Former Cyprus Central Bank Head And Senior Fed Economist: "The European Project Is Crashing To Earth"

Tyler Durden's picture

Back in August 2011, one of the most prescient European (ex) central bankers, Cyprus' very own Athanasios Orphanides was optimistic, but with a caveat: "I am optimistic that with the right actions and effort by all we will pull through this," Orphanides told reporters after a meeting with Finance Minister Kikis Kazamias. They were Orphanides' first public comments since warning authorities in a July 18, 2011 letter that Cyprus ran the risk of requiring an EU bailout unless urgent action was taken to shore up its finances." 

Two years later, following endless dithering and pretense that just because the ECB has stabilized the markets, all is well, and "action was being taken" when none was (because in the New Normal the lack of market collapse is somehow supposed to represent structural changes are taking place, which never actually happen), Cyprus is beyond the bailout stage - it is now quite literally on the verge of total collapse. This is also why Orphanides, who recently (and perhaps prudently) quit as Central Banker of Cyprus following a clash with the new communist government (and was replaced by a guy named Panicos), no longer is optimistic. "The European project is crashing to earth,” Athanasios Orphanides told the Financial Times in an interview. "This is a fundamental change in the dynamics of Europe towards disintegration and I don’t see how this can be reversed.

It can't. Which is what we have been saying all along. But it apparently takes a former Federal Reserve senior economist to say the perfectly obvious, and for reality to finally hit front and center.

More from the FT's interview with Orphanides:

This week’s events had made “a mockery” of EU treaties, he added. “It suggests that in Europe not all people are equal under the law.”


“We have seen other eurozone countries, the Netherlands, for instance, put national interests ahead of the European interest by trying to bring down the economic model of countries such as Cyprus or Luxembourg.”


He also called into question the credibility of the ECB’s threat to pull the plug on the Cypriot banking system. On Thursday, the ECB warned that if an EU-IMF rescue programme was not agreed by Monday, it would ban the use of “emergency liquidity assistance” to prop up the Cypriot banking system.


According to Mr Orphanides, about €10bn of ELA is being provided via Europe’s Target2 payments system used by its central banks. “If you say it is no longer authorised, it would force the Central Bank of Cyprus to default on its Target2 obligations. Cyprus would then have to leave the euro area.”


“The ECB will have forced Cyprus out. This is the one thing Mario Draghi doesn’t want to happen – he does not want to be the ECB president who triggers the break-up of the euro. It is painful to watch.”


So far, global financial market reaction to the Cyprus crisis has been subdued. But Mr Orphanides warned that would change. “I don’t think that the full extent of the shattering of the trust that we have seen in this case . . . has been seen fully yet.


“Banks’ funding costs in the [southern eurozone] periphery will rise further – there is no way we will avoid that. This, in turn, will make the recession in the periphery deeper, adding to the misery that the mishandling of the crisis has caused so far.”


“Financial markets are over-influenced by what happens in London or New York – there, the intricacies and processes of European politics are not very well understood.

We couldn't agree more.

As a reminder, Mr Orphanides was governor of Cyprus’s central bank from 2008 until last year, when he was replaced after clashing with the island’s then communist government. As member of the ECB’s governing council, Mr Ophanides’ views were respected because of his background as a senior economist at the US Federal Reserve. He has since returned to academic economics in the US.

We can't wait until the world of very serious economist, some of them even with Nobel prizes, turn on one they proudly praised as their own, as recently as months ago.

In the meantime, Orphanides is absolutely correct.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
overhere2000's picture

The rumors of my death have been greatly exaggerated.  

redpill's picture

I appreciate the little thumbnail of the Executor's end.


As for the Eurozone, I don't think there was all that much trust to begin with.

Careless Whisper's picture

"The European project is crashing to earth,”

The European Central-Command-and-Control project is crashing to earth, and returning democracy to the European sovereign nations.

fixed it for ya'

TBT or not TBT's picture

With the usual interim nationalistic authoritarian phase, democratic or not so democratic. Europe will revert to form.

bigyimmy007's picture

Going to be interesting to see the world revert into what it was before bankers and hack politians crammed globalization down our throats.

It's amazing that oligarchs just never learn that nothing is eternal, especially not absolute control of large swaths of people.

Buck Johnson's picture

No kidding, Sovereign nations are coming back into being.

McMolotov's picture

The end of Return of the Jedi.

The headline made me think of the song Gronlandic Edit by Of Montreal:

"We fell back to earth like gravity's bitchez, bitchez. Physics makes us all its bitchez."

(Reality is somehow more fucked up than this video.)

disabledvet's picture

this stuff makes me think of this guy:
"every action has an equal and opposite reaction." scientific processes are not balanced (yin/yang) but rather "cross purposed." this is why applying a social scientific construct ("communist government") to an actual population (happy little island people) is REALLY a bad combination. i think the best response is build a bunch of these "and point them in various directions":

hansg's picture

Star Wars. It is a huge starship ("executor") crashing into an even bigger specimen (the "death star", only recently completed after spending quadrillions of intergalactic credits. Just imagine the amount of economic stimulation this one battle produces!)

Alexandre Stavisky's picture

"The fact had gone all abroad that the foreign crank who carried million-pound bills in his vest pocket was the patron saint of the place. That was enough. From being a poor, struggling, little hand-to-mouth enterprise, it had become celebrated, and overcrowded with customers."


Tailors, tinkers find the day to day fabrication of real goods tedious. Rise with real fabrication. Fractionalization, hypothecation, paper and digital unbacked and unredeemable money enforced by bully boys with guns and legal tender laws. Presto Million pound notes. A good commander keeps his core well-defended with best troops. Outer ring of defence is manned by mediocre warriors and pickets. Hence EU project was intended to fail. Pushed forward to absorb the first shocks and protect more vital interests.

Renewable Life's picture

Article Translation:
"Don't hang me, hang the other guys!"

NewThor's picture

Many things are crashing to Earth.

Ragnorak is gonna be all sparkly with fire.

Vaya con Dios,

you beautiful 



Where u at NASA...errrr...spaceX?

maskone909's picture

Dood if thats your vid u are pretty fuckin funny. Nice editing good work

NewThor's picture

Thank you sir. 

I think it's dandy for an 8 hour turn around.

I'm spending more time on a video that deals with the...


...I have my ideas.

But. Did you guys know I front ran Nasa on the 8th?

I beat them by 5 hours.

The Sun really is acting Jim Morrison strange.

And, a cosmic event that changes everything

would sum up the monetary and fiscal policy

of every government since the 80's.

Though. If those fuckers knew,

those fuckers will pay for it.

forever +1 beyond the singularity.




new game's picture

rather go poof from a hot rock than a room of rocks slow bleeding me of liberty...

swissaustrian's picture

Luxembourg (and the Irish fund landscape as well as UK funds) is gonna be killed by new EU regulations on investment fund manager compensations. They'll limit bonuses (performance fees) to double of the basic salary, that's totally gonna destroy incentives to have great returns:

DoChenRollingBearing's picture

It looks like all the havens (in Europe anyway) are going to get shut down.

CrazyCooter's picture

I see it a little differently; there is no capital left in the system. The desperation seems really obvious. This is showing up first in Cyprus because of the leverage relative to the size of the economy.

I would further note that this was cited recently on ZH for those applying logic and grade school arithmetic:

I just mention this again because often I get busy at work and simply miss articles in mass and don't have time to go back several days or more to play catch up.

In my layman's mind, I sort of see this whole thing like this ...  with the pawning of an an asset to Bank A for cash by anyone, where Bank A pawns the asset to Bank B for cash, where Bank B pawns the asset to Bank C for cash, where Bank C pawns the asset to Bank D for cash, where Bank D pawns the asset to Bank E for cash, ... , where Bank ZZ pawns the asset to bank AAA for cash.

Question: When bank X fails, who owns the asset? In fact, WHERE is the asset?

Conclusion: The bank still knows where the deposits are ...



disabledvet's picture

to me this whole thing started with the collapse of the Doha, Qatar property market. "suddenly things got serious." next up "the Arab Revolt." then came Greece. then the Fukushima nuclear disaster. Now the Canadian property bubble appears to be deflating. China clearly slowing. and now the EU itself. still that's some fine bangin' ivories there...

DoChenRollingBearing's picture


Two observations Cooter:

1)  You lay out the slipperiness of "what is money"...

2)  There is still capital around, much of it in hiding.

new game's picture

they spied a pile of money that seemed unattended.

boris is not happy, plebs pissed, and now money terror game.

take 1/3 and choas or fucking buzzsaw job.

damned the torpedoes i say...

All Risk No Reward's picture

Financial Art of War:

1. $100k mortgage created from nothing secured by house; $200k in the bank

2. Bank goes under

3. Economy collapses

4. Jobs lost

5, Can't pay mortgage

6. Home foreclosed on by bank

7. Bank bought for pennies on the dollar by TBTF front bank for Biggest Finance Capital - the definers of money as debt and the controller/operators of the system.

Big Finance Capital left citizen homeless as surely as if the Nazis or Stasi stopped by, pointed a gun at their head and told them to get lost.  The only difference is the looted person doesn't really understand that they were looted.

Debt Money Tyranny

How to be a Crook

War is all about deception
~Sun Tzu

The best warriors never have to fight
~Sun Tzu


thisandthat's picture

Like they need great returns to get the bonuses...

Schmuck Raker's picture

"...a guy named Panicos"

Truth is indeed funnier than fiction.

Tao 4 the Show's picture

Yes. And now Orphanides will be orphaned by the club?

toys for tits's picture

I heard that they're tapping Crash Gordon to replace Bernanke.

disabledvet's picture

one of my all time favorite hollywood characters. here he is robbing a bank actually:
he was awesome in Men in Black of course...but this was the most under rated show i think in television history:

s2man's picture

Well, he who panicos first, panicos best. Perhaps Cyprus will be ok.

atomic180's picture

900M Euro put, Tyler if you could is this fact or fiction and who's the WHALE that placed this bet...

tinsmith's picture

Soros, that sneaky bastard.

El Oregonian's picture

Yes, and using the mind-numbing Commu-Bots as unwitting accomplices...

swissaustrian's picture

Does anybody have a reliable source for that?

DeadFred's picture

Everything is copy/paste that I see. Maybe Tyler will shed some light but it's likely a hoax or baseless rumor. Too bad.

atomic180's picture

GS hedges in the VIX but I woulden't PUT it past them JPM or possible Deutsche Bank

DoChenRollingBearing's picture

Cyprus is another example of why it is dangerous to have all your money in banks...  Everyone should own some precious metals: gold, silver, platinum, palladium...  It's diversification!  But, diversification within the PMs is worth thinking about too.

"Diversification in Precious Metals"

Ancona's picture

Actually, Cyprus is an object lesson on the failure of the EU. This is what happens when you cede power to unelected technocrats who then enact capricious and arbitrary laws, then proceed to break them because it suits them to do so. They have decided to sacrifice Cyprus in whgat I see as the ultimate, arrogant act of retruibution as punishment for not doing their masters bidding. Personally, I hope the whole fucking thing comes down in a giant smoking heap.

DoChenRollingBearing's picture

Ancona writes:

"Actually, Cyprus is an object lesson on the failure of the EU. This is what happens when you cede power to unelected technocrats who then enact capricious and arbitrary laws, then proceed to break them because it suits them to do so."

Yes, bureaucrats enacting capricious and arbitrary laws is the problem.  And we see it here, big time, as well.  It may be that The End will indeed be very messy, as the technocrats will not yield the power to make arbitrary decisions as they please...

Ghordius's picture

guys, guys, this brawl is between elected national leaders, remember?

Charles Wilson's picture

Ancona stated:

"This is what happens when you cede power to unelected technocrats who then enact capricious and arbitrary laws, then proceed to break them because it suits them to do so..."

For Americans reading this, this is called, "Whistling past the graveyard".

Our government has used this system for years.  The Congress, the "Legislative Branch", creates a Bureaucracy such as the EPA and cedes Administrative Power to the Executive Branch to provide the Bureaucrats and scaffolding to run the Show.

The entire Charade has now become a funnel for $$$ to be given to chosen Political Groups and to question this process is to be met with, "SO you WANT to DESTROY THE ENVIRONMENT!!!"

Don't do too much "Tsk, tsk,,tsk, Oh, those poor little people in Cyprus..." with your morning coffee and your morning read.  'N don't look over your shoulder, 'cause there's already some stranger from the Executive Branch already lookin' over yours.



DoChenRollingBearing's picture

CW, please trust me on this point, but I believe Ancona is well aware of US bureaucrats' power to injure and even destroy business and freedom here in the USA.

Preaching to the choir here...

Charles Wilson's picture


My Post was not AGAINST Ancona.  No offense intended and I hope I am preaching to the choir.  Sometimes, however, I wonder with the Snarks floating around here.

Annnd, I have had experience with the Demons at the EPA.  Positively Dreadful people.

Look at it this way.  Suppose I had a 1976 RE-5 rotary engine Suzuki with oil cooled rotor that I wanted to convert to an air cooled rotor with Roller Bearings instead of Plain Bearings.  Shouldn't I be able to find someone SOMEWHERE with roller bearing knowledge who could help me?  Why should I have to fill out an Evironmental Impact Statement to do that?



Silver Garbage Man's picture

Everyone should have lots of precious metals

DoChenRollingBearing's picture

Silver Garbage Man  writes:

"lots of precious metals"

Correctamundo!  I am not at the point (yet anyway) where I can say that having money in the bank IS diversification for me, LOL...

20-20 Hindsight's picture

Sure, whatever.  Everything will come crashing down... some day, any day now.  Does anyone really think that this mess won't be fixed yet again?  "Fixed" is the operative word here.  

Be sure to expect Dow to pursue its glorious ascension to heaven, as if nothing happened.  As someone wrote recently, a nuclear bomb could flatten Washington DC and the markets would still find some reason to levitate.  

On Monday morning, Cypriots will be so relieved to learn that they only lose about 10 % of their savings... and the markets will be happy that the sheeple are happy.  And so goes the story...


disabledvet's picture

market will probably sell off on the news that "they've only been partially obliterated."

toys for tits's picture

The Dow has become as relevant to forecasting these credit induced financial crises as the BLS's unemployment rate. 2008 was after the fact as well as now with Cyprus.  The only thing we can glean from it is whether a company is in trouble, but not a country.

After the fact, we'll see running for the door, so we need to look outward and not lose faith just because the Hindenburg is getting higher.