The Eurozone Crisis Thread

I wonder whether there is an ulterior motive in trying to keep Greece on track. Huge numbers of wealthy and moderately wealthy Greeks shifted their savings to Cypriot banks in the fear that domestic ones would collapse or, more feasibly, that Greece would convert back to the Drachma. This will come add a pretty sharp disincentive to doing that again.

Seems strange not to do this as a wealth tax, rather than simply penalising savers. A million Euro holiday home is left untouched but a million Euro in the bank will be decimated.

Christopher Pissarides, a Nobel Prize-winning economist and chairman of the government’s economic advisory committee, warned that the island’s economy would collapse within “two or three days” if the legislation failed to pass.
“If the law isn’t voted through, what happens will be much worse. There will be many bankruptcies and most Cypriots will lose everything because the banks will not reopen,” he said.

hmm.

Mr Anastasiades explained that Cyprus gave way after the ECB threatened to push the island into a disorderly default by withdrawing liquidity support for Laiki, its second-biggest bank, on Tuesday.
He said Cyprus had a choice between “a catastrophic scenario of disorderly bankruptcy, or a scenario of a painful but controlled management of the crisis”.

oh je.

always a good thing that I roadtest my halfbaked first impressions, ty caek, altho tbf I did concede the false dichotomy point in the original post, along with a clear statement (backed up by y'self) that most of the money in cyprus is held in banks by foreign nationals

it's more socialist than letting the economy fall apart! if indeed that was what would have happened

the point that we have reached in contemporary capitalism: paying for bank bailouts w/ the savings of a country's ppl in order to preserve the rapidly depleting capitalism husk is more socialist than idk communism?

ja, sorry, "ludicrous" a bit strong, but i think it's a pretty confused interpretation of this to consider it socialistic.

cyprus's finance minister 17 days ago:

Cyprus's new finance minister on Friday ruled out a haircut, or imposed losses, on bank deposits to ease a financial bailout from international lenders, now stalled amid worries about debt sustainability.

"Really and categorically - and this doesn't only apply in the case of Cyprus but for the world over and the euro zone - there really couldn't be a more stupid idea," Michael Sarris, who took over his post on Friday, told reporters.

Sarris, a widely respected economist, was the first appointment of new Cypriot President Nicos Anastasiades, who won presidential elections on Feb. 24 on a platform of constructively attempting to seek a deal with lenders.

letting the economy fall apart would not result in communism or anarchism or what I believe may be ideal: localised economies

it would result in exploitation, foreign first-world sharks moving in and buying up land and people, cyprus finally sublimated as luxury mediterranean commodity with no autonomy whatsoever (more so than at present), slave labour and capitalism of a far nasties kind than this bureaucratic fudge

what's the solution? dunno. open table.

first maybe return northern autonomy to cyprus government

what would that do?

all for what isn't actually that much money.

is it really not that much? or is it only considered too much relative to cyprus gdp?

it's not that much from the POV of the ECB

haha this is a clusterfuck

This is so dumb and counterproductive and people at all ends of the political spectrum seem to agree, but whatever this is/was, it certainly isn't socialism.

Some background on the Russian connection:

http://m.bbc.co.uk/news/business-21831943

Lots of that money is filtering through Cyprus to the rest of the EU at the moment. Inflating property prices in London too. A Cypriot agent that acts on behalf of Russian clients offered my mother an insane amount of money for some commercial property she inherited - more than twice the market value, last year.

Rethinking this. If it pisses enough people off to bring about mass redeployment of funds into credit unions, it'll have been an inadvertent success. Otherwise, it's enforced chipping-in where what is chipped into is most probably a reloading gun

oh ... kay.

Cyprus may drop tax for small savers

Cyprus now says bank depositors with savings under $26,000 would be exempt from a levy, amid continuing outrage over a bailout plan.

Better. Exponential curve, Cyprus!

every article i've read about it is a mixture of bafflement and anger. the ft seemed kind of amused at the incompetence this morning, implying that basically what happened was all the negotiators were very tired and got confused over the weekend. shops, hotels, etc. refusing credit cards apparently.

i imagine there was some idea of an ultimatum like "if you're going to make us do this, we'll do it to everyone!" and then everyone else just called the bluff and whoops.

http://krugman.blogs.nytimes.com/2013/03/17/the-cypriot-haircut/

yeah what krugman says is what I don't get about this -- why isn't this just going to make everyone feel less secure about having their money in Cypriot banks? I mean maybe some of the littler guys won't -- as a cypriot electrician interviewed on NPR said, "where would I put it?" But overall it can't be great for their banking system.

alphaville has some speculation this is a move to lean on russia for a heavier hand in the bailout.

Russia's pretty heavily exposed in Cyprus, right?

yeah max otm in the other thread that this isn't the fait accompli that i (and others) thought it was

i guess the prospect of literal defenestration is proving a strong disincentive

if anything the russians will be hit harder now, since the money still "has to be" raised

weird "mouse that roared" vibe from this

Well Cyprus mps voted it down.

cyprus to EU: gfy

Prime Minister Dmitry Medvedev said the euro zone decision seemed to be aimed at confiscating someone else's property.

"This practice, unfortunately, was well known and familiar in the Soviet period," Medvedev was quoted as saying by Russian media.

Oh man

Plan B, say government advisers, would require state pension funds to hand over about €4 billion of their reserves. Cyprus would ask Russia for the other €2 billion, arguing that Russian companies, with an estimated €25 billion stashed in Cyprus, would then no longer face the prospect of losing 10-12% of their deposits. Michalis Sarris, the finance minister, flew to Moscow as soon it became clear the bill would not be approved.

that's one of the things we did <3 <3 <3 governments/banks

haha ok no touching savings but wipe out retiree's pensions sure that's legit.

Germany's finance minister has warned Cyprus that its crisis-stricken banks may never be able to reopen if it rejects the terms of a bailout.

Wolfgang Schaeuble said major Cypriot banks were "insolvent if there are no emergency funds".

cyprus should just extort russia into paying the whole bill

don't even touch the savings

http://static.guim.co.uk/sys-images/Guardian/Pix/pixies/2013/3/19/1363725322421/Protesters-outside-Cyprio-008.jpg

Marios Mavrides, a government MP and former finance minister, raised the prospect of the country becoming the first to leave the euro. He told BBC2's Newsnight: "If we cannot come up with the €5.8bn in a few days then I think we will go to the Cyprus pound. That will be the end of Cyprus in the eurozone. We're going to exhaust all other possibilities but what can we do? If we have no other solution we cannot leave the people without money."

wtm

to add to my panicked and unproductive waffling upthread, I'm going to Cyprus in September to see my grandmother. will be able to report back on the riotous disrepair utopian barter economy

Prime Minister Dmitry Medvedev said the euro zone decision seemed to be aimed at confiscating someone else's property.

"This practice, unfortunately, was well known and familiar in the Soviet period," Medvedev was quoted as saying by Russian media.

― Mordy, Tuesday, March 19, 2013 10:22 PM Bookmark Flag Post Permalink

"Thankfully," he continued to himself, stroking his siamese cat, "today we conceal it much better...muhahahaha...HAHAHAHAHAHAAAAAA!"

Cops at lagarde's apartment?

Heard something about that too...

http://www.guardian.co.uk/world/2013/mar/20/christine-lagarde-flat-raided-police

yves smith gives her take:

http://www.nakedcapitalism.com/2013/03/cyprus-bailout-stupidity-short-sightedness-something-else.html

14. Even despite all the arbitrariness above, at least it solves the problem right???

Absolutely not. You will haircut 10% of deposits on day 1 to make up a capital shortfall and promptly watch 30% of the rest of the deposits flee the country, leading to a much bigger capital hole that Europe will have to fill.

In addition, this will severely cramp Cyprus’s main economic driver the last 2 years (selling real estate, tourism and accounting services to Russians) so any concept that it will make the debt “more sustainable” comes from a lunatic place in financial modeling. Cyprus is a 78% services-based economy. So, if you assume that GDP growth is exactly the same before and after you confiscate the assets of your clients, well, I have a solvent Cypriot bank to sell to you…

This is so obviously risky, that the more paranoid commentators believe it is a deliberate plan by Germany to end up as a multi-deca-billion creditor to Cyprus to which the pledging its oil and gas reserves is the only solution. I don’t think this is the case, but boy it is getting hard to believe that they are this short-sighted.

all the front pages in germany today are of the demos in cyprus where people held up pictures of merkel in nazi uniform, etc. the german elections later this year are going to be oh boy.

why don't the ppl in cyprus realize that this isn't the germans fault but the fault of an elite of ideologues???

Not sure where this theoretical EU pot of gold is supposed to come from - it's the Member States holding the money and EU competence in area of public health is close to nil. I guess you'll be comparing the situation to the financial crisis- but in this instance, there were mechanisms already in place to put together financial packages. So ultimately the question is basically whether Germany and France will agree to inject massive sums to save Italy, which I guess is unlikely for the time being since they will have to reckon wih their own crisis. So maybe your overall point holds, in situations of widespread crisis, cross-border solidarity goes out the window (cf. export bans of medical masks by some countries)

As long as we don't have an EU-wide health system (yes I know about the EHIC), this isn't to be managed at the EU level.

I think France and Germany will inject massive sums into Italy, yes. The ECB can print euros as needed. nb I am a philosopher not an economist.

https://ftalphaville.ft.com/2020/03/18/1584528247000/The-ECB-is-under-pressure-to-act-fast--/

Acting now..

😷😷😷

Italian bond yields jump as EU leaders fail to reach agreement
The failure to reach an EU deal is causing investors to worry about the eurozone, with Italian borrowing costs rising. Talks have been suspended until tomorrow.

Eurogroup chairman Mario Centeno said on Wednesday morning:

After 16 hours of discussions we came close to a deal but we are not there yet. I suspended the Eurogroup and (we will) continue tomorrow.”

Failure to share the financial risks between hard-hit countries such as Italy and Spain and wealthier nations such as the Netherlands and Germany could endanger the eurozone response to the pandemic, so investors are watching closely.

Via Reuters:

The 10-year Italian yield rose 20 basis points to 1.799% in early European trading, hitting its highest since March 19. Two-year bonds yields were up 22 basis points [0.22 percentage points] on the day at 0.79%, the highest in three weeks.

The gap between German and Italian 10-year bond yields also widened to 213 basis points [2.13 percentage points], up 29 basis points [0.29 percentage points] on the day.

#Italy bonds rally w/10y risk spread over Germany plunges to 235bps as Moody’s hints that it could hold off downgrading Italy to junk. Moody’s currently ranks Italy as Baa3, its lowest investment grade, w/review scheduled for May8. S&P will review Italy rating this evening. pic.twitter.com/OhBuMKIS85

— Holger Zschaepitz (@Schuldensuehner) April 24, 2020

https://www.independent.co.uk/news/world/europe/coronavirus-europe-economy-recovery-france-germany-grants-macron-merkel-a9520566.html

Breaking: Apple and Ireland have won their appeal against the European Commission's €13.1 billion ruling:

The General Court of the European Union annuls the decision taken by the
Commission regarding the Irish tax rulings in favour of Apple

— Tony Connelly (@tconnellyRTE) July 15, 2020

Seems bad. Potentially no impediment to Eurozone countries setting an effective 0.005% tax rate on international companies afaict, though it will be appealed.

ffffs

If Berlusconi somehow ends up as PM that will be another pretty good indication of where 2021 is headed https://t.co/sQYdfqxzmu

— Populism Updates (@PopulismUpdates) January 12, 2021

No, grazie.