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Pandora's box in Cyprus

Automatic Earth:

Still, when you see things happening that seem this far out of field, there's often an ulterior motive behind them. Like if the Eurogroup counted all along on Cyprus not accepting the terms of the deal forced upon it. Or Anastasiades counting on the fact that the deal would never be ratified by parliament.

Exactly. Please don't throw me in the briar patch?

Meanwhile, I'm curious to know who the Cypriot politicians on all sides of the aisle are talking to today. And yes, Beppe Grillo comes to mind again,* Niall Farage [see here from 2010] perhaps. Who else can they expect any support from?

More tomorrow (the vote coincides with a national carnival holiday) and Tuesday. Let’s be clear on one thing in the meantime: the deal as it is on the table is an unmitigated disaster for Europe, and the effects will spill to at least the rest of the western world. At the same time, if Cyprus says no, the implied threat is that Europe will let it fall like a stone, bankrupt the banks, and throw it out of the Eurozone.

And that would be the end of the Eurozone; if Cyprus leaves, so will others. Are they really going to take that risk after 5 years, 500 emergency meetings and €5 trillion in bailouts? Hell no, you kidding?, but they still threaten to do it, and in such a transparent fashion? Why would Anastasiades, or anyone else for that matter, fall for that? Something doesn't add up here.

The eternal question: Stupid and/or evil?

NOTE * I found this post by Googling "Grillo Cyprus." Nothing else yet!

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wanderindiana's picture
Submitted by wanderindiana on

Krugman says shady Russians deposit in Cyprus... Hmmm...

You can sort of see why they’re doing this: Cyprus is a money haven, especially for the assets of Russian beeznessmen; this means that it has a hugely oversized banking sector (think Iceland) and that a haircut-free bailout would be seen as a bailout, not just of Cyprus, but of Russians of, let’s say, uncertain probity and moral character. (I think it’s interesting that Mohamed El-Erian manages to write about this thing, fairly reasonably, without so much as mentioning the Russian thing.)

shargash's picture
Submitted by shargash on

The "bail-in" has variously been described as a tax or a levy. Neither of those would normally come with any kind of exchange (paper equity or fantasy nat gas shares). Now, maybe there is a translation problem, but I think it is more likely they're backpedaling once they realized the can of worms they've opened.

Tomorrow is going to be interesting, especially since Cyprus has a carnival-like national holiday tomorrow. If the people are in the streets anyway, and they're really pissed...

Jessica Yogini's picture
Submitted by Jessica Yogini on

Perhaps the more crucial thing to watch for is the level of withdrawals in other Southern European countries, especially Italy and Spain, and even in core European countries. How do they view this precedent of partial confiscation of people's savings? To what degree do they see it as a threat to themselves? To what degree do they think that Cyprus is different and "it can't happen here", "Not to us"?
Modern civilization is also a complex network of relationships of trust. The willingness of American and European elites alike to throw that away is impressive.