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Guest Post: The Good, The Bad, And The Extremely Ugly Of The Cyprus Deal

Tyler Durden's picture





 

Authored by Yanis Varoufakis, originally posted at YanisVaroufakis.com,

There are some good features of the Cyprus deal and, of course, some bad aspects. However, its repercussions for the Eurozone as a whole are exceptionally ugly and will, I submit, mark a turning point for Europe; a point at which Europe took a nasty turn toward a set of mutually disagreeable outcomes.

The Good

  • Unlike the Eurogroup’s original decision, deposit insurance for accounts up to €100 thousand will be respected. The reversal of the decision to ‘tax’ insured depositors constitutes a last minute restoration of common sense.
  • Marfin-Laiki Bank’s bond and shareholders will be wiped out – as they ought to. The original Eurogroup decision to let them off the hook (especially the bond holders) while haircutting depositors (including those whose deposits were guaranteed by the state) would have been an indefensible re-ordering of a failed banking system’s creditors.
  • The new deal treats different banks differently, as it ought to. The earlier Eurogroup decision imposed blanket haircuts on all accounts irrespectively of the bank’s bottom line. At least now uninsured deposits will be haircut in proportion to the size of the bank’s black hole, thus restoring a degree of private responsibility on the part of depositors viz. their choice of banker.
  • By forcing losses on uninsured depositors and the banks’ bondholders, taxpayers have to bear a smaller burden of the bailout loans; and this is, ceteris paribus, a good thing.

#000000;">The bad

  • The Memorandum of Understanding has not been written up yet and, thus, the deal is utterly incomplete. In particular, we have no idea what degree and type of austerity will be imposed upon a collapsing social economy. Given the troika’s track record, it is almost certain that yet again they will elect an austerian package bound to crush the weaker Cypriots with ever-increasing verve.
  • #000000;">The effect of the complete wipe out of the foreign depositors will have a devastating effect not just on the banking sector but also on the hotel and tourist industry. As a Russian commentator noted: “Now that the Russians’ deposits have been all but confiscated, who will stay in the €500 per night five star hotel rooms on the island? Mrs Merkel?” It is highly doubtful that the troika will factor in the deflationary effects of this aspect in their fiscal consolidation and debt sustainability plans.
  • #000000;">The transfer of €9 billion of ELA money from winding down of Marfin-Laiki to the Bank of Cyprus – it flies in the face of basic banking resolution principles, reflecting the ECB’s Taliban-like defence of what it considers to be its ‘realm’.
  • #000000;">Capital controls have been touted, even though it is not clear how they will be implemented, creating a second-tier euro: Cypriot euros that are no longer exportable (nb. Imagine Vermont dollars that cannot be taken out of Vermont: a logical travesty within a currency union)

#000000;">And the extremely ugly

#000000;">Setting aside the Cyprus drama and the tragedy awaiting its people, the repercussions of the past week’s shenanigans for the Eurozone as a whole are exceptionally ugly. As I wrote the other day, in one short week Europe has managed to put in jeopardy the sacrosanct concept of state guaranteed deposit insurance (even if, in the end, they took this threat back), to bring back into question the integrity of the Euro-area and to sacrifice the European Union’s single market principle according to which capital controls are inadmissible.

#000000;">However, the ugliest dimension that the new deal has introduced is the effective end of any hopes of a genuine Eurozone-wide banking union. Mr Dijsselbloem, the new Eurogroup head who seems terribly keen to be more amenable to German thinking than his predecessor, Mr Yuncker ever was, said so in no uncertain terms when rejoicing that the Cyprus deal #000000;">paves the ground for new bailout arrangements such that the European Union “…will never need to even consider direct recapitalisation” of failing banks. This constitutes the death knell of both the direct recapitalisation agreement reached last in the EU’s June 2012 summit and, naturally, of any meaningful banking union. The message is thus clear: Each to his or her own! All plans to use the ESM in order to de-couple the banking from the public debt crisis are off the table.

#000000;">The combination of (a) the denial of the need to effect public debt consolidation, (b) the derailing of a meaningful banking union and (c) the heavy-handedness with which Cyprus was treated over the past week, spell a new, uglier, state of affairs in Europe. Up to now, supporters of austerity and of the German approach to the Eurozone Crisis in the deficit countries (including France) have argued that we need to go along with Berlin and Frankfurt so as to inspire sufficient confidence in those who control the purse strings (in our willingness to ‘do our homework’) before they can yield to the inevitable eurobonds, to the logic of a banking union, to whatever it takes to bring about greater political and economic union.

#000000;">Alas, the Cyprus deal reveals how wrong this view was: Even though peoples throughout the periphery (in Ireland, in Portugal, even in Greece and Italy) have, however grumpily, bowed their heads to severe austerity and the removal of labour protection laws, the powers that be in Berlin and Frankfurt are shifting away from unifying moves, adopting increasingly authoritarian, divisive policies that are pushing the Eurozone in precisely the opposite direction to that dictated by political and economic sustainability.

#000000;">In short, while the bailing in of inane Cypriot bankers and risk-taking depositors is to be welcome, I would not be at all surprised if the Cyprus week-long episode does not register in history’s annals as a major turning point; as the moment in history when Europe moved beyond the pale.

 


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Tue, 03/26/2013 - 13:30 | Link to Comment little buddy bu...
little buddy buys the dips's picture

dear europe,

 

http://www.youtube.com/watch?v=I7ZN8wGIxBI

 

you're welcome,

 

little buddy

Tue, 03/26/2013 - 13:30 | Link to Comment FLUSA.com
FLUSA.com's picture

When is the next Cyrpus Shake video coming out on youtube?  You know the one that has the bankers dancing while holding the depositors upside down by the ankles and collecting all the change that falls out...

Tue, 03/26/2013 - 13:35 | Link to Comment Ratscam
Ratscam's picture

Archduke Ferdinand moment with a delay!

Tue, 03/26/2013 - 13:45 | Link to Comment Abraxas
Abraxas's picture

If these guys had ruled in 1914, they could have made it look like the archduke had committed suicide.

Tue, 03/26/2013 - 13:35 | Link to Comment PUD
PUD's picture

AGAIN...BEN BERNANKE HAS PROMISED TO LIFT ALL GLOBAL BOATS WITH A ROBUST US CONSUMER LED RECOVERY....SAID IT HIMSELF...THERE YA GO!

Tue, 03/26/2013 - 17:21 | Link to Comment Things that go bump
Things that go bump's picture

I refuse to consume.

Tue, 03/26/2013 - 13:38 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

"In short, while the bailing in of inane Cypriot bankers and risk-taking depositors is to be welcome, I would not be at all surprised if the Cyprus week-long episode does not register in history’s annals as a major turning point; as the moment in history when Europe moved beyond the pale."

May I suggest that this tipping point was reached two or more years ago? This week was simply the moment of the collective recognition of this past event.

<And yet the majority of the collective is still blind to their own denial. Such is the process of loss and grief.>

Tue, 03/26/2013 - 13:48 | Link to Comment old naughty
old naughty's picture

+1 000000>

Tue, 03/26/2013 - 14:04 | Link to Comment AlaricBalth
AlaricBalth's picture

CD. You are absolutely correct. In fact the bail-in plan was codified by the European Commission, June 2012, in a document called: Impact Assessment; establishing a framework for the recovery and resolution of credit institutions and investment firms.

http://ec.europa.eu/internal_market/bank/docs/crisis-management/2012_eu_...

Beginning on page 130 are complete procedures as to when a bail-in is appropriate and financial modeling to determine the amount of the bank levy or haircut.

"This section examines how the bail-in tool could absorb losses of defaulted banks (failed banks in the no recapitalisation scenario or failed and non-viable banks in the recapitalisation scenario) and (only in the recapitalisation scenario) allow banks to re-establish their Minimum Capital Requirements without recurring neither to ex-ante funded schemes (DGS/RF) nor to taxpayers' money."

Tue, 03/26/2013 - 14:09 | Link to Comment defencev
defencev's picture

All the bullshit that you post here would make some sense if you were consistent in any shape or form. How this jerk can talk about banking union if Cypriot banks operated in a way that would be impossible in pretty much any other European country.

Essentially, the Cyprus became a money laundering mechanism for Russian mafia with full expectations that if something go wrong EU will bail them out. Add to that the alleged fly of Russian funds after "freeze" and you get the pefect picture of "Cypriot banking system". The banking union presuppose the same rules applied to all banks.

The crush of money-laundering operation was a good thing for Europe and that is the lesson of this (very small) episode.

Tue, 03/26/2013 - 14:30 | Link to Comment akak
akak's picture

You may collect your paycheck now, Tokyo Rose.

Tue, 03/26/2013 - 14:49 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

All my bullshit are belong to you.

Tue, 03/26/2013 - 15:46 | Link to Comment Piranhanoia
Piranhanoia's picture

Hey Defencev;  You appear to be working on the idea that the banks in Europe proper don't launder money for anyone that asks.  Since you have just seen that they agreed to let Russia withdraw their money from Cyprus "pre haircut", and England, USA, France,  Italy and every other country or important person,  (to them and their definition of such a person)  you don't understand what you are talking about.   Money laundering is the major business of all banks everywhere.  Only the Banks of Lebanon and North Dakota seem to be solvent, and they probably launder money too.  Why do you think organized crime plays by any rules at all?  

Tue, 03/26/2013 - 16:18 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Euro-Pacific Bank, founded by Peter Schiff. 100% reserves/deposit ratio. They do not lend, it's just a transactional bank. You can also choose to have your account held in gold, held by the Perth Mint.

Tue, 03/26/2013 - 13:36 | Link to Comment BandGap
BandGap's picture

Jeez, one blow job and now they're gay forever?

Tue, 03/26/2013 - 13:37 | Link to Comment max2205
max2205's picture

Why would anyone leave cash in a bank that pays no interest. ..

Tue, 03/26/2013 - 13:37 | Link to Comment williambanzai7
williambanzai7's picture

I can imagine people trying to get their hands on Vermont Dollars on fiat judgement day.

Tue, 03/26/2013 - 13:39 | Link to Comment One of We
One of We's picture

Senator: Oh, fellow Members of the Roman Senate, hear me! Shall we continue to build palace after palace for the rich? Or shall we aspire to a more noble purpose, and build decent housing for the poor? How does the Senate vote?
Senators: Fuck the poor!
Senator: Good.

https://www.youtube.com/watch?v=3B1IQYD4Uew

Tue, 03/26/2013 - 13:42 | Link to Comment Tinky
Tinky's picture

Content: A-

Formatting: D

Tue, 03/26/2013 - 13:43 | Link to Comment Iam Yue2
Iam Yue2's picture

Crooks, cons and capers......

Tue, 03/26/2013 - 13:48 | Link to Comment Tinky
Tinky's picture

Capers? De rigueur in any high-class salad Niçoise.

 

 

Tue, 03/26/2013 - 13:50 | Link to Comment Atomizer
Tue, 03/26/2013 - 13:50 | Link to Comment whisperin
whisperin's picture

It is funny that there is no mention of the constipation (panic) in the CFO's offices of Large US multinationals with all that cash that is on deposit in Eurozone banks that hasn't been repatriated for tax reasons. Looks like damned if you do and damned if you don't. Imagine trying to calculate the the odds on a haircut or do I bring it back and pay taxes!

Tue, 03/26/2013 - 14:08 | Link to Comment DUNTHAT
DUNTHAT's picture

EXCELLENT POINT !

Tue, 03/26/2013 - 14:47 | Link to Comment Ying-Yang
Ying-Yang's picture

Hmmmmmm.... scare the money back to the US

Yeah... Morgan Fairchild, that's the ticket.

Tue, 03/26/2013 - 15:41 | Link to Comment snblitz
snblitz's picture

The unrepatriated monies are in foreign branches of US banks.

Tue, 03/26/2013 - 19:31 | Link to Comment WallowaMountainMan
WallowaMountainMan's picture

that works only when the parent banks in the u.s. of a. going insolvent, not when the foreign counrtry goes under.

(tip of the hat to a zh comment fella whose name i don't recall....)

Tue, 03/26/2013 - 23:53 | Link to Comment WallowaMountainMan
WallowaMountainMan's picture

dble post sorry

Tue, 03/26/2013 - 13:51 | Link to Comment AZLagun
AZLagun's picture

Pardon me but am I the only one scratching my head trying to figure out how any of this could be labeled as "Good"?  This can be difined as nothing more than THEFT.  Truly disgusting!

Tue, 03/26/2013 - 13:57 | Link to Comment Citxmech
Citxmech's picture

The "good" part comes when the rule of law is respected.  If you invest in an enterprise destined for failure - "you get noting - you lose sir, good day!"

Bailing out losers rewards poor investment, encourages riskier investments, and undermines confidence in the system.

Tue, 03/26/2013 - 14:11 | Link to Comment s2man
s2man's picture

Allowing an insolvent bank to fail is theft?  Given, the bank itself may be called guilty of theft for gambling with deposits, and loosing, but that's the risk of putting your money in a crappy bank.  What little I keep in the bank is in a 5-star rated one.

Disclosure: I started my bank run four years ago.

Tue, 03/26/2013 - 15:20 | Link to Comment JR
JR's picture

Let me explain, AZLagun. what Yanis means by "Good." Yanis is happy that risk-taking depositors” got there’s, in the rear, and equally happy, apparently, that the risk-taking bankers got there’s also, to the tune of +$63.5 billion in bailout money in the pocket, and are on the risk prowl again. 

It's true. Mark Gongloff tells us that “the White House Office of Management and Budget recently estimated that TARP will ultimately cost the government $63.5 billion.”

Yes, and as the stock market cruises record highs, led by skyrocketing banks stocks and Bernanke’s FRN helicopter, Gongloff warns us that the crisis still haunts us

And here’s another warning from Christy Romero, the Special Inspector General for the Troubled Asset Relief Program: “The biggest and most interconnected banks are bigger and more interconnected than ever before, and the government has no idea whether it will be able to safely wind down a too-big-to-fail bank in the event of another crisis.

“The people taking those risks are insulated from the consequences -- that's moral hazard” and “it continues to exist."

.“In fact,” writes Gongloff, “the bailout could arguably have made a future crisis more likely, by encouraging big banks to take on even more risks, in the widespread belief that they can always turn to the government for more cash in the event they crash the Hindenburg, again.”

“Government,” in this case, means you, taxpayers.

But “Government” is flush when it comes to banker handouts so in 2009, Congress approved another $108 billion credit line for another IMF crisis fund to help out these folks, and in the fall will be considering making permanent a $65 billion U.S. taxpayer contribution to an IMF crisis fund that Legarde et al., can use as a weapon to threaten “risk-taking depositors.” Never mind you taxpayers that U.S. taxpayers already are the biggest “contributors” to the Fed-owned IMF.

So, the bottom line is that Americans are facing austerity, loss of jobs, downsized living standards, lower wages, and zero rates on savings from their labors coupled with high inflation subtracting further purchasing power. But the “good news” is that USA Today reported Thursday that at least 10 CEOs took in $50 million apiece in 2012, largely as a result of cashing in stocks that have soared in value with the rising market. According to the newspaper,

“Early 2013 proxy filings detailing 2012 compensation show a growing number of CEOs reaping $50 million or more, gains that could prove unmatched in breadth and size since the Internet IPO craze enriched tech company executives more than a decade ago.”

And so fat cat Ford CEO Alan Mulally, whose take home pay increased an additional $61 million last year by cashing in shares that vested to bring his total paycheck for 2012 to $82 million, would like to thank all of you peons for his comfortable living conditions “made possible by downsizing and the slashing of wages for newly hired workers to $15 per hour.

Mulally’s pay is now more than 2,500 times that of a new auto worker.”

Tue, 03/26/2013 - 13:52 | Link to Comment machineh
machineh's picture

Capital controls have been touted, even though it is not clear how they will be implemented, creating a second-tier euro.

THIS IS WHY the banks can't reopen till Thursday. 

Cyprus is writing comprehensive capital controls, to pen in tens of billions of would-be flight capital.

Their scope will shock you: limits on off-island wire transfers; limits on physical cash transfers; limits on off-island credit-card charges; strict review of import pricing; perhaps even import licensing and restraints on buying forex.

Argentina is the model: it now requires advance licensing, case by case, of every import. Many applications are simply refused, even for vital spare parts.

Wake up Cyprus: the correlón is coming, and it's going to last a long time.

Tue, 03/26/2013 - 13:56 | Link to Comment ebworthen
ebworthen's picture

"Vermont Dollars"

LOL

How about "Detroit Dollars"?

Tue, 03/26/2013 - 14:00 | Link to Comment JR
JR's picture

Risk-taking depositors? What on earth are you talking about? Are you saying that money raised by individuals is a risk unless the bankers have it in their equity market to use in their own speculations?

Has the circle of lies come full circle to where sound money is money on the banker table and risk money is what you have in your pocket?

Tue, 03/26/2013 - 14:07 | Link to Comment s2man
s2man's picture

Well put, Yanis.  Many have been calling for the end of bailing out banks with tax payer's money, my self included.  Now we finally get it and many cry out "confiscation" and "theft".  I've gotten sick of hearing it, this week.  This was not theft (except perhaps by the banks), it was a bank failure, clear and simple.  Those who were insured are intact.  Those who were not insured, "Aaaand, its gone".  

Tue, 03/26/2013 - 14:10 | Link to Comment Urban Redneck
Urban Redneck's picture

Just in case anyone missed it above...

That 9 billion moving from bank A to bank B.. is 9 billion euros of BANK DEBT OWNED BY BANKERS TAKING SENIORITY OVER DEPOSITORS.

it should really be moved from the bad to the really ugly section

 

Tue, 03/26/2013 - 14:13 | Link to Comment Cycle
Cycle's picture

I would agree that the crude handling of the Cyprus banking crisis impairing savers is the spark for the next Great Global Depression, at least in the West.

Tue, 03/26/2013 - 14:15 | Link to Comment MFLTucson
MFLTucson's picture

Put it in US banks are you will be assured a complete loss when the dollar collapses, or when Dimon decides he wants it.

Tue, 03/26/2013 - 14:21 | Link to Comment w00dmann
w00dmann's picture

I was chatting with my girlfriend (amateur investor) last week about global affairs.  She asked for my opinion; I said the world economies were on the skids.  Her response?  "They will fix everything.  They always do".  Yesterday, after the Cypress deal was reached, her reaction?  "See I told you they would fix it".

That, more than anything, shows you how difficult it is to get through to people.  Despite what I tell her, despite EVERYTHING going on, most people simply do not want to know the truth.

 

 

Signed, gobsmacked 

 

Tue, 03/26/2013 - 14:33 | Link to Comment Tinky
Tinky's picture

Try witholding sex. If you're any good, she'll begin to pay closer attention.

Tue, 03/26/2013 - 15:09 | Link to Comment w00dmann
w00dmann's picture

Haha!  Awesome response.  Dirk Diggler to the rescue.

Tue, 03/26/2013 - 14:39 | Link to Comment ebworthen
ebworthen's picture

Sold some games back to GameStop yesterday.

They won't buy unopened games because they might be "stolen".

If you sell them opened games, they want your license and a thumb print.  I said "wow, selling a $15 game and you get all my information and a thumb print when the bankers in Europe can steal money legally."

"Huh?" she said.

Neither her nor her young male co-worker had heard of Cyprus or the ECB stealing depositor money.

"Cyprus?  Where is that?" she said.

Rest easy J.P. Morgan, Citi, and the FED; the young sheeple of Amerika have no idea what you are doing.

Tue, 03/26/2013 - 14:26 | Link to Comment NeoLuddite
NeoLuddite's picture

What's happening in Cyprus isn't a haircut - hair grows back.

 

It's an amputatio to feed the tribalist cannibals.

Tue, 03/26/2013 - 19:54 | Link to Comment Diogenes
Diogenes's picture

"Haircut" = "shearing the sheep".

Tue, 03/26/2013 - 14:27 | Link to Comment NoWayJose
NoWayJose's picture

This article misses one CRITICAL point - the central bankers managed to find a way to completely bypass a country's elected legislators, and force a country to owe a 10 billion Euro debt that no one in Cyprus voted to approve.  That's the new template, as it goes even further than the previous self-inflicted central bank template created by Bernanke and Paulson and Geithner.

Tue, 03/26/2013 - 14:35 | Link to Comment Tinky
Tinky's picture

"...it goes even further than the previous self-inflicted central bank template created by Bernanke and Paulson and Geithner."

You say that as if the Congress actually supports the best interests of the broader American public.

Tue, 03/26/2013 - 14:29 | Link to Comment worbsid
worbsid's picture

When BOA moved all their derivative risk to the depositors bank from the investment bank, I changed banks, actually to a credit union.  Don't want the MF GLobal treatment, thank you.

Tue, 03/26/2013 - 14:36 | Link to Comment NeoLuddite
NeoLuddite's picture

What's happening in Cyprus isn't a haircut - hair grows back.

 

It's an amputatio to feed the tribalist cannibals.

Tue, 03/26/2013 - 19:55 | Link to Comment Diogenes
Diogenes's picture

Haircut=shearing the sheep

Tue, 03/26/2013 - 14:42 | Link to Comment ShrNfr
ShrNfr's picture

As Ben when Tacco is there: "Sorry Shortie, I guess you have to hang around a bit."

Tue, 03/26/2013 - 14:45 | Link to Comment Peter K
Peter K's picture

Spanish depositors hold funds in Spanish banks who purchase Spanish soveriegn debt. Hmmmm. What could possibley go wrong? :)

Tue, 03/26/2013 - 14:47 | Link to Comment newworldorder
newworldorder's picture

So, why is the Euro still valued at its lofty levels vs., the USD. Given their banking issues, Greek, Italian, Spanish, Portuguese GDP and the FED bailing them out with SWAPS, should the Euro  have taken a dive already? What is holding it up at current levels?

Tue, 03/26/2013 - 16:06 | Link to Comment hooligan2009
hooligan2009's picture

euro was issued at US$1.199 per Euro in 1999..it fell to a low of c. 83 cents per euro a few years later and reached a high c. 1.60 in mid-2008 and it has an average of 1.2124 over its life time. The definition of "lofty" is fraught with psychological bias.

http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-usd.en....

notwithstanding all the crap coming out of europe, it ought to be apparent that the problems in the US, the UK and Japan are just as big, and in some cases bigger, in terms of consumer debt and U6 unemployment.

i personally don't differentiate between nation states and trading blocs..people are pretty much the same wherever they live..language and governments make the difference, not aspirations and values.

pigeon-holing regions/countries creates tensions and inhibits travel and the exchange of ideas...

just saying..

Tue, 03/26/2013 - 22:51 | Link to Comment Mark Urbo
Mark Urbo's picture

I'm sorry, but every time I'm over there on business I have the same thought on the flight back...

..the Euro is overvalued !

Tue, 03/26/2013 - 15:03 | Link to Comment Paracelsus
Paracelsus's picture

I find it very frustrating the way we have gotten away from risk and its consequences. When (part) of the French army mutinied in Algeria,and eventually it got sorted,the officers Major and above,were demoted and reassigned or retired.The officers below major were court martialed and shot (some,not all I expect). It was another classic example of "too well politically connected to prosecute",but DeGaulle was pretty pissed off the way the OAS kept trying to whack him,Soprano's style. I am confused that we are still having this philosophical discussion about accountability. We cannot prop up and bailout every failing dry cleaners,gas station,etc.

Businesses should be allowed to fail,white collar crime should be severely punished,and it should be obvious by now that some form of precious metal needs to be reintroduced as backing for all currencies TO PREVENT THEM FROM PRINTING FOREVER. 

Much of this Austerity discussion is a smokescreen for the huge defense expenditures made over the years. Ask yourself where all the Reagan era money for SDI went,with nothing at all to show for it besides propping up the NASA shuttle program. Many of these "Black" programs had no financial oversight,leading to monumental waste which has been accurately documented in the past.

I understand that the Greek military has some very expensive hardware,much of it purchased from the German consortiums. Who are the Greeks afraid of? Turks? Macedonians? This is an enormous financial commitment for weapons when their society is crumbling from within.At some point loyalties amongst the officer corps may become stretched to the breaking point.It should be recalled that sometimes small issues like Cyprus can quickly escalate into serious events.

Tue, 03/26/2013 - 22:49 | Link to Comment Mark Urbo
Mark Urbo's picture

I disagree with your comments on SDI and the black programs. Technology gained from SDI research and early program efforts lives on in many if not all of the current missile systems.  Black programs of the '80's are basically what provide a US tech advantage today in warfare terms.  There is always waste, but those programs broke down some serious tech barriers...

 

Tue, 03/26/2013 - 16:13 | Link to Comment Z'
Z&#039;'s picture

The Cypriot turmoil was started with a 75% haircut imposed by the EU on privately-held Greek sovereign bonds... a bailout that shielded the ECB-owned bonds from any losses.  In fact, the profit made by the ECB on these Greek bonds was funneled back to Greece, while Cyprus is now hung out to dry.  Effectively, this creates a situation where the EU shielded its own losses, choosing instead to enforce larger losses on the private bondholders including the Cypriot banks, while sending profits to Greece. Now the calamity from default is being passed on to Cypriot depositors.

Until there is proof of money-laundering through due process of law, that appears to be a meme that is merely convenient to justify accountholder plunder.

This is not a banking union applying the same rules to all banks.  The words theft and confiscation seem appropriate when the tables are tilted so dramatically.

 

http://www.athensnews.gr/portal/11/52962

http://www.cnbc.com/id/100480935/ECB_Profits_From_Greek_Bonds_Promises_Funds_for_Athens

http://www.zerohedge.com/contributed/2012-10-05/mainstream-media-still-doesn%E2%80%99t-get-ecb-greek-debt-swap

http://www.zerohedge.com/news/guest-post-great-ecb-osi-bond-swap-scam

 

 

Tue, 03/26/2013 - 17:39 | Link to Comment newworldorder
newworldorder's picture

Z'  - Thank you for your observations.

The fact of the matter is that the European Union, Monetary Union, and all the other European Entities, have not made European Citizens equal. That was the promise that has turned into the GREAT LIE. There are essentialy two ways forward. Complete the monetary union process, with each sovereign giving up financial control of money, OR disassemble the current monetary structure, elimination of the EU Central Bank and withdrawal of the Euro.

Other than one of these two courses of action, will lead to continued uncertainty and possible catastrophic harm to many of the current EU member nations.

Tue, 03/26/2013 - 23:39 | Link to Comment WallowaMountainMan
WallowaMountainMan's picture

what would be the difference in loss on privately held greek bonds as it happened vs a non purchase scenario of greek bonds by the ecb in the first place?

is that perhaps why the markets did not react?

genuinely curious...

 

 

 

Tue, 03/26/2013 - 16:46 | Link to Comment manapisca
manapisca's picture

Severe austerity and the removal of labour protection laws? Where? Not in Italy.

What the government has done in Italy so far is raise taxes. There have been no spending cuts. All the entitlements are still in place, nothing has been liberalized or privatized. The italian State hasn't sold one brick of it's huge real estate portfolio and all public companies are still state owned. As to labour protection laws, it's easier and less costly to get a divorce than to fire an employee. 

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