2013 April 11 Thursday
Cyprus Bank Failure Costs Soar
The Euzo zone is a continuing source of amazement. Will the pain of bank failures force Cyprus out of the Euro?
The cost of the rescue has risen to 23bn euros ($30bn; £19.5bn) from 17.5bn euros, according to Cyprus' creditors.
More than one year's GDP. But since the Cyprus GDP is contracting and might go down by another 10% or even 20% the bail-out costs will rise even as the government becomes less able to come up with the money.
I have read that Cyprus banks were pressured by the Euro government into buying Greek government debt. Then the Euros decided that Greece could default on most of that debt, driving Cyprus banks into insolvency. Charles Hugh Smith argues the Cyprus financial collapse was delayed a year to give northern European banks time to get their money out. Basically, the Greek default immediately meant that Cyprus was doomed. So why wasn't the Cyprus crisis made to reach a climax sooner? Was it delayed by the most well connected for their benefit?
Ambrose Evans-Pritchard says talk of Cyprus as a Russian money laundering center has been exaggerated.
The EU authorities have gone to great lengths to insist that Cyprus is a “special case”, but I fail to see what is special about it. There is far more Russian money – laundered or otherwise – in the Netherlands. The banking centres of Ireland and Malta are just as large as a share of GDP. Luxembourg’s banking centre is at least four times more leveraged to the economy.
You can find a graph of GDP growth/shrinkage for Portugal, Ireland, Greece, and Slovenia since 2006. The Greek economy is in its 5th year of shrinkage. The Portuguese economy had a slightly up year in 2010 but has otherwise been shrinking since 2008. Its budget deficit is growing. Meanwhile, Greek unemployment has hit 27.2%. The Euro zone has been a disaster for southern Europe.
By Randall Parker at 2013 April 11 11:18 PM
Yes, but what do you expect when your economy is based on Funny Money? People laugh at Bitcoin being fake, but what is Real about the Euro or the Dollar? None of them has any Real Value! They're all phony numbers without anything backing them! Just bad IOUs made out by the Worst Crooks and Dishonest Usurers in History!
The Entire Point of Paper Money was that they were Certificates of Deposit of Gold or Silver held by Banks! None of today's phony money is backed up with ANYTHING!
"The EU authorities have gone to great lengths to insist that Cyprus is a “special case”, but I fail to see what is special about it. There is far more Russian money – laundered or otherwise – in the Netherlands. The banking centres of Ireland and Malta are just as large as a share of GDP. Luxembourg’s banking centre is at least four times more leveraged to the economy."
1) Well, Malta actually is a problem waiting to happen. It will fall.
2) Ireland has been in a mess for quite a while. So, what's his point?
3) One has to be cultureblind to compare Luxembourgians to Cypriots. I don't even... I don't even know where to start explaining.
4) Netherlands have created a century old trade tax advantage for money flows -- not storage.
Why do guys like that get paid for their words?
The comments under that piece reveal an almost surreal Germanoskeptic element. Why do all these people diss the sole country that acts as euro benefactor. Anybody slightly informed would agree that Germany doesn't need Cyprus, Greece or whatever peripheral Euro country; Malta, Ireland, Slovenia, Portugal. Of all the endangered countries only Italy is really important. The Euro would survive Spain leaving too; it'd probably not survive such misrun countries staying. I hope Netherlands, Austria, Finnland and Germany start a new currency, one backed by gold. The rest can have their euros and ECB printing presses.
Trade is fine, cross-border european migration fine too, but sharing euro finances? No, not good at all.