Three months ago [4], 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.
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.