Cyprus — Bucking the ECB

Remember all those warnings about what would happen if we didn’t bail out the sharks who owned our banks’ bonds?  The ATMs would stop giving out money, the banks would all collapse, little children who could neither walk nor talk would be running in the street, cursing their maker, the sun would rise in the north and sink in the south, the world would end.  And KPMG would get no more fat government contracts.

The people of Foxrock huddled by their plasma-screen radios listening for the crackling words of our leaders from deep in the Merrion Street bunker, not knowing from one moment to the next if their second Merc was safe, nor even how many buy-to-let properties they might be reduced to.

Dark days indeed but in the end, the elected representatives did the right thing by KPMG and turned the debts run up by a few crooks into a legal obligation on all of us.  The Battle of Ireland was won, if only by a whisker, and the people of Foxrock rested easy again.  Young Fiachra would have that month in Zermatt with his school pals after all and Dearbhfhorgaill could afford to buy that Lexus SUV and still repeat Second Orts.  Because she’s totes, like, worth it?

Never was so much done by so many for so few.

Bank of Cyprus

Guess what, fools?  As pointed out widely at the time by many sensible folk and also by me, it was all a scam, as the Cyprus parliament has shown.

In the face of similar threats from the ECB, they said no.  They voted unanimously to reject the moronic, idiotic, ham-fisted attempt to rob the people who held deposits in Cypriot banks, and quite properly so too.

Now, I don’t know how many Russian oligarchs have money in the banks of Cyprus.  And I don’t know how much of that money is dirty, though it seems obvious that most wealthy Russians got there by dubious means,, but it doesn’t matter.  Collective punishment is wrong, especially when that punishment is inflicted on small people who have their life savings on deposit.

It’s theft, in other words, and here’s the irony of it.  According to a recent paper by Lee Buchheit and Mitu Gulati (with thanks to the Prof), a large chunk of the next Cypriot bond to mature has been bought at a discount of up to 30% by international hedge funds, otherwise known as sharks.  What does this mean?  Simple: it means that the original bondholders have already been stiffed, and the bailout serves only to give the sharks a huge return on their investment.  I wrote about this some time ago in relation to Roman Abramovich’s purchase of Irish bonds, for which we, the patriotic Irish, paid him full face value.

Cyprus is not playing the ECB game and guess what?  The ECB blinked first.  They backed down.

This gives the lie to every word of nonsense Fianna Fáil, Fine Gael, and, to their endless shame, the Labour Party, used to intimidate the Irish people and it shows quite clearly that all the threats were hollow.   We could have safely allowed Anglo and Irish Nationwide to collapse, with no consequences at all, since these were not real banks, but instead our elected representatives chose to cower beneath ECB threats and inflict their losses on us and on our grandchildren.

The leading actor in this farce in Germany, and so much for the myth of German efficiency.  At every stage of this crisis, all their politicians and technocrats  have demonstrated is a heavy-handed unimaginative arrogance.  Inflexible, overbearing and domineering, they’re reinforced every stereotype we’ve ever known and added a few, since we wouldn’t normally associate stupidity with the Germans.

Study the Cyprus farce and be very angry for what the ECB, driven by Germany, has done to Ireland.

 

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Elsewhere: Germany’s dilemma

 

14 thoughts on “Cyprus — Bucking the ECB

  1. Of course, blame the Germans! They are the bad boys/girls again – the new Brits, eh? The next 800 years and such like? Never blame yourselves?

    Why don’t you blame the muppets who pretend to run Ireland? Those who were too cowardly to stand up against capitalism? Come it from Britain, USA or now Germany?

    Why did the Irish muppets not act as the Icelandic people and just let the foreign investors take the hit?
    Why ever do the Irish comply whatever their “superiors” or “big house landlords” tell them to do?

    All it takes is a big NO, as the Cypriots did by now and as the Icelanders did already years ago.

    But of course, the Irish love to have an overlord to blame for their own failures.

    When will you ever grow up?

  2. What would you do Carrig? Seriously, what do you suggest? As one Citizen. We are open to all new innovative ideas here.

  3. I’d buck you Bock. sorry, kidding.
    I never met any German I liked either. Bunch of dry arses.
    They’re efficient with the humour all right.

    I can’t help but think the whole EU project is fucked.
    The writing seems to be on the wall.
    There isn’t even a facade of democracy.

    Stupid leaving money in any Irish bank?
    I need to look into moving my millions elsewhere.
    The Germans would surely mind it for me.

  4. I admire the balls of the Cypriots in saying No and the clear message from the Cypriot government. Sadly they are doomed in the short/medium term.

    Cyprus isn’t Spain or Italy and Angela and her Teutonic stormtroopers need a scalp.Of course they fear the collapse of the Euro experiment but Germany have calculated that it can lose the Cypriots and continue the Euro project.–Cyprus have only embraced the Euro x 5 years and they are already fucked.
    So I fear Angela will happily allow the Cypriots to implode and go bust–just to scare the shit out of the rest of the PIIGS–“look vaat happens vhen you do not do as you are told pixieheads” . “You vill follow ze rules und pay your debts; othervise you vill starve Ja!”

    I’m hoping Michael and Enda have the balls to use our German friends to get back into the bond markets and then dump the Euro–set our own interest rates and turn the boat around. The Euro has been and always was about maximizing German exports–to hell with the consequences for us pixieheads–let the pixieheads strike back!

  5. 1-default
    2-exit euro
    3-centralise banking system
    4-print punts
    5-subsidise agriculture and fisheries
    6-focus on export led economic growth

    Maybe do an iceland, somewhere in there aswell, bang up the bankers. Maybe have a swiss style political reform into a more direct form of democracy.

  6. Ps. Germans are not responsible for the state of the economy. It is the fractional reserve system, used to generate exponential levels of credit, When the Credit is contracted In the form of higher interest, the banks come knocking for their money. Boom and bust. There is always more debt in the world than Currency. We can never pay off our debts. If the entirety of the country was liquidated from homes to government we would still be billions in the hole and stillstill paying interest.

    We need to examine the strucure of the system, from social political and economic perspectives before any change can be made.

    This structure is dominated by a corporate super entity, a mesh of Incestous ownership Ranging from deutch banke to wallmaart. If you think your being fucked by germans, your not the Germans are being fucked by the same system. Divide and conquer. Old school tricks.

  7. There is an interesting (or rather worrying) flow of events in relation to the Cyprus crisis.

    1. Irish Banks get into trouble
    2. ECB tells Irish government they can’t “burn bondholders” – they obey and the taxpayer is paying instead.
    3. Greek Banks get into trouble
    4. ECB orders a “haircut” on Greek bondholders (i.e. “burn them”)
    5. Cypriot banks are among key holders of Greek government bonds – and as a result these banks, despite having a very healthy deposit base, become insolvent and Cyprus needs a bailout of 17 billiion euros.
    6. ECB agrees to give 10 billion but, as dictated by Germany (and at a meeting of EU finance minsters hosted by Michael Noonan) they are told to take the rest from the depositors – effectively “stealing” their money,
    7. The Irish government hails this as “a good deal for Europe, Cyprus and Ireland” (although every govt spokesperson I have heard since Sunday is back-tracking on this)
    8. They Cypriot parliament refuses to ratify the deal (based on public opinion)
    9. They try to find other solutions, including asking Russia for a bailout, but nothing seems to work, or is feasible in the time they are given.
    10. The ECB says they will pull the plug on Monday next – and the only option on the table is what they agreed to (point “6” above).

    It is now very clear that the ECB did not want Ireland to burn bondholders because the German and French banks who held a lot of Irish bonds would have suffered the same fate as the Cypriot banks. But when it came to burning Cypriot bondholders they did not seem to care.

    Sounds like a lot of double-standards and hypocrisy to me….. and all quite worrying for anyone with a “few bob” in the bank. It also makes me wonder if any of them have any idea what they are doing!

  8. Capitalism purports to allow people to attain their aspirations; in the process they become indebted. Debt is just another form of social control just the direct controls exercised by socialism/communism, but with a more palatable taste.

  9. Very disturbing indeed. Monday will be interesting in a worrying way. ‘2013 ? Yea that was the year when everything just fell over after pukeing on its shoes’

  10. Given today’s announcement on the plan it is interesting to add a few more points to the sequence in my contribution earlier

    1. Bondholders in the 2nd largest Cypriot bank (Laiki) will now be BURNED – according to The Guardian “All lenders to Laiki will see their investments wiped out, in a first for a eurozone bailout” . Interesting given what the Irish Government has been told since 2008. I wonder who these bondholders are?

    2. Deposits below €100,000 are guaranteed but those above will “be placed in a “bad bank”, meaning they could be wiped out entirely.” While €100,000 is a lot of money to many people, many others throughout Europe, who have worked hard over the years, would have more than this amount in savings. I find it very worrying that this decision is taken so “easily” by the ECB. Of course, it seems that the assumption is that, in Cyprus, anyone with over €100k is Russian, so “good enough for them”.

    In my humble opinion all of this spells disaster for banking in Europe. Trust has been eroded an people will start looking for “safer” places to put their money – even if that means in a tin box in the garden.

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