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"Cyprus Is The Homage Europe Pays For The Denial Of A Systemic Crisis"

Tyler Durden's picture




 

Three months ago, Yanis Varoufakis explained Europe's bogus growth pact and the papering over the cracks that was being done by the IMF and ECB, "The idea here is that, yet again, the Eurogroup-ECB-IMF alliance is not ready, politically, to reveal the truth to its various constituencies." He was, obviously, correct. This weekend, in a brief BBC Radio interview (below), as Cyprus erupts and brings the European circus back into town, Varoufakis exclaims, "every bailout agreement, beginning with Greece’s in May 2010, seems less logical and more toxic than the previous one." In three minutes, the Greek economist illustrates how the leaders are laying waste to the supposed pillars upon which the European Union was founded.

 

 

Via Yanis Varafoukis,

Here are some unedited thoughts I just shared with the BBC’s Radio 4 on Cyprus while we are all waiting for the new deal to shape up:

 

Cyprus’ banking sector must shrink. As did Ireland’s, the hard way. What is essential, as every Irishman and woman will tell you, is that the politicians do not load up the weaker citizen’s/taxpayers’ shoulders with enormous debts on behalf of bankers that refuse to wither.

 

Every bailout agreement, beginning with Greece’s in May 2010, seems less logical and more toxic than the previous one. The culmination was of course Cyprus this past week. Think about it: In one short week, Europe has managed to put in jeopardy:

 

  • The hitherto sacrosanct concept of state guaranteed deposit insurance
  • The monetary integrity of the Eurozone
  • The European Union’s single market principle according to which capital controls are a no-no.

If only the agreement reached at last June’s EU Summit to de-couple the banking crisis from the public debt crisis had been implemented, we would not be having this conversation now.

 

The Cyprus debacle is the homage that denial of the systematic nature of the euro crisis pays to a systemic crisis.

 

Cyprus parliamentarians offered the Eurozone a reprieve from the stupidest and most potentially destructive Eurogroup decision since this Crisis began three years ago. It now remains to be seen whether, scared by the sound of their own NO, they will now succumb to an even less rational deal.

 

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Sun, 03/24/2013 - 20:43 | 3370339 ZippyBananaPants
ZippyBananaPants's picture

Go Gators!

Sun, 03/24/2013 - 20:50 | 3370366 macholatte
Sun, 03/24/2013 - 21:14 | 3370474 fockewulf190
fockewulf190's picture

Thanks, but I´ll stick with Phyzz. 

Sun, 03/24/2013 - 21:20 | 3370508 thisandthat
thisandthat's picture

"I can send money to whoever I want, whenever I want, wherever I want"

You just can't send whatever you want, which is tantamount to capitals control...

Sun, 03/24/2013 - 21:03 | 3370421 zorba THE GREEK
zorba THE GREEK's picture

Cyprus bought Greek bonds with the depositors money, so they should

just give the depositors the Greek bonds and call it even.

Sun, 03/24/2013 - 21:08 | 3370441 johngaltfla
johngaltfla's picture

Or better yet, retain their sense of honor and national sovereignty:

 

Perhaps Cyprus should call 1-800-ICE-LAND
Sun, 03/24/2013 - 21:52 | 3370670 disabledvet
disabledvet's picture

again: surround your island with a couple of hundred thousand of these http://www.youtube.com/watch?v=ibiS26Tky40..then tell the world "any ship that comes within a hundred miles of our island and we'll blow you out of the water."

Sun, 03/24/2013 - 21:07 | 3370439 zorba THE GREEK
zorba THE GREEK's picture

Any person who has money in any European bank, after what has gone down in

the last 5 years, deserves to lose it.' A fool and his money are soon parted.'

Sun, 03/24/2013 - 22:14 | 3370760 Buck Johnson
Buck Johnson's picture

No kidding, I wouldn't trust a EU bank even in Switzerland to save my life.

Sun, 03/24/2013 - 20:45 | 3370341 howenlink
howenlink's picture

"papering over the cracks that was being done by the IMF"

 

More like the crack pipes.

Sun, 03/24/2013 - 20:46 | 3370347 Squishi
Squishi's picture

build the hoover dam 

Sun, 03/24/2013 - 20:48 | 3370349 CClarity
CClarity's picture

Up next, the even littler island of Malta - - - and another depository bank joke.  Cuz Greece was too small to matter, Cyprus too small to matter, next Malta, until it is finally the teensy weensy fiefdom of San Marino that sends the EU to tilt.  Make Archduke Ferdinand look like a pillar of importance (because, in the annals of history, he became one)

Sun, 03/24/2013 - 20:48 | 3370350 Cognitive Dissonance
Cognitive Dissonance's picture

"The Cyprus debacle is the homage that denial of the systematic nature of the euro crisis pays to a systemic crisis."

Denial isn't just a river in Egypt. It's also a corrupt, hemorrhaging and soon to be bled out socioeconomic system.

Sun, 03/24/2013 - 20:48 | 3370359 insidious
insidious's picture

Why aren't the Cypriot bankers being arrested and prosecuted?

Sun, 03/24/2013 - 20:49 | 3370362 Cacete de Ouro
Cacete de Ouro's picture

We await David McWilliams with a new narrated 5 minute Cyprus cartoon....

Sun, 03/24/2013 - 20:59 | 3370395 DavidC
DavidC's picture

Cyprus had the upper hand in this and it's just bent over and yielded to bullying and outright theft.

I wonder when the bank runs start in Spain, France etc.

DavidC

Sun, 03/24/2013 - 21:21 | 3370513 Cabreado
Cabreado's picture

"Cyprus had the upper hand in this and it's just bent over and yielded to bullying and outright theft."

That depends on your definition of "Cyprus."

 

Sun, 03/24/2013 - 21:05 | 3370424 tom a taxpayer
tom a taxpayer's picture

Yanis Varoufakis brings up a side of the crisis I have not heard before, namely, the burden on the Cyprus taxpayers to repay the 10 billion Euro loan. As Yanis points out, the troika is dealing the pain to bank depositors and the taxpayers. So, even if there is no haircut on insured depositors, there will be a hit to taxpayers.

Sun, 03/24/2013 - 21:08 | 3370440 lolmao500
lolmao500's picture

No big deal but a small IED exploded at a bank in Cyprus... very bullish.

Sun, 03/24/2013 - 21:08 | 3370446 gatorengineer
gatorengineer's picture

Well if you take a step back the charade only has to last until the German elections.  If Germany moves left (Merkel looses), as expected, they will become alot more free with their savers money.....  So in all liklihood, you will see a Fiscal Union take shape without the nordic countries.  My bet right now on first out would be the Finns...  Ben has a heck of a start on the EU, and the could easily monetize a few trillion... Can road kick....  

Sun, 03/24/2013 - 21:12 | 3370460 Whoa Dammit
Whoa Dammit's picture

Great phrase, and sadly all to true: "bankers that refuse to wither." 

 

Sun, 03/24/2013 - 21:18 | 3370494 howenlink
howenlink's picture

Now we have the BitCoiners battling the Phyzz's.  They have us so well trained in class warfare, pretty soon you'll have the Silver Bugs fighting with the Gold Bugs, and the Maple Leafers battling the Krugerranders.

Mon, 03/25/2013 - 08:51 | 3371714 margaris
margaris's picture

yeah, why not just all united against the thieving bankster class.
Well, people like to argue about everything.
I hope that in the future the argument will shift towards the best decapitation tool:
guillotines,
or lets get creative and reinvent a modern version of it, much like the multiple laser cutting machine as seen in movies like "the cube" or "resident evil".

Sun, 03/24/2013 - 21:33 | 3370558 gwar5
gwar5's picture

The whole thing is craven. Like Poland being invaded in WWII, you know they aren't just going to stop there.

 

The EU elites were never given this kind of authority, they are just taking it and daring the masses to stop them. They should absolutely be arrested and go to jail. These are crimes. Their contempt for democratic self government has been on full display for years, that's why they wanted an EU with unelected leaders in the first place.

Democratic government and sovereignty is gone and they are now the sovereigns if this is allowed to stand and continue.

 

Sun, 03/24/2013 - 21:45 | 3370628 Arthur
Arthur's picture

An obvious question if you bank in any EU counrty would be why maintain more cash then you need to pay your monthly bills?

I mean really, how from is from demanding Cyprus depsitors fund the bank bailout to demanding the same of all depositors to help kee the ECB afloat?

I would be  moving my Euro's out of Europe asap.

 

 

Sun, 03/24/2013 - 21:58 | 3370697 disabledvet
disabledvet's picture

this is a tough one...the fear of this happening prompted the massive moves by our Treasury in 2008...i'm thinking "the Troika" has thought of this and thus "will have the Bank of Cyprus open come" Monday even? but it sure looks like unemployment will spike enormously here.

Sun, 03/24/2013 - 22:47 | 3370868 Dr. Engali
Dr. Engali's picture

And what do you think will happen once the banks are opened? They will be bled dry. Hopefully people are taking notice of this and start bleeding the banks world wide..... I doubt it, but it would be nice to see.

Sun, 03/24/2013 - 21:49 | 3370654 nmewn
nmewn's picture

A-yep...

"Every bailout agreement, beginning with Greece’s in May 2010, seems less logical and more toxic than the previous one. The culmination was of course Cyprus this past week. Think about it: In one short week, Europe has managed to put in jeopardy:

 

  • The hitherto sacrosanct concept of state guaranteed deposit insurance
  • The monetary integrity of the Eurozone
  • The European Union’s single market principle according to which capital controls are a no-no.

If only the agreement reached at last June’s EU Summit to de-couple the banking crisis from the public debt crisis had been implemented, we would not be having this conversation now."

Wait, what?

There is some seed, some kernal of truth remaining in the public mind that...government debt is different than personal debt?

There is hope.

Mon, 03/25/2013 - 09:01 | 3371765 falak pema
falak pema's picture

one thing is sure : there is a big difference between private PROFIT and government profit. Thats so clear, the one keeps growing exponentially as the other disappears just as fast.

Your point on debt decoupling is debatable, not because of principle but because of SIZE : the private shadow banking debt; aka derivative ketchup sauce; is so huge it could bring down any nation-state government (other than reserve currency, until and unless that fiat goes weimar), just like it has bankrupted the Cypriots. 

It was private debt that killed Cyprus economy. Those bank scions of Russian easy money conduit took on too much risk; like everywhere else. The private capitalist class are the worst kleptocrats around.

Decoupling the banking/private sector debt from public debt globally, in eurozone or in US, is impractical as its officially four times the size of public, without accounting for whats hidden under shadow banking rug. The Jamie Dimon syndicate caper is too large.

Mon, 03/25/2013 - 09:15 | 3371811 Ghordius
Ghordius's picture

"The hitherto sacrosanct concept of state guaranteed deposit insurance" had the chance of being debated on in several european parliaments, including the EU and the Cypriot one, with one clear answer: yes (though still only at national level, here)

"The monetary integrity of the Eurozone" was in "jeopardy"? even if so - debatable - so what? sovereigns come before currencies

"The European Union’s single market principle according to which capital controls are a no-no." - isn't it too early to say? of course, seen from afar we are as "socialist" as ever

I'd go further and state hyperbolically that for us europeans government debt was always different from personal debt, going back to when "don't put faith in" princes were issuing it - it's on the other side of the pond where gov debt is valued higher, in both law and minds

Sun, 03/24/2013 - 22:00 | 3370703 WallowaMountainMan
WallowaMountainMan's picture

"The hitherto sacrosanct concept of state guaranteed deposit insurance"

disagree. it wasn't the ecb who wanted the under 100k to pay, as the final deal shows. it was the pres of cyp's insistance to cut the over 100k crowd to under 10%.

the ecb et al made two mistakes:

1. thinking the pres of cyp could deliver the vote on his 9.9% taking on the over 100k crowd and 6+% taking on the under 100k crowd.

2. the ecb et al  did not understand that their best and only strategy when faced with taking a % on the under 100k crowd choice was to turn the deal down and reveal that it was because the pres of cyp was the one who wanted the reduction on the over 100k crowd,thereby forcing the under 100k crowd to take a hit. that is exactly when the ecb et al lost control of the eurozone and the euro.

having learned that they ( the ecb et al ) could not get this done by having cyprus vote on it, they came up with the non voting solution, winning the battle, but losing the war they lost at step 2 above.

cyprus will exit, enraged that they were denied their right to vote.

no matter what the cost.

after all, they have been invaded many time before, only to toss out the bums.

look for turkey, russia to offer humanitarian aid, probably through the church.

Sun, 03/24/2013 - 22:25 | 3370792 WallowaMountainMan
WallowaMountainMan's picture

listening to zh provide link to webcast reveals cover for non vote by cypriot parliament came from one of the measures passed by the cypriot parliament in their last session!!!!

fascinating. great forethought by the ecb. perhaps a little wool over the eyes of the cyp parliament? the outcry will tell. the parliament members' record voting on that issue would be revealing.

this greatly reduces cypriot anger towards ecb et al. refocuses it on their own parliament for making that error.

net result, cyprus stays in the euro.

nicely played euro. 


Mon, 03/25/2013 - 01:45 | 3371264 Monk
Monk's picture

That's because unregulated financial speculation for years leading to the current crisis was also illogical and toxic.

 

Mon, 03/25/2013 - 03:57 | 3371342 lewy14
lewy14's picture

Completely irreverant and off topic:

Is it me or did anyone else expect to see a Harlem Shake video when they hit "play" on that embed?

Mon, 03/25/2013 - 06:49 | 3371419 falak pema
falak pema's picture

Hahaha, so the financial world realises its the problem and blames the Political world for not taking their warts and tumors seriously...

Pot calling the kettle black? 

I won't choose any pecking order in this perverted logic!

As for the Greeks and Cyprus citizens they should realise they have been part of two nation states which are total financial scams as business models; they only have themselves to blame in the end. 

Wake up citizens of Club Med, you are on the Titanic in the bottom deck and we are on the top decks so its no consolation.

Mon, 03/25/2013 - 08:45 | 3371682 steve from virginia
steve from virginia's picture

 

 

A done deal (?) in Cyprus, there is diminished purchasing power, no different from the effect of inflation.

 

Like inflation, imposed by official decision-making, from the outside. From now on, Cypriots will find it hard to gain food, electricity ... petroleum.

 

Russian energy suppliers doing business in Cyprus have been ruined ... their money stolen by the EU in a maneuver straight out of a Victorian novel ... The energy component is hard to miss along with the geopolitics. Energy is the underlying issue: Cyprus' own energy waste, its massive exposure to the energy business by way of its banks and banking customers, its dependence on an arbitrage model that competes with the EU's version.

 

We'll see if the Russians are spiteful or whether they continue to accept euros. They can certainly sell every BTU of energy they extract for dollars ...

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