Good for parliament having not one member vote for the measure while the ECB blinked – or sort of blinked. Bloomberg was reporting that the ECB announced it would continue to provide liquidity to Cyprus within the rules. I am not sure what that means, within the rules, as I was under the impression that parliament would have had to accept the terms of the bailout in order to benefit from the OMT program.
I’ve written a couple of posts about Cyprus already, but didn’t post them because I couldn’t really believe that kind of deal, including confiscation of bank deposits, was happening. If the point of the entire affair is to preserve the integrity of the banking system, it seems counterproductive. It would be much better to just let a bank or two go down rather than spoil the whole barrel, euro zone wide, over a few bad apples.
Petar Sisko was so kind as to explain to me the reasoning in the comment section of a post by Marcus Nunes.
Heres a take: I think it is because of the perception of Cyprian banking system in EU. Germany is pushing hard against countries like Luxembourg and Switzerland which are perceived as destination for tax evader. Cyprus is perceived as place for (mainly russian) mafia money laundering. They also have problem with log corporate tax rate in Cyprus which is very low so they are a sort of mediterranean off-shore place where people register they businesses. In Germany they had pretty loud public debate about helping banks with laundered money even before this summit, and since the election is behind the curve, Schauble wouldnt let anything negativly influence the outcome.
It’s very helpful to understand the politics surrounding the deal; and I have to say that it is on pretty shaky ground that points straight to the euro zone periphery being mere satellites of the German state in a one-size-fits-one manner — to the deep hot place if what’s good for German politics isn’t good for anyone else.
And so I wonder how long the periphery is going to put up with the abuse of being bankrupted by tight money and then suffering the effects of punishments levied on an entire population for the sins of a few. The bank levy is not justice; it is theft on top of the theft of tight money, robbing multitudes of their livelihoods and futures in a way that only standing armies could do otherwise. It’s disgustingly tyrannical.
As an aside, I noticed that the rumblings in Europe over the Cyprus deal have tightened monetary policy in the US somewhat, which is the last thing we need over here. If I were an adviser to President Obama, particularly Secretary Lew, I would have him refer this matter of the bank deposit deal over to the Department of State so we can test the mettle of our new Secretary of State in making it an international incident. Is John Kerry part of the good ol’ tyrants’ club or is he a real small-d democrat and liberal? Enquiring minds would like to know.
For those who think I’ve gone off the deep end in suggesting such a thing, I would remind them that what the ECB is doing to Europeans is only slightly different than declaring war on one’s own people militarily. The only real difference is that the damage is not to life or limb, at least not directly; it still results in the same kind of economic suffering and loss of freedom and democracy as war. And we need to ask ourselves if every life lost in WWII meant anything at all as we sit back and just watch everything gained in that war and cold war evaporate into thin air. If we don’t try to do something about this now while something can be done diplomatically, we will most certainly regret it.