Tuesday, March 19, 2013

Cyprus rejects Eurogroup demolition plan

The Cypriot Parliament rejected with 36 votes against, 19 abstentions and not a single vote in favor the proposal to raise €5.8 billion of banking capital from depositors, via a special tax. This was the condition imposed by the Eurogroup (meeting of the finance ministers of the Eurozone, with regulatory capacity) to loan €17 billion (or is it just ten?) to the Cypriot banks, some of which are in apparent dire straits. 

In the end, after a very long weekend of meetings, protests, counter-proposals, etc., the bill gathered not one single vote. It is of course unclear how many of those who opposed, let alone abstained, would have voted in favor if they had any hope of victory but it seems that in the end nobody wanted to vote in favor of financial suicide. 

Let the banks fall therefore... as they must.

In a side note, it must be mentioned that at least €4.5 billion were moved out of the country even before the EU's conditions were formally stated. It seems that some depositors had way too good connections. 

Sources: Bloomberg, DWN[de].

Update (Mar 20):

This article at Cyprus.com is a very good analysis (from a purely capitalist viewpoint, it must be said) of why this Eurogroup attack against deposits was the equivalent to shooting Cyprus dead. It seems that the survival instinct of Cypriots, including MPs, so often so sheepish, has avoided the worst.

However the threat remains, and dissident (Neokeynesian) economist Y. Varoufakis warns that the next step is likely to be a bailout with conditions similar to Greece, i.e. hitting pensioners and taxpayers instead than account-holders.

This should never be the case, not even under theoretical free-market capitalist conditions: if a bank must fail, so be it. Smaller accounts are 100% insured (to avoid the worst) and the state can always retake the bank as public company for a small cost after due bankruptcy.

However Europe is not anymore a common sense place but a dictatorship of the banksters: they rule the Union and they rule the states and dictate the terms so they always win.

But even that is unsustainable in the short run: things will change one way or another. You can only squeeze a lemon so much, right?

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