Friday Jukebox: Kill Your Television

North says:

Open thread eh?

Cyprus.

I gotta admit, I’m chewing on my nails a bit on this one. This actually looks like the one that could possibly break the credit union or the currency or the continents banks.
Yeah, tiny ol’ Cyprus. They’ve got a pair of huge banks that’re in it up to their ears. The government is in the hock for them I’m gathering, I’m not clear on if they have to or if they volunteered a la Ireland?

The reason Cyprus is kindof different than the previous countries is that Cyprus has been an offshore bank account country for not only Europe but also the Middle East and Russia. There’s a lot of allegedly dirty money in there and that makes em look really unsympathetic. Essentially a lot of accounts for people dodging taxes, people hiding money they’ve pillaged out of the USSR and people doing a lot of dodgy things in the Middle East. Or at least that’s how Europe proper views it. Also Cyprus isn’t very strongly connected to the rest of Europe’s banks so bringing Cyprus down didn’t look on the surface like it’d topple other banks.

Accordingly there’s not much sympathy for bailing them out. Essentially the ECB is playing hardball. They said to Cyprus ‘Okay you’re in debt because of these banks. Make your banks depositors pay for it. The Cyprus Elite, of course, doesn’t wanna piss off their big depositors.. if their money isn’t safe in Cyprus they won’t keep it there… so instead they go after their little insured depositors. Funny thing about that, the small depositors aren’t politically influential but there’s a huge ton of them. So they riot and the Parliament votes the plan down.

So they have until Monday to come up with a dumptruck load of money. Like a years worth of Cyprus’s GDP. By monday. And they can’t borrow it either, it has to be free and clear.

I am puzzling where this could be going. If they manage to stick to their plan A and lay into their creditors what the hell does that mean for Italy, Span etc? Every country that’s looking wobbly could have bank runs. Honest to 1930 bank runs! And that’ll start out killing weak banks but could turn into a wave that kills ordinary banks or even strong banks.
Plan B is Cyprus flips everyone the bird and bails out of the Euro. Cypress goes to the economic stone age. A lot of people loose a ton of money. And all the other periphery countries might end up with Bank runs anyhow as everyone tries to move their money into Germany. To say nothing of how no one knows how to actually take a country off the Euro.
Plan C is more more more Austerity but we’re starting to see signs that the periphery is getting sick of it. You have to sell austerity by saying in the medium to long run it’ll be better but people are starting to see nothing but bad into infinity and all that being imposed by foreign Eurocrats. The voters may not stand for it.

I’m not entirely sure how I feel about solutions. I mean my normal reaction is the ECB and the Germans need to face up to the fact that they have been enjoying their open market playground in Europe for over a decade now; they need to print some damn Euros and pay for it. On the other hand all that bailout money would be going to some severely unsavory characters. It’s no wonder the continent is dragging its feet.Report