
7. The number of FDI projects into and out of Europe declined in 2012, mirroring global trends. A total of 3,891 projects into Europe were recorded, representing a 20.82% decrease in comparison with 2011. In 2012, the top 10 countries accounted for 72.19% of FDI projects into Europe. FDI projects into Ireland (new to Ireland and expansion or new projects by existing foreign-owned firms in Ireland) amounted to 147 and represents a decline of 21%. Spain and Poland were the only top countries to experience a growth in FDI.
8. Record indigenous Irish tradeable exports of €16bn in 2012 plus tourism and transport services exports, amounted to €23.7bn. However as a ratio of FDI exports discounted for MNC profit and revenues shifting would only account for 20.5% of the adjusted total.
9. Japan’s finance minister said this week-end that it will take more than the Bank of Japan’s (BOJ) target of 2 years to hit its 2% inflation target.
10. Limited regional overlap in exports means that a 40% devaluation of the yen would result in a 3% rise in the weighted exchange rate of the euro covering major trading partners.
11. Sovereign bond yields have fallen this month partly in response to BOJ’s aggressive QE moves. Japan’s four biggest life insurers, along with a number of smaller ones, are set beginning Monday to unveil their investment plans for the fiscal year that began April 1. They have a total of ¥332 trillion ($3.38 trillion) in assets—that even a small shift could cause big waves.
12. Mark Zuckerberg, Facebook CEO, called this week for more US H-1B visas for talented foreign specialists because “the supply runs out within days of becoming available each year,” even though two-thirds of US workers with STEM (science, technology, engineering, or mathematics ) degrees, are employed in non-STEM occupations and the US Department of Commerce has said that “growth in STEM jobs was three times as fast as growth in non-STEM jobs” over the past 10 years.
A high percentage of Asians are employed in Silicon Valley but racial and gender discrimination is rife. The number of women, Hispanics and blacks among the IT workers has fallen over the past decade.
From the Cyprus to the main event.
There is that potential 25bn Euro hole in our banks that will need filling at some stage.
It’s most likely isn’t it that that would be achieved through haircuts on deposits over 100k or recapitalisation by the state or both isn’t it.
I suppose the question is – how real is the possibility of another banking crisis in Ireland?
“However, they must have reasoned (i) he knows what he is doing and (ii) if he does not, the consequences lie solely with him.”
Nice bit of mind reading. I think they were wondering if The Hobbit part 2 would live up to the promise of Part 1: but I’m aware that’s a touch speculative on my part.
“Negotiation and its outcome are a messy business; a trial of strength. We have an example currently under way in relation to CPII domestically and no one blinks an eye. It beats me why a cold eye is cast on the domestic version but a moralising one on the international.”
Two issues! A trial of strength? Little Cyprus versus the Troika and 17 Finance Ministers would appear to be a bit lopsided?
It should be clear that the domestic non-issue is just a continuation of the Irish medias lack of serious analysis of events whether domestic or international.
Colm McCarthy is the only person that has questioned the debacle of April the 15 th.
It seems the decision to haircut depositors is now the new policy regardless of what some of the main players say. At least Schauble is forthright.
Diesel boom is quoted yesterday as saying that we should move on and put in place 80-90% of the necessary actions required for a banking union…regardless of the need for Treaty changes. So we get a de facto banking resolution mechanism without the necessary legal authority.
Seems like peculiar thinking for the head of the Eurogroup in what is supposed to be monetary union.
@ Gary O’Callaghan
How could the ECB give a “blanket guarantee of liquidity”? Is it not a contradiction in terms?
Your comments on the ECB and Target 2 leave me equally perplexed. Are you suggesting that the bank is trying to game the system?
The David and Goliath parallel simply does not cut the mustard as far as Cyprus is concerned.
Dijsselbloem’s job is to get agreement between two opposing camps and what he is suggesting is an obvious compromise (and coincides with what the Commission is saying).
It is not clear what the real motivation is behind the German stance. Perhaps our esteemed minister for communictaions is right (as conveyed on the Marian Finucane show), if I am recalling him correctly, “everything is on hold until after the German election”.
FYI on the legal question this very interesting recent report by Derek Scally.
Why the sudden concern regarding non-euro members? Do the members not have enough troubles?
There are those that argue that the ECB forced Ireland’s bail out of its banks to protect German bondholders or maybe less provocatively the Eurosystem.
Maybe so, but I hope we can all agree that the ECB had no similar vested interest is bailing out Cyprus’ banks. Hardly systemic to the euro project. And surely no particular venal interest in protecting the depositors whether they be of the Cypriot, Russian or British variety and no material interest in protecting the small group of bondholders.
The desire to bail out its bank(s) was the sole prerogative of the Cypriots. That they had access to any official bail out at all was a concession. A full bail out was simply not on. I can well believe the narrative that they were told they can have so much but the rest is up to them.
But German wise man, Bofinger, has put his finger on it. Cyprus shouldn’t have targeted any depositors per se, it wasn’t there fault. Cypriots decided that it was in their national interest to bail out the BOC. They should have bailed in its citizens in whatever way is politically acceptable in Cyprus, Bofinger suggested a wealth tax. The original idea of targeting all depositors, even those of good banks, was kind of along those lines but was hopelessly unfair as it let those “canny Cypriots”, as Bofinger put it, who moved their deposits out of Cyprus totally off the hook.
“Non-euro European countries are not going to join the SSM without this, Berlin worries”.
Agree. The 17 is more than enough and who in their right mind would want to join such a club. (Reminds me of Groucho).
It’s time to start talking about ‘exploring’ the idea of dual currencies in Ireland. Punt 2.0 le do thoil.
1) Talk about your commitment to the Euro while exploring options for adding a separate national recovery currency.
2) It can always be found to be unfeasible, especially if national recovery comes in a different form i.e ESM buying our Banks for 20 Billion.
3) Having 2 currencies puts us in a stronger position politically when it comes to discussing debt with the unelected bankers that now decide the fate of European citizens. 2 currencies to 1 is a lot easier than 1 to zero to 1, zero being the tricky part.
The politics is obviously tricky, but how about a joint statement from the Finanace ministers of the PIIGS. Saying they’re exploring options of additional 2nd currencies. Like that patronising statement from those clowns in Helsinki, expect propose a solution for something instead of make things worse.
Apologies in advance for making the same points as before but for me the Cypriot levy on bank deposits demonstrated how misunderstood the banking system is and I still question the logic of deleting money from people’s accounts in an economy that’s already short of money.
Let’s think about the system for a moment.
Cypriot banks typed new money into their borrower’s accounts and in doing so they increased their liabilities, [their ‘deposits’ account]
They simultaneously gained assets [their ‘debtors’ account increased.]
At that point it’s impossible for all loans to be repaid and inevitably they have to write off some assets from their ‘debtors’ accounts. Note that this would be the case even if Cyrpiot banks behaved prudently and lent sparingly only to those with the highest credit rating.
The solution is to reduce their liabilities and the account that was chosen was their ‘deposits’ account, deleting money from people’s accounts in the process at a time when the Cypriot economy needs it most.
Would anyone else like the troika etc. to look at the big picture here?
There’s no reason why 97% of money should exist as the banks’ liabilities in the first place. To delete money from people’s accounts and start this unnecessarily risky system again is so short sighted.
@ Brian Lucey
How would you make this system run better? Bear in mind that we use the banks’ liabilities as money.
If we let the banks go bankrupt their liabilities won’t exist anymore.
If we reduce the banks’ liabilities in any way to resolve the banks we reduce that amount of money from the money supply.
If we rescue the banks by replacing their reduced ‘debtors’ with another asset, perhaps ‘central-bank-reserves’ we discredit the system and all we do is delay the next wave of insolvency.
It’s too big a question for a forum like this but any thoughts welcome.
How were the members stupid enough to accept Cyprus into the EZ? Having lost its banks Cyprus has lost its “business model”. An economy totally dependent on foreign deposits and corporate tax dumping was an accident waiting to happen. The Cyprus banks collapsed because, in order to pay high interest rates to depositors, the banks chose to invest in Greece which was the only country with a risk premium high enough to have even higher interest rates. A country with a communist prime minister educated in the USSR ,a country that lost its only power plant to the explosion of an arms stockpile of contraband weapons originally sent from Iran to Syria!
You are starting to sound kinda foolish. As it happens you haven’t even got the mechanics of what happened in Cyprus right. The Russians et al deposited real money, even gold perhaps, in Cypriot banks. They in turn lent the money to the Greek government. That was a bad investment. There was no typing or money creation involved.
@ Overseas Commentator
Do you make this up as you go along?
Here , read this
” An economy totally dependent ” really? Y’know the data are not that hard to find.
“he Cyprus banks collapsed because, in order to pay high interest rates to depositors, the banks chose to invest in Greece which was the only country with a risk premium high enough to have even higher interest rates.”
“A country with a communist prime minister educated in the USSR ,a country that lost its only power plant to the explosion of an arms stockpile of contraband weapons originally sent from Iran to Syria!”
Wow. two racist and one xenophobic comments in one sentence
A) what matter where he was educated? Mrs Merkel was a commie edumicated functionary.
B) It was CONFISCATED by the cypriots doing their international duty, and was on teh way to GAZA which is not Syria.
Honestly. A basic fact checking would do this and many other blogs a world of good.
“After another round of discussions, in which Mr. Schäuble demanded a tax of as much as 18%, Mr. Sarris was ready to accept a levy of 12.5% on deposits above €100,000 and 7.5% for smaller deposits.”
The above is the FT quote posted by Frank Galton.
I posted the following on Namawinelake, having read that Schaeuble is now once again promoting the Cyprus deal as the ‘new template’.
“I wonder if I am the only person who is sick and ******* tired of Schaeuble and the destruction he is causing throughout Europe.
He lead the charge to destroy Cyprus, and succeeded, because they had the ‘wrong business model’. He used Dijsselbloem to mouthpiece his own bank solution for Europe. He also rubbished the June accord that Merkel had signed, almost before Merkel got back to Germany.
So, now he wants the Cyprus solution. Which one? The one that was finally implemented or the one he demanded the previous week, telling the Cypriot president that he could not care less where the money came from, as long as he got it.
Schaeuble is now by far the most dangerous man in Europe.
Let him have his Cypriot solution. But first let him and Germany return every red cent lodged in German banks or in German bunds to the country the money came from.
It is time to take the gloves off with Germany.
How dare Germany, and in particular Schaeuble, impose another solution on Europe. This must be stopped now.
It would be better to smash the Eurozone and the EU to smithereens, than to allow Schaeuble go one inch further with any of his proposals.”
People need to wake up to reality. We will not have a banking union because Germany does not want a banking union. With all the funds on the continent flowing freely and unfettered towards Germany, who is surprised.
1) The loans to Greece were 170% of Cyprus GNP . Some people think that it was a gesture of solidarity towards the sister country, other think that it was due to greed or stupidity.
2) It is true that Merkel studied in East Germany ,however she never was Secretary General of a communist party. Demetris Christofias was General Secretary of AKEL, the communist party of Cyprus, and was the European Union’s and Cyprus’ first, communist head of state.
3) The containers of explosives had been sized by the US Navy on a Russian vessel going from Iran to Syria .The US and England offered several times to dispose of them .The Cypriot government refused because he did not want to indispose the Syrian government .This has been well documented in the wikileaks.
a bit early in the evening for a nonsensical rant; the last thing Irish “canny” depositors in German banks want is for every red cent to be returned
Ah Jausus lads are yis thick or whah?
The big questions are:
1: What happens with mortgage underperformance and SME underperformance? Is it a second banking crisis? And will there be a Cypriot type solution?
2: How come the 10% drop in export figure has gone without a mention.
I am 100% sure that another shock is coming out way. You guys are too self absorbed to see it
@ Overseas commentator
I would advise that you shouldn’t really take Prof Lucey too seriously
I am not in least bit concerned about ‘canny’ Irish depositors. Neither is Schaeuble, as you should have learned from Cyprus.
But then you give an 80% rating the following:
“How were the members stupid enough to accept Cyprus into the EZ? Having lost its banks Cyprus has lost its “business model”. An economy totally dependent on foreign deposits and corporate tax dumping was an accident waiting to happen.”
The above commenter will not care too much about Irish deposits, ‘canny’ or otherwise.
Wikileaks….. right. Bedtime.
” US Foreign policy assessment as outlined by their Ambassador to Cyprus was as follows :
Official Cyprus is telling us their primary interest lies in fulfilling UNSC obligations and removing the cargo from the island, preferably under UN cover. However, RoC political realities — mainly, the desire to keep Moscow happy at all costs and prevent Damascus from retaliating by upgrading relations or links with the “illegal Turkish Republic of Northern Cyprus” — pose a countervailing demand that the vessel eventually reach Syria. We therefore recommend that Washington keep this in mind as it evaluates this latest proposal that Cyprus has decided to explore withthe Russians. It is difficult to gauge from here what Moscow’s position would be once the question reached the Council or Sanctions Committee. In any case, the RoC is looking for an out, and the passage of time now increases the likelihood of an unfortunate government decision to allow the Monchegorsk to sail.”
So ,according to you this cable was a forgery?
The FT’s excellent David Gardner on Cyprus
Ordinary Greek Cypriots will now feel they are victims of brutal outside forces in a German-dominated Europe. But Cyprus was also the beneficiary of brutal outside developments. Cyprus grew rich on the misfortunes of its neighbours; its decision to do a certain kind of banking for a living was shaped by the disintegration of Lebanon, the former Yugoslavia and the Soviet Union.
Beirut was the unchallenged financial and services entrepôt between the west and the petrodollar-fired Middle East until Lebanon descended into civil war in 1975. As that tribal war ground on until 1990, with two further wars with Israel to come, Cyprus acquired bits of Beirut’s banking business, but seemingly little of the ostensibly free-wheeling Lebanese capital’s conservative banking habits – such as high levels of provisioning against bad loans and very high deposits to loans ratios.
One need go no further than compare Cypriot banks’ catastrophic exposure to Greek bonds, a market with which Beirut financiers were familiar, but cautious.
Cyprus report into the munitions
Lawyer Polis Polyviou delivered his 643-page report on the incident to Mr. Christofias (then president) on Monday morning. Mr. Polyviou said the president of the Republic of Cyprus had failed to ensure basic security measures. He also dismissed the president’s defense, given in testimony to the inquiry, that “like a cheated husband” Mr. Christofias had been the last to find out about the danger the munitions posed. “In this case I am not referring just to an institutional responsibility. In this case, I apportion serious and very heavy personal responsibility” to the president, Mr. Polyviou said, the Cyprus News Agency reported.
The public inquiry has deepened the government’s embarrassment, as it emerged that Cyprus had kept the munitions in an effort not to anger Iran and Syria. Cyprus seized the Iranian munitions from a ship headed to Syria in 2009, enforcing a United Nations arms embargo. Mr. Polyviou said Monday that Mr. Christofias had told Syrian President Bashar al-Assad that the weapons would remain in Cyprus until they could be returned.
Mr. Polyviou said he accepted Mr. Christofias’s assurance that he had no intention of returning the weapons. But “that assurance, which I think was completely wrong, contributed in [the weapons’] staying” in Cyprus, Mr. Polyviou said, according to Cyprus News Agency.
Thanks for article by Mr. Fidler. It is a good summation of the situation.
Supposedly safe assets (senior bonds and deposits) are a lot more risky since the emergence of the new Schauble doctrine on banking. It is interesting that Weidmann is singing from the same hymn sheet as the good Doctor.
Where does that leave our “Pillars” given the facts outlined by Eureka above?
@ Brian Woods II
I’ll have to think of more entertaining ways to make my points in future – Even I’ve stopped reading my comments because I know what’s coming next.
As it happens though the accountancy procedures that banks carry out are my speciality and banks can’t lend depositor’s money to governments as you suggested. ‘They in turn lent the money to the Greek Government’ is exactly the type of thing I’m trying to correct lest the next generation of economists misunderstand the system.
If Russian depositors transferred money from their Russian accounts to Cypriot accounts the Cypriot banks would credit their ‘deposits’ account (liability) and would debit their ‘central bank reserves’ account (asset) [After the Cypriot central bank and the Russian central bank sort out the net difference of trading between the countries be exchange of ‘foreign reserves’ in the usual way]
Completely separately, if the Cypriot banks wanted to buy Greek bonds, they’d credit their ‘central bank reserves’ account (asset) and debit their ‘Greek Governments bonds’ account (asset)
Later on if the Greek bonds became worthless they’d credit their ‘Greek Government bonds’ account (asset) and debit their ‘bad debts’ (token asset) account at which point they are insolvent.
As well as this it’s impossible for all Cypriots to repay their loans so the banks would also have to credit their ‘debtors’ account (asset) and debit their ‘bad debts’ account (token asset).
Under the levy they would debit their ‘depositors’ account (liability) and credit their ‘bad debts’ account (token asset) and in doing so they would indeed delete money from people’s accounts and the Cypriot economy.
Incidentally for there to be a Russian deposit in the first place there has to be a matching debtor on the books of the Russian bank and yet the ‘deposit’ that was created in the process no longer exists due to the Cypriot levy making it even more impossible for Russians to repay their loans to banks. Hence the fear of contagion.
All this talk of pork, pubs, diesel booms and wikileaks is mildly entertaining but doesn’t address the real issue.
It seems very likely the euro will not survive. It may take 10 years, but the trajectory is clear.
John Foody is right, we need to start thinking about plan B.
Ireland was the first to be bailed out – perhaps we can be the first to ‘step’ out?
On the subject of the thread, at the recent round table at TCD Alan Taylor made the point (which he seemed to grapple with saying for some reason), that the Cyprus bailout was the first time that the imposed conditions included dictating what industry was or wasn’t acceptable for that country to pursue.
He said that that was wrong.
@ Paul Ferguson
Here’s one for you: MMT makes the Guardian.
‘There’s no need for all this economic sadomasochism’
Including a discussion of Ireland.
Plan B? A back-of-the envelope job?
It’s of course feasible to exit the euro with consequences, but who among the folks who can do something about it, would because of personal interest? Even the well-heeled beyond policymakers who may advocate it, would likely privately wish otherwise, if the punt was set to be restored.
Having had a future private pension subject to a haircut, because of lack of protection provided by those who feather their own nests well, I wouldn’t be too eager myself to see the back of the euro.
Neither would some Italians.
Last week Italy raised €17bn from the sale of local inflation-linked bonds to retail investors.
In 2011, retail investors in Italy owned €223bn worth of government debt, about 14% of the total, data compiled by the Bank of Italy show.
Italians in total own about two-thirds of the sovereign debt
The banking industry isn’t really an industry like any other. While banks traditionally intermediated , transformed maturity and provided utility functions, today’s megaprofits lie in credit production and the associated leveraged speculation. The Wall St shadow banking system, with its City of London ‘free zone’, was such glorious piracy that the globally systemic US banks were sucked in. A limitless, lawles bonusfest.
IMHO, Cyprus was just one more little country trying to pay with the big boys, and it was good while it lasted. The regional political background is outlined above. Core EZ banks are under threat now, and core EZ politics is hardening. It’s a case of divil take the hindmost, and the Cyriot banks came down with the Greeks. It wasn’t such a safe haven after all, it seems.
I don’t think Alan Taylor is reaslly correct in the point he makes, if I understand it correctly. Our banking ‘industry’ has been forced into massive deleveraging as part of the bailout terms. Prospects of overseas growth have been wiped at a stroke, and they have been left to rot in a stagnant domestic market. Our PTB can’t protest because they are so determined to whistle in the dark about ‘export led recovery’.
Haughey and his successors put our sovereignty into play. the Euro wired our domestic financial sector into the global bonus game, and all the outcomes now are path dependent. There isn’t a snowball’s chance of breaking the bank/sovereign link.
The IFSC hasn’t been trashed yet, but it will almost certainly be in firing line, along with the rest of the tax-arbitraging FDI services sector, when Bailout 2 comes along. We will be feeling the early tremors in the CP2 struggle.
thanks for the guardian link.
David Graeber has now succeeded to destroy the slightest amount of credibility, he might have had with me.
I had read his book “debt”. It was clear that he was at certain point just taking one or two anecdotes to claim a general pattern, but who knows what he knew about a certain subject beyond what he writes.
His “had based their entire argument on a spreadsheet error”, is just one of his typical sweeping allegations, for which since the 4/17 reply of Reinhart Rogoff it is clear, that this was just 0.3 of a delta of 2.2 for one of 16 numbers provided, and the rest standing.
And Reinhart Rogoff was never relevant for policy setting in Europe.
But maybe somebody shows me some German / AAA politician mentioning the names? I would be interested!!
Reinhart Rogoff spent a whole book collecting and describing information, that these financial crisises are a complex dynamic process, with contagion, spillovers and interdependencies between government, foreign, private, corporate debt, contagion within regions, etc.
And that this is certainly not described by just one simple number government debt / GDP and a growth rate as a simple function of that.
And all that is easily accessible for everybody, including one David Graeber.
The issue raised by CMcC is a key issue, and one that almost no journalists have tackled – why were capital controls introduced?
The uninsured deposits in BoC and Laiki were already frozen, so the controls were in effect only needed for insured deposits. (Also we know that the CBC (and presumably the ECB) only wanted controls for BoC and Laiki, not for all banks, and it was the government that instituted the island-wide controls).
BoC and Laiki were, post-merger and post-haircut, solvent. It appears that the ELA was about to “run out” and thus post-bailout the deposits were ring-fenced to prevent them leaving new BoC. The problem here is that the rules for ELA, as well as for other key ECB rules, are secret. This is totally unacceptable – there should be calls at the highest levels for proper transparency in the ECB. If I were a member of the relevant Oireachtas committee I would have hauled Honohan up within a week to grill him until some answers were provided. Of course the Oireachtas committees are a joke as they have no real powers to compel testimony, and no answers would have been provided, but that’s another problem. The bottom line is that it appears there are unpublished ECB caps on both ELA and Target2 liabilities.
There are still a lot of unanswered questions and myths about the Cyprus bailout, such as
1) The correct creditor hierarchy is now being used to resolve banks
The only banks in which depositors were hit were BoC/Laiki in Cyprus. Depositors in BoC/Laiki branches in Greece and other countries were untouched, as is well known. Why the different treatment? What is less well known is that the Troika lent funds (2.5bn) to recapitalize Hellenic and Co-op (in combination about 80% the size of BoC/Laiki), in exactly the same way as they have lent to banks in Greece and Spain – i.e. no creditor haircuts. Why the different treatment between the two sets of banks?
Also shareholders and bondholders in BoC were not wiped out. Depositors and old shareholders/bondholders now get new shares, of different classes. In practice I don’t know what this means as regards the value of the old shareholders’ new holdings, but the structure only makes sense if this is non-zero.
Also different classes of depositors were treated differently. Municipal and educational institution accounts and some pension funds were exempt from haircuts, and perhaps charities also (I don’t know how this ended up). The set of accounts deemed exempt is obviously a purely political decision.
So the whole thing was totally arbitrary and the result of political deals, or political weaknesses, played out first at EU level, and then at national level.
2) It was mainly Russian depositors that were hit.
Less than 5% of BoC deposits were Russian owned. The 20+ other banks that Russians mainly used were untouched as regards haircuts (but are subject to capital controls). It seems that Russia will now make any further loan assistance conditional on these controls being removed.
So why does this all matter from an Irish perspective? Well the fact that AIB and PTSB are not profitable even before any write-downs, and that PTSB has no chance of ever being profitable (60% of mortgages are trackers), means that in the medium term there’s going to be another restructuring, as NPLs are getting worse and retained earnings won’t solve the problem. If everyone acted rationally, and removed all their deposits over 100K from PTSB, where does the money come from to pay the insured depositors in a PTSB restructuring, given that the deposit insurance scheme is essentially unfunded? From uninsured AIB/BOI depositors? Or the taxpayer?
@ Flj et al
In the heat of debate, the fact that the ground is shifting with regard to austerity may be missed.
Berlin is clearly softening its stance (except, it seems, in the case of Ireland; not listed by Schaeuble among the countries in which the people are suffering!).
On the assets issue, I think that the Italian experince recently with regard to inflation-linked retail bonds demonstrates the opposite of what you suggest i.e. punters in Italy – and elsewhere – now think their money is safer with their governments than their banks. People are even buying prize bonds!
This demonstrates the rather obvious point that both governments and banks are in the banking business in the sense that it is essentially one of maturity transformation without which capitalist economies, as far as I can see, would cease to function.
The change in direction in Berlin is in no sense, however, a Pauline conversion. Rather, I would think, a burgeoning realisation that the mainstay of the German economy, its car industry, is threatened with a major downturn, with domestic sales, notably of Volkswagen (-17%!) collapsing. This will certainly soften the cough of the CSU in Bavaria in the lead-in to the September elections.
Merkel appears to be going round in an ever-decreasing circle. There is no obvious exit. The SPD finance spokesman, by way of example, complained in the Bundestag debate on Cyprus that the CDU/CSU were using its supposed opening to the introduction of eurobonds as a stick with which to beat it during the campaign!
@ Paul Quigley
It is an interesting further example, if such were needed, of the effect that the distortion of language can have on the comprehension of reality, a bit like describing the sale of imported motorcars as an industry.
I agree with you on the fact that a new restructuring of the Irish banking system is unavoidable , sooner or later provisions on non-performing loans will force AIB and PTSB to recognize that their equity is negative.
What I fail to understand is how the Cyprus precedent has any effect on the Irish situation (except that by now nobody will be stupid and callous enough to tax the deposits under €100000).
@ Gavin Kostick
Cheers for the link. Great line.
”they have made a powerful case that if we just get back to that basic problem of money-creation, we may well discover that none of this is ever necessary to begin with.”
Step 1: Russian makes deposit in Cypriot bank
DR CB Assets, CR Russian Deposit (no problem yet?)
Step 2: Bank buys Greek bonds in the market
CR CB Assets, DR Greek Bonds (still no reason to take a hit)
Step 3: Greek Bonds tank, so we are led to
CR Greek Bonds, DR P&L
Now Step 2 for the prudent bank might have involved German Bonds or indeed the Apple Corporation, in which case Step 3 would be unwarranted, contrary to your assertion that it was inevitable no matter how prudent the Cypriot bank was.
If you are arguing that levying people is bad news, who could object. Greek bonds going belly up was bad news. A wealth tax to pay for it would also be bad news. To suggest that a deposit levy is uniquely bad news because of how we account for money just doesn’t stack up.
BTW the Russian Deposit would not, ceteris paribus, have left in its wake an asset of the Russian banking system. By c.p. I mean presume that the reserve ratios had remained the same then in the ebb and flow of money creation/cancellation the loss of the Russian deposit as a liability of the Russian banking system would have been matched by a drop in assets. In the unusual event that the original deposit was directly linked to a loan, that particular loan may well be still in place but that is quite irrelevant.
If your constant assertion that all loans can’t be repaid is merely a reflection of the maturity mismatch, who can argue, but I sense you see some more profound fallacy.
Apologies if this has already been referenced:
@ Brian Woods II
I see we’re agreed on the accountancy procedures and so the situation is fundamentally very different to ‘They in turn lent the money to the Greek Government’.
I’m pointing out that if current accounts were removed as liabilities of the banks then they’d be risk free. If a bank went bankrupt the balance of people’s current accounts would move to the new bank of their choice.
If anyone was willing to lend money to a bank for the purposes of secondary lending then the normal rules of capitalism should apply and the original investor should see their assets drop.
However the daily payments system would not be affected under such a system.
The systemic inevitability of loan defaults comes from the fact that compound interest is owed on all the money the banks create. I totally agree that in theory is it still possible for all loans to be repaid since banks only delete the principal of the loan upon repayment but I’m looking at the extent of the mortgages and SME arrears for my conclusion.
The reason we haven’t been plagued with the complications of mass default for many decades is because the money supply has growth at an average of around 7% per year for almost 50 years.
If you take out a loan and over the course of the next 20 years the money supply quadruples your loan can feel quite manageable. Any loans taken out today will struggle/default when it’s not feasible for the money supply to grow at such a rate. Inevitable loan defaults are going to make the system unfit for purpose and unstable for the foreseeable future I think.
It was Mr. Fidler that pointed out that the assets were more risky now after the policy shift…I was merely pointing out that if they are going to haircut deposits
(whilst maintaining the parri passu supposed rule) then your senior bonds are automatically at risk. As regards the Italian retail bonds..is it the case that these are unique (that word again) and Italians don’t need that much external bond buyers..a bit like the Japs.
The ground has shifted again today in Cyprus with the news that the exempt categories are to be haircut after all by 27.5%….supposedly so that the large depositors don’t suffer too much.
Could Russian pressure be at work? It is a real dogs dinner.
Barrosso admits today to operating Federalism by stealth. Seems the ground is shifting in Brussels.
Cypress was also different or special in how it’s banking sector was funded,presenting quite a nice target.Unfortunatly the initial reaction was use a shotgun,almost injuring some “innocent” bystanders,rife much better approach.
We’re in danger of seriously straying off topic.
On the face of it, requiring M2 to be totally collateralised by CB assets would eliminate the systemic importance of any bank to the money transmission system, at least in the short run and would remove the “ATMs won’t work” scare. However, I take the defeatist view that since no country has implemented this regime the advantages do not override the obvious complications in operating such a system.
In any event the real systemic importance of a TBTF bank are in regard to its other liabilities. Furthermore to control the money supply you really must look beyond M2.
Banks lending to the Greek government was of course a slip of the mind but I hope not in the deposit selling category.
“A deposit is just a claim on a bank. It is not ownership of the cash in the bank. “If that was wanted, the money should have been placed in a segregated trust account, not on deposit.”
Economics often frames issues in terms of rational agents. Why would a rational agent not choose a segregated trust account?
Why place money in a bank at all? The conventional answer is to earn interest. A segregate account would not earn interest, indeed it would incur charges.
MH, who is certainly on top of the data, states in a previous post.
“In 2011, retail investors in Italy owned €223bn worth of government debt, about 14% of the total, data compiled by the Bank of Italy show.
Italians in total own about two-thirds of the sovereign debt.”
This seems to mimic the Japanese situation.
Depositors, it seems to me, are only concerned with their own situation. OC above makes a point which struck me some time ago and on which I made a tentative comment i.e. in practice there now exists an EU wide guarantee for deposits up to €100,000 as that is what the average punter recognises is the political breaking point.
Incidentally, Isabelle Kaminsky of Alphaville had some very interesting coverage on the impact of the Cyprus imbroglio including the possible role played by the liquidation of Anglo-Irish. It is far too technical for me to follow but others may have views.
With the euro train apparently destined for t@ts up central there will be rational people more interested in capital protection than the lorelei call of interest from failing banks in immoral and undeserving peripheral europe. It is not like there aren’t precedents either. Think of all the dumb money that went into Bankia shares.
I don’t believe the writer is correct. Seems there is no such thing as a segregated trust account. A banker is not a fiduciary.
See Foley v Hill…
Per Lord Cottenham…
“The money placed in the custody of a banker is to all intents and purposes the money of the banker, to do with it as he pleases. He is guilty of no breach of trust in employing it; he is not answerable to the customer if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of the customer, but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the customer, is when demanded, a sum equivalent to that paid into his hands.”
Here there is a deep and deepening distrust in all economic theory, and all, especially anglo, economists.
Bruno Kreisky once said, being asked, why austria was so successful after WWII: We exported all of our economists.
I have here the german version of a book in front of me : James O’Connor 1973 “The fiscal crisis of the State”, at a time, where most western countries had a debt/GDP of about 30%
Today we laugh about that.
Some other books from the 70ties / 80ties, I read at that time, about long term, systematic government fostering of environmental research since the 1950ties, and wonder, whether that taxpayers money was well spent.
In the eighties we got sold on the Reagan stuff, and the Japan miracle (Queisser: Kristallene Krisen), and how low interest rates spurred some seemingly invincible Japanese MITI did it so much better than us. And we will all cater real soon in an eurosklerotic Disneyworld , wearing lederhosen, to the tourists of America and Japan and the other asian tigers.
And our 3-tier school system is just neanderthal, etc. etc. blah, blah, blah.
Private universities, lots of tuition, freely roaming credit sector.
Lord Cott is referring to a different thing. If you leave your dog in the trust of your bank manager whilst you go on holiday, she certainly can’t do what she likes with it. Similarly if you placed notes and coin, precious metal, jewellery, stocks and share certs, the deeds to your house etc. in her trust she again is not free to do as she pleases with them. Money other than notes and coin? What does that mean? You could leave your bank statement with her but all that would protect is the piece of paper; whichever bank issued the statement is free to do what they will with the “money” which it is stated you have deposited with them.
Brian Wood 11
The difference is if you give them money. Try AIB today and see if they will take a million into a “segregated trust account”. I don’t believe they will.
As for storing valuables…this is a service they formerly supplied for a fee. I’m sure there was a limit on the potential liability should things go wrong.
What do you mean by money there? Be very precise.
I moved over the years from the left to more conservative.
Bismarck said: who is 20, and is not a socialist, has no heart, and who still is it with 40, has no brain.
When I worked in the student union (“Fachschaft”) the political police came and searched my mailbox, and I was about 1 second away of slamming somebodies fingers in this box, before my nose touched a search warrant, I still have a copy of today.
Recenctly, I went to the library and looked up references of what the leader of the German communists, Sahra Wagenknecht, an economics PhD has to say. The references are thin, the reasoning often naïve, but I do not have any reason, so far, to question her good character.
I can not say the same about people like de Grauwe, Münchau, many others in many other outlets, and of course not the speculator Soros, and all those folks working for his enrichment, via INET or otherwise.
The Reinhart / Rogoff topic of the last week is a kind of touching stone of who argues honestly or not.
Disagreeing with other peoples points is one thing. Systematic distortion of what they said, another.
Cyprus bocht .
It is hard to kick against the pricks
The point is as always, the BANKS in IRELAND!
Rescued, once already, it is implicit in Colm’s note that they will need more restructuring. Cyprus was a complete mess for reasons set out by commenters above. Ireland was not far behind and much more “money” is involved.
Once there is a run on a bank, still more ALL the banks in a small stupidly run country, there is a strong likelihood that it will continue despite any rescue?
So my comment is this: all quoted European banks are probably insolvent, but some have lost so much confidence that the likes of Soros and so on, can make money out of clearing the decks for the post boom economy to form? This will be a fully dead, BUST, economy, not the Zombie version in Japan or elsewhere.
One Reggie Middleton, not a Corkman, Chris, has drawn international attention to the Irish Banks. Has anyone here heard of ZeroHedge? He makes good points, albeit not as a lawyer or accountant. The Jig is up, Gentlemen of Venice! There will be no soft landing for the remaining attempts to create a Switzerland by the Liffey. The City Of London has yet again, won. They hold the gold and the bog trotters have a stinking load of mouldy paper made everywhere else. Emigration can resume and the plantation of Ireland by the great and good from Romania and Bulgaria can begin.
What on earth made CJH and DD think they could make this work when the Kondratieff wave was clearly set out? Bob Chapman, RIP, sold his NY apartment early because he knew what was coming. Steve Keen mathematized history for a late pass, but by then the Green Jersey, animal spirits, were evident. Gentlemen, you are about to witness the modern equivalent of the Famine, in exquisite slow motion, so gird your loins?
Asking as Colm does, whether the Purser or Chief Steward will get to rearrange deckchairs in rainbow colour is irrelevant. The real question is one of timing. When? Has the Cyprus experiment lit the fuze? Is the contagion now so evident that the BOJ-fuelled speculators can take down all of the EU banks or just the weakest?
For those who played their part in organizing this Extravaganza, thank you!