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View Diary: Cyprus: A Germanic Morality tale (21 comments)

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  •  Several Scenarios Come to Mind (6+ / 0-)

    If Cyprus defaults, I guess.

    I have to wonder if the best course of action is not to shut down the banks, withdraw from the Euro, tell the Russians to flick off and go Iceland on the whole thing.

    The losses to global wealth, finance and banking could easily be absorbed by the world economy.

    Maybe the global elites are worried about the precedent being set, though, and that's what this is unlikely to be permitted to happen.

    "I'll believe that corporations are people when I see Rick Perry execute one."

    by bink on Tue Mar 19, 2013 at 06:18:12 PM PDT

    •  They appear (2+ / 0-)
      Recommended by:
      Frank Schnittger, northsylvania

      to have made that decision, with the Parliamentary vote to reject the terms of the bail-out.  The major bank in question (Laiki), I have learned, was already nationalized last August.  Which means that the government owns it, probably because the last owner had already screwed it up so badly that was its only option.  Now they're going to have to cut their losses.  According to a report on BBC, Athanasiades specifically tried to shield the large depositors by limiting their "tax" to under 10%; that is probably what caused the meltdown as the amount demanded by the Germans could have been made up by either a 16% tax on deposits over 100K EU, or the haircut they worked out where supposedly insured amounts were to be taxed 6.75%.  It was the latter that sparked rebellion, as he was cutting into insurance "guarantees" relied upon in good faith by small depositors.

      The precedent that the ECB appears to have been setting, which will still hold good, is that large depositors can no longer expect to be routinely shielded from bank collapses over and above the amount of standard insurance.  Unfortunately they will have done that in the most embarrassing manner possible, with great damage to the credibility of all actors in the financial system.  Expect a rapid return of the European "south" to historical modes of corruption, cash transactions, grey markets and local patronage, all developed originally to deal with financial institutions and governments which could not be trusted.

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