Submitted by Mark J. Grant, author of Out of the Box,
Unique and Special Cases
Greece was a unique and special case. Cyprus is a unique and special case. One wonders, and with good reason, what or who will be the next unique and special case. The one thing we all know for certain is that when you are tagged with this moniker that it is not good. The other thing we know is that Europe, at any time, is ready to create unique and special cases to further their own interests. Perhaps, to be fair, it might be better to say that Germany will lord over this dynamic because it is generally the German interests which are to be furthered.
There was a time, early on in the European Union, when there was much more democracy and even handedness in the policy making of the various nations. That has long vanished. Subscribe what motives you like, but Germany has wielded its financial capacity to dominate the Continent. All roads now lead to Berlin with Brussels but a waypoint on the journey. To read the roadmap correctly then you must understand that each decision made by the European Union will be to protect Germany and her interests and that is how things will be decided because Germany controls everyone's purse strings and is doing its best to gain more control. Domination not with guns but with money. A much more pleasant endeavor than last go round; at least no one is being killed.
Standing back from the fray, however, leads me to be more than circumspect. In the first unique and special case of Greece they changed the bond indenture retroactively which violated the agreement made between bondholders and the issuer with a vote and the flourish of a pen. Then they said it would never happen again.
In the case of Cyprus the Germans demanded, by all accounts, that the private bank depositors in all of the banks in Cyprus have part of their money confiscated. They called it a "tax" but that is rather like calling the Eifel Tower a marshmallow. You can say it all you like but you only look stupider each time you make the statement. Then they said it was a unique and special case once again.
When unique and special cases are the order of the day then they cease to be either. If changing the Law to suit your fancy is no longer unique and special then I submit that the Law has been minimized and while still waved around like some banner to mislead people that it is no longer a functioning scheme for the sovereign nations in Europe. The law may still apply to people but it no longer applies to the desires of Germany. Money has toppled legality. The German trump card will win every hand.
When playing the Great Game you must have a firm grasp of the reality of the playing field or you will lose your way and so I point out that Germany is now the judge, the jury and the Court of Appeals. Every major decision that comes rolling out of the European Union will be written in German and then translated for the rest. Now the Germans pay lip service, they have long schooling in this, but they have all of the respect for the people in Italy, Greece or Cyprus that they do for the people of Madagascar which is why they could care less about confiscating people's money in some small nation because, to them, it is irrelevant and a triviality. It is not France's, "Let them eat cake" but a matter of disdain so that oats and wild mushrooms are good enough for those schweinhunds. "Eat what we give you and say thank you." Then they are appalled and outraged when someone like Cyprus says, "No."
Consequently the most likely outcome to Cyprus will be some sort of vengeance. They will convene and decide how much damage might occur if a country leaves the European Union and this may temper their decision but, I assure you, vengeance will be what they are after as that is how they perceive control to be exercised. In the Bible vengeance may belong to the Lord but in the European Union it belongs to the Germans.
The purpose of today's commentary is to provide some pause for thought. The special case of Greece has transpired. The much trumpeted denials have been shown to be a reality. The unique situation of Cyprus is in the process of transpiring but we all know now what was demanded and there is a second dose of reality. Therefore when unique and special cases have become the order of the day then the risk factors for investing in Europe have grown dramatically and must be honestly considered. The greater fool theory is expecting different results when performing the same actions again and again. Europe may be fine for hedge funds, for gambling upon events, but for investors; perhaps not so much.
Caveat Emptor, let the buyer beware, has taken a step forward; Buyer Beware!