The Germans
swindled out of Cyprus Banks €4.5
billion (€4500 / citizen) to bail out Greece
and they now caused a bank run because they did not want to live up to the
single currency basics! Capital is fleeing to the eurozone-core and the ECB is
being toyed into implementing bankruptcies and capital controls wiping out
billions on the pretext that it is Russian money! It is not our money we are
trying to protect. Nor even Cyprus' credibility. It is the eurozone's
credibility which is at stake here. We are into a currency union and the European
Institutions allow the German government to order the ECB what to do at
Germany's benefit. It would have cost them nearly nothing to provide stability
but they just would not get it. This is madness, but there is nothing that
Cyprus can do to stop them.
This
is not about Cyprus any more. Actually it has never been. Cyprus is tiny to do anything about it. Cypriots
were made to pay €4500 each for the bail out of Greece and they are now being
forced to contribute another €6000 each. All this because the German government
would not contribute €100 per German citizen to provide the necessary
stability! The only way this could be walked back by now would be to
re-capitalise Cyprus Banks with German money and allow anyone
to withdraw their deposits. It should not cost the Germans more than €1000
each.
Clarification 26.3.2013: The maximum of €1000/ German citizen is not a net cost. It would replace deposits fleeing and earn interest assuming a worst case scenario of all €80 billion deposits fleeing to perceived safety. Most of them would end up in eurozone countries anyway. The actual cost would have come down to far less than €100/ German citizen. Such an announcement would not have caused a bank run to begin with and the requirements would have been much much less.
Clarifications 27.3.2013: Please read the comments below by clicking on "comments"
Clarification 26.3.2013: The maximum of €1000/ German citizen is not a net cost. It would replace deposits fleeing and earn interest assuming a worst case scenario of all €80 billion deposits fleeing to perceived safety. Most of them would end up in eurozone countries anyway. The actual cost would have come down to far less than €100/ German citizen. Such an announcement would not have caused a bank run to begin with and the requirements would have been much much less.
Clarifications 27.3.2013: Please read the comments below by clicking on "comments"
"It should not cost the Germans more than €1000 each."
ReplyDeletePray tell, why should I pay "just" €1000 for your mess?
BTW, I could need some loan (wages in the North are not that great after all). Will you transfer €1000 on my bank account? I guess that's just peanuts for you.
You do not get it do you? This is not Cyprus' mess. Cyprus is not bankrupt. Its banks have assets of €120 billion. Cyprus is facing a bank run caused by the ineptitude of eurogoup politicians. They believed Dr. Schauble, a lawyer by training, that Cyprus was not systemic and that they could have a party at the bank depositors expense on the pretext that they were Russian. They thought it was a legal question. This is what happens when lawyers are allowed to meddle with economics. If Cyprus is not systemic, why are you all people still talking about it? Most of you did not even know what Cyprus was before this great stupidity! An initial minor €17 billion issue was lead to balloon to €50 billion and who knows where it is heading. I wish I could see the data how much is costing the ECB to support the euro these days. This is what happens when blockheads want to run the world!
ReplyDelete"It would replace deposits fleeing and earn interest assuming a worst case scenario of all €80 billion deposits fleeing to perceived safety. Most of them would end up in eurozone countries anyway."
ReplyDeleteThe money doesn't end up in the bank accounts of ordinary german taxpayers. Many in the South don't seem to know that many Germans are not rich. We haven't seen real wage increases during the last decade. There were welfare cuts in order to "reform" our labour market and "increase" productivity. There is a huge low wage sector which is part of the German "economic miracle". Middle class Germans on the other side pay high taxes (the really pay, not like the greek "taxpayers").
I dont want to pay for the eurozone mess any more. That is the feeling shared by many germans. Most of us never wanted the Euro (just Kohl and some economic elites wanted that). And we are not the scapegoats for the financial problems of southern europeans, pointing at us like we are imperialistic nazis who want to establish a fourth reich. We just dont want to pay for other peoples debt. Ask the banksters in Frankfurt, London or Paris. Maybe they agree to the waiving of their bonuses.
"Cyprus is not bankrupt. Its banks have assets of €120 billion."
Have the Cypriot banksters ever heard of the priciple of financial diversification? They invested too much money in Greek assets. Thats why the Greek mess also is Cyprus' mess.
By the way, German banks pay 0,5% on deposits... how much did depositors in Cyprus get?
1. "The money doesn't end up in the bank accounts of ordinary german taxpayers"
DeleteOf course it doesn't. That is why when Germany contributes to a loan for bailing out a eurozone country they should not claim that it is the German taxpayer that has to pay. It is just the German Banks lending the money that fled back to the ECB.
2. "Have the Cypriot banksters ever heard of the principle of financial diversification"
Unlike German Banks who often engage in speculation (instead of recycling the money back into the eurozone system) Cyprus Banks did not hold Greek Sovereign debt because they were speculating. Greece was a major market in which they operated. The option of least risk would be to keep their liquidity in the sovereign debt of the market they operated. That is, if the German government hadn't rigged the game to begin with.
3. "German Banks pay 0,5% on deposits"
The reason German Banks pay a lower interest rate than Banks in the periphery is simply because they have more capital available compared to the demand in Germany. There are two reasons: One, there are less development and business opportunities because of market maturity. Two, because they get more capital from deposits in the periphery that flee as they cause uncertainty and risk by their political decisions.
The German people are being fooled by the story their leadership has been repeating over and over regarding Germany's southern partners. It is amazingly similar to the Joseph Goebbel's propaganda and its acceptance by the german public during the second world war!