But the path that led to Cyprus’s current crisis — big banks bereft of money, a government in disarray and citizens filled with angry despair — leads back, at least in part, to a fateful decision made 17 months ago by the same guardians of financial discipline that now demand that Cyprus shape up.
That decision, like the onerous bailout package for Cyprus announced early Monday, was sealed in Brussels in secretive emergency sessions in the dead of night in late October 2011. That was when the European Union, then struggling to contain a debt crisis in Greece, effectively planted a time bomb that would blow a big hole in Cyprus’s banking system — and set off a chain reaction of unintended and ever escalating ugly consequences.
“It was 3 o’clock in the morning,” recalled Kikis Kazamias, Cyprus’s finance minister at the time. “I was not happy. Nobody was happy, but what could we do?”
He was in Brussels as European leaders and the International Monetary Fund engineered a 50 percent write-down of Greek government bonds. This meant that those holding the bonds — notably the then-cash-rich banks of the Greek-speaking Republic of Cyprus — would lose at least half the money they thought they had. Eventual losses came close to 75 percent of the bonds’ face value.
The action had an anodyne name — private-sector involvement, or P.S.I. — and, it seemed at the time, a worthy goal: forcing private investors to share some of the burden of shoring up Greece’s crumbling finances. “We Europeans showed tonight that we reached the right conclusions,” Chancellor Angela Merkelof Germany announced at the time.
For Cypriot banks, particularly Laiki Bank, at the center of the current storm, however, these conclusions foretold a disaster: Altogether, they lost more than four billion euros, a huge amount in a country with a gross domestic product of just 18 billion euros. Laiki, also known as Cyprus Popular Bank, alone took a hit of 2.3 billion euros, according to its 2011 annual report.
What happened between the overnight session in 2011 and the one that ended early Monday morning is a study of how decisions made in closed conference rooms in Brussels — often in the middle of the night and invariably couched in impenetrable jargon — help explain why the so-called European project keeps getting blindsided by a cascade of crises.
“I cannot remember that European policy makers have seen anything coming throughout the euro crisis,” said Paul de Grauwe, a professor at the London School of Economics and a former adviser at the European Commission. “The general rule is that they do not see problems coming.”
Simon O’Connor, the spokesman for the union’s economic and monetary affairs commissioner, Olli Rehn, declined to comment on whether Mr. Rehn had taken a position on the possible impact of the Greek debt write-down on Cypriot banks.
As well as hitting Cyprus over its banks’ holdings of Greek bonds, the European Union also abruptly raised the amount of capital all European banks needed to hold in order to be considered solvent. This move, too, had good intentions — making sure that banks had a cushion to fall back on. But it helped drain confidence, the most important asset in banking.
“The bar suddenly got higher,” said Fiona Mullen, director of Sapienta Economics, a Nicosia-based consulting firm. “It was a sign of how the E.U. keeps moving the goal posts.”
Cyprus, she added, “created plenty of its own problems” and was not aided by the fact that the country’s last president, a communist who left office in February, and his central bank chief were barely on speaking terms. But decisions and perceptions formed more than 1,500 miles away in Brussels and Berlin “didn’t help and often hurt,” Ms. Mullen said.
Cyprus banks, bloated by billions of dollars from overseas, particularly from Russia, had many troubles other than Greek bonds, notably a host of unwise loans in Cyprus at the peak of a property bubble, now burst, and, critics say, to Greek companies with ties to Laiki’s former chairman, the Greek tycoon Andreas Vgenopoulos.
Mr. Kazamias, the finance minister at the time of the Greek bond write-down, said he had little idea of just how badly the move would hurt his country’s banks. “We worried but we never received any information that this was a red line” that should not be crossed, he said. The Cypriot government, he added, initially calculated that “we were in a position to cover the losses,” and it was only later, after depositors began to flee and the Cyprus economy stalled, that “we found out that this was impossible.”
But Charles H. Dallara, the lead representative for the banking industry who negotiated with European officials in 2011 in a bid to keep the losses imposed on Greek bonds as low as possible, said the writing was on the wall.
It was “very clear that the effect of the Greek deal on Cypriot banks would be severe,” said Mr. Dallara, the former managing director of the Institute of International Finance, the banks’ lobbying group. “But there were elections coming up, and the tendency in Brussels is to let these things drift. So nothing was done.”
Slashing the amount that Greece paid on its bonds was necessary at the time, he acknowledged, because it helped reduce a mountain of debt that could have pushed Greece from the euro. “But looking back, in reality there was no way to avoid the eventual adverse effect on Cypriot banks,” said Mr. Dallara, now the chairman of the Americas for Partners Group, a private markets firm.
Even before the Greek debt bombshell, Laiki Bank “was already in a bad way because of bad lending,” said Kikis Lazarides, a former chairman of the bank. But, he added, the write-down on Greek bonds “was more or less the killer blow.”
Like many Cypriots, Mr. Lazarides is angry that Europe’s richer countries, particularly Germany, largely dictate policy. “We have to change some things in Europe in the way decisions are taken,” he said.
After the Greek write-down, Cyprus compounded its problems by dithering on whether to seek a bailout from the European Union. At first, it appealed to Russia, which provided a 2.5 billion-euro loan in December 2011. But this money quickly ran out, and when Cyprus did finally go cap-in-hand to its European partners for a lifeline, it received a rude shock: Germany, already gearing up for an election this year, wanted not just budget cuts and other conventional austerity measures but a complete overhaul of Cyprus’s economic model, built around financial services for foreigners seeking ways to dodge taxes and, Berlin suspected, launder dirty money.
“They did not want the Cypriot model to exist as it did — they wanted Cyprus to stop being a financial center,” said Pambos Papageorgiou, a former central bank board member who is now a member of parliament and on its finance committee. “It was very brutal, like warfare.” Mr. Papageorgiou complained that the European Union had shown “the opposite of solidarity” in its dealings with one of its weakest and most vulnerable members.
In the three years since Europe’s rolling debt crisis first exploded in Greece, governments and citizens in the hardest-hit nations have fumed that decisions made in Brussels pay little heed to their interests and are dictated instead by the economic concerns and election cycles of Germany. Whether in Athens, Dublin, Rome, Madrid or Nicosia, people increasingly ask whether the European Union serves their own aspirations or those of remote institutions dominated by others, particularly Germans.
Such questions have grown to a furious pitch in Cyprus, where terms set early Monday for a 10 billion-euro bailout will deepen an already painful recession and send unemployment — now at 15 percent — soaring. They require the dismantling of Laiki Bank, with the loss of around 2,500 jobs, and a significant reduction in the country’s role as an offshore financial center.
“We are looking at a very grim future for Cyprus,” said Michael Olympios, chairman of the Cyprus Investor Association, a lobbying group. “Even firm believers in European project like myself see now that it was a bad idea and that we should have at least stayed out of the euro.”
As jobs disappear and the economy contracts, Mr. Olympios said, faith in Europe will wither. “I used to be a believer. Not anymore.”
Iata si vocile americanilor de rand:
Lee NYC
Germany forced Cyprus to take the write down on Greek bonds. Cyprus participated in the bailout of Greece and other member countries and when they got into trouble because of those write downs they had conditions imposed on them that were tantamount to financial warfare and which will virtually guarantee the demise of their economy. According to the IMF, since 1970 there have been 147 bank bailouts recorded and in no other case were depositors expected to take a loss. Interesting, that.
Now in order to cater to their domestic audience pre-election, the Germans position themselves as the responsible grown-ups punishing their lazy, Southern European "partners" when they themselves played a major role in creating the mess.
Murphy's Law Vermont
"An ounce of prevention is worth a pound of cure"
Government permitted lax banking regulations are the cause of this crisis.
The EU should require that all banks offer accounts where the deposits will be invested safely in approved assets that can be fully guaranteed.
If depositors want higher returns, fine, but let them know the severe risks involved and that they are on their own.
Don't let banks masquerade as a hedge fund.
jbok
At a time when "AAA bonds" turn out to have been junk, mismarked by complicit ratings agencies--and a trust fund, SSI, is under attack--it won't be easy finding "safe, approved assets" other than cash. The crisis in trust of banking won't go away anytime soon, and the in the investment markets? Only if you're one of the swindlers; you can trust you won't go to jail.
And the ordinary people of the nations are being attacked in order, not to fix the corruption, not to end the problem, but just to let the corrupt system go on for a while longer. Big trouble ahead, guys. Batten down your hatches.
In reply to Murphy's Law
Vlad1959 Boston, MA
My sympathies are firmly on Germans' side. The crisis was caused not by Germans' diktat but by Greek profligacy and Cypriots' bad banking practices. They made their own mess and now they cry victim and assail Germany for refusing to close eyes to those misdeeds and just give them a blank check so they could happily continue as before.
Germany should bail out Greece and Cyprus for its (and Europe's!) own sake, but the bailout should come with significant strings - to force Greece and Cyprus stop their bad practices going forward.
It is not 'Europeans", it is careless Cypriot bankers. The bankers' common sense is to never to put too many eggs in one basket. They should not have been so heavily invested in Greek bonds.
Mani the parakeet Little India, Singapore
Not forgetting bad loans to Russian developers too.
In reply to Vlad1959
reminore ny
way things are going - the Germans will be selling NO luxury items and NO weapons systems to their former markets...we'll see how smug the German
'electorate' will be then...
In reply to Vlad1959
hadarmen NYC
Germany for a long time is the main contsructive force behind the EU, particularly Helmut Kohl must be remembered his tireless efforts to put EU in world wide known competitive union. French politicians must be remembered such as Giscard d'Estaing for their legislative contributions.
However Todays EU is in dire straits. I am not talking here why this crisis happened, I am talking here how this crisis handled.
Let's start first incompetent and non visionaries Sarkozy, Berlusconi and Cameron. These three don't have any clue what was about 2010 European and 2008 US economic crisis. Ultimately they caused their own countries downturn and helped ultimate culprit, Angela Merkel.
Merkel single-handedly played down these crisis as if a single country or bank crisis, She never conceived or pretended that this is a global level crisis and problems about Euro structure could be fatal for the union.
We have been almost 5 year in this crisis, Merkel did nothing for fundamentals of the crisis.
This level of Betray can be plotted only in Stasi, we never know this will be a major issue here.
This is not about rescuing Greece or Cyprus, this about undoing what has been achieved in EU until now. Merkel meticulously executing her plan.
This was happened before under the incompetent eyes of French and British politicians, 1933-1939 in Germany. The result was devastation of Europe.
RH Schumann Bonn
Aren't we being just a bit paranoid here? Are you seriously accusing Merkel for deliberately ruining Europe? Who is to gain by it? Certainly not Germany. Please stop fighting WWII!
In reply to hadarmen
BB NJ
Excellent reporting connecting the dots.
Laundered Greek & Russian money, uninsured and invested in worthless Greek bonds. Shockingly, German taxpayers don't want to pour money into this "financial center" to support future money laundering. The Cypriot economy seizes up as money flows out. Do the banks have any real assets?
What to expect:
* More interest in the natural gas fields.
* More stress on the Eurozone.
* More pain for Greeks.
* Russians can't find any value except maybe a port
This is all about the Greek part of Cyprus. What happens to the Turkish Cypriots?
Same comment goes for the USA. If you think the US government policy is not as "obscene" just look at how much we owe the Chinese.
Mathias Weitz Butzbach, Hessen, Germany
Why don't they just leave the euro, nobody forces them to stay in.
To me this sound more like a spoiled brat.
The cypriots veiled their financial sector until the german intelligence service digged into it in autumn 2012. They can't blame the EU or Berlin in purposely destroying their economic modell - we just didn't knew what was realy going on there.
And they are angry that they just get a 10 billion € help. Makes me wonder how much help they would get, if they weren't in the EU. Russia already declined any help, why aren't they cypriots angry at them ?
And all this blaming Germany for what is happening in other countries is so pubertal, they show up when everything is already on fire, expecting a solution that causes no pain - and of course they want to keep their generous life-style and their political coteries.
Germany has no voice in domestic politics, but we are often aware of things, which go totally wrong or hard to sell in Germany. For example our retirement age is 67 which is much higher than in most other countries, and we do blame early retirement for a runaway government deficit. Also liberalized transportation, Greece still refuses to allow competition, but closed business and high transportation expenses are a major reason why Greek companies can't compete in a global market.
Cyprus was in dire straits long before the EU stepped in, but denial and lack of self-awareness is one thing they never seem to run out of.
PQuincyCalifornia
Mr. Weisz, German banks (esp. the Landesbanken) were among the most irresponsible players bringing economic crisis to the world: huge bailouts by central banks were required to prevent their collapse. Now that they have been saved, they are out seeking to resume their games. If you think Ms. Merkel is out protecting the hard-working German Bürger, and not listening to Deutsche Banks and other German commercial banks' interest in eliminating a competitor, then you are naive.
In reply to Mathias Weitz
j. von hettlingen Switzerland
There have been widespread resentments towards Germany in Cyprus but there are also growing disenchantment in Germany as well.
A new political party has been founded there called "Alternative für Deutschland", Alternative for Germany, an openly anti-Euro party and comes from the centre right. They are sick and tired of bailing their unruly neighbors out. So, in light of the elections later this year, Merkel has to tighten her purse strings, making it even harder for others to borrow.
The Cypriot banks were victims of the Greek bailout, because it was private bondholders who had to take a "haircut". But Cypriot banks have fewer private bondholders than banks in other eurozone countries, so unfortunately ordinary savers are now the victims.
Andy Paris
Cypriots blaming the EU or Germany for the implosion of their financial industry and the anti-Euro party you describe are two peas in a pod as far as selfish delusion is concerned.
Germany built the EU in its own interests and has profited mightily from it, while blaming others for debt fueled profligacy it engineered to its own benefit
Cypriots like the Greeks before them followed along like lemmings hoping to arbitrage on the open market advantages of the EU, with unrealistic expectations of the downside and the willingness of its partners in crime (Germany not the least among them) to lend a hand when things inevitably went pear shaped.
Hubris all around I'd say...
In reply to j. von hettlingen
Uziel Nogueira Florianopolis - SC - Brasil
During panic days of any financial meltdown, there always be decisions taken that prove to be detrimental ex post. It is inevitable. The euro zone crisis is no exception.
Cyprus banking breakdown being originated in Greece's rescue plan of 2011 is not a surprise. It is a natural outcome of a financial system highly integrated and EXTREMELY vulnerable to systemic shocks. Known as the butterfly effect in chaos theory.
Other unpleasant surprises may be revealed in the euro zone. Anyway, the euro zone rescue plan proves to be superior to the American rescue plan of 2009.
The European model does not creates moral hazard while the American does. In fact, the US is a good academic case study of moral hazard creation during financial duress.
During Wall Street Apocalypses Now 2009, the Bush administration took a fateful decision to rescue the whole financial system with taxpayers money. That decision created a moral hazard difficult to be erased in any financial reform.
Banks too big to fail became a permanent fixture of the US landscape. This means a system vulnerable to systemic shocks similar to the one occurred in 2009.
In sum, the European model of rescue is superior to the American for two reasons:
1. Europe removes the main source of vulnerability-instability in the financial system a.i., banks too big to fail;
2. It is socially equitable because the burden sharing falls on the wealthy whereas the American falls entirely with taxpayers.
Ronald CohenWilmington, North Carolina
Risk without loss is no longer risk -- it's gambling with other people's money which takes caution out of the equation. Americans paid but in "socialist" Europe the investors lost.
In reply to Uziel Nogueira
Mark Kobe, Japan
This is such an unbelievable crisis caused through lax regulation, toleration of corruption at the highest levels of government, corporations, and banks, and being passed onto the public of these various nations (the US included). Even more unbelievable, politicians and corporate leaders are still able to sing the song of less regulation for the banks and more austerity for the populace... and the people actually buy it!
One would think after a worldwide economic collapse anyone speaking in favor of those that caused the crisis would risk being lynched.
NHC Istanbul, Turkey
I was living in Turkey when Turkey was jumping through the hoops to win acceptance into the EU. In the end, the EU rejected Turkey's application. I find it ironic that now Turkey's economy is thriving while the EU countries are having their own financial issues. It is the Turks who should be smiling now!
Joe Atlanta
Don't blame the EU for writing down Greek debt. The debt was pretty much noncollectable. Instead blame Cyprus for buy Greek bonds in the first place. If they had done due diligence, they would have known how corrupt the Greek banks had become and how worthless the bonds they were selling. As long as banks get to gamble with deposits insured by governments, they have no incentive to act prudently.
Miklos Legrady Toronto
The European wars of the 1600-1950's are now being refought, not with guns, but with banks and monetary policies.
s.h.basse Bornholm, Denmark
Taming the beast.
To tame a beast much larger than you can handle, you little by little nudge it away from the catastrophic direction it is heading!
That is what both Merkel and Obama are trying to do!
The crisis is not an “economic crisis” beast, but a chimera consisting of a production crisis and an economic crisis. This chimera beast was born way back, when the “old industrial countries” liberalized and internationalized their legislation so that the internationalized companies no longer were tied to their mother countries. Today the economy is global and international, but the project of maintaining the western societies are still (now unfinanced) national projects!
This crisis will not dissapear it will continue as long as the specific nature of the beast is not understood!
http://unifiedscience2.blogspot.com/2011/02/deeper-causes-of-downturn.html
Fraser Canada
The Americans can't evade some responsibility for this mess. For one thing, the great financial crisis started on Wall Street and spread worldwide. Second, the US is the largest shareholder in the IMF and nothing passes through that organization without US approval. So all this hand-wringing about the Europeans is not very becoming on the part of Americans.
Bill NYC
The gist of the argument here is that Europeans are responsible because they didn't bail out Greece ENOUGH. The fact that the world of finance is interconnected, however, doesn't mean that every single loss due to corruption and horrible financial decisions should be collectively borne by society as a whole.
lohdenniswyckoff, NJ
Wow! Cypriots blaming others for their reckless investments and its consequences. Investments involves risks, even bonds. If you can't handle risk, don't take them. Don't accept money to invest if you can't invest responsibly.
While the EU may have made many mistakes, blaming them is absolutely ludicrous on Cypriot and Greek role and responsibility. In the mean time, the bankers profited and the Cypriot economy flourished. It's a bubble and all bubbles eventually burst.
mingsphinx Singapore
Trust The New York Times to blame Brussels for the illegal and unconscionable write-down in Greek sovereign debt. Have you forgotten the theatrics put on by the succession of Greek leaders who openly blackmailed the European Union even after it had become known that the Greek government had perpetrated massive fraud? Are you so blinded by ideology that you are willing to believe European governments wanted to forgive Greek debt when the bulk of those debentures are held by European financial institutions which could become endangered as a result of their losses on Greek debt holdings?
Stop whipping the Germans and for once take a balanced, reasoned view of this unseemly situation. The Euro-zone situation is not like Syria – you do not have to manufacture the truth in the name of national security. So just tell it like it is. If the Cypriots want to blame someone they should blame the Greeks for lying so viciously. But in no way can Cyprus escape responsibility for its own crisis. Cypriot banks piled into Greek debt because the yields offered were higher. They were greedy, myopic and stupid and they got burned.
Nick Ridgefield, CT
“The general rule is that they do not see problems coming.” I'm sorry, but how is this different than little Timmy Geithner and his pals? Asleep at the wheel and pliable as Silly Putty. Many act like we're some bastion incapable of having the same thing happen here, they are wrong......
Dr. Politics Ames, Iowa
There is clearly something existentially broken with the Euro Zone model. This is not a matter of tweaking this or that. It is highly dysfunctional that only ONE country, Germany, is such a dominant force. Second, it is not surprising that the Germans are tired of bankrolling their corrupt, tax cheating, and incompetent Euro cousins. I mean, we should feel sorry for the doings of an offshore banking haven for sketchy money and the clearly clueless government of that country -- REALLY?!
A bailout of Cyprus will result in the banks and government just saying, "Whew, close call. Now let's get back to business as usual! Let the champagne flow!" There is no good light at the end of this tunnel.
Joanne N Europe
The Republic of Northern Cyprus, i.e. Turkish Cypriots, aren't part of the EU. As for German taxpayers not wanting to pour money into this "financial centre" I bet they didn't want to pour money into their own banks, who got far too exposed to American subprime mortgage packages. But nobody asks taxpayers, do they. In fact, in both cases the taxpayers (in Germany AND the southern countries) are just bailing out their banks.
elijah stuttgart germany
The fact that Cyprus' banks held so much of their assets in Greek bonds is the result of weak regulation by the Cyprus government. This lack of diversification is not prudent policy - and a competent and non-corrupt banking regulator would not have allowed this.
Cyprus complains about the lack of solidarity from Europe and about being treated differently than larger European countries. But what other European country had such a bloated and corrupt banking structure, with so much foreign money and so little regulation?
Cyprus was a center of banking criminality with the support of its politicians, who in turn were kept in office by its citizens. Ultimately the house of cards came crashing down and the Cypriot people and politicians are looking to blame outsiders because it is easier than accepting responsibility for their own failings.
John Hartford
The usual Euro doomsayers like Grauwe get quoted and some fixer from a Nicosia "consulting" firm (although to be fair she does point the finger at local incompetence). The EZ didn't see the Cyprus meltdown coming? Well why then have they been negotiating with the previous rather feckless Cypriot government for the last year? Everyone with minimal financial knowledge knew this was coming. Yes the Cypriot banks got burned on Greek bonds but then so did a lot of other investors. The Greek bond exposure by Cypriot banks is only part of the problem. Much of the money has gone into other dubious areas like a local real estate bubble, propping up local airlines and other shaky businesses.
C from Atlanta Atlanta
So Andrew Higgins is telling us that Cypriot bankers putting so large a proportion of their assets in one place like Greek government bonds is good banking practice?
Beware of Greeks bearing bonds.
The Honest Ex-Banker Canada
Just like in Cyprus, the UK government (Bank of England) and the US Government (Federal Deposit Insurance Corporation FDIC) are already planning on how to take money out of savings accounts in the next financial crisis. The FDIC and the Bank of England have written a joint paper explaining how savings deposits which are said to be guaranteed for the depositor will instead be used to bail out failing banks.
Hard to believe.
See an explanation and the Bank of England/FDIC paper which proposes this at: tiny.cc/z4jcuw
Henry Germany
Germany, in the end, guarantees (in fact: pays) for most of the Greek and Cyprus losses......therefore Germany can demand correct banking practices and elimination of corruption and money laundering! Or do you expect German tax payers to absorb the losses, that are caused by these unprofessional (to say it nicely) Cyprus or Greek bankers? In addition, the Maastricht Treaty says clearly, that trans-national bailouts are forbidden.
Fabrizio Bartolomucci Rome, Italy
Either Cyprus is part of Europe and so she damaged herself, or you should blame Germany instead of Europe for all the world's sin. It is not possible to shrink and enlarge Europe according to one's rhetorical needs!
Julie Dahlman Portland oregon
Until the 80's here in the US corporations paid taxes and so did the wealthy elites and they always had loopholes. It is an outright lie that corporate tax rate is 39% or 35% after all tax loopholes some corporations are not paying a time federally or at a state level. The wealthy elite hire a attorneys and accountants to lower their tax rates and lobbyists to change the tax laws for them. Carried interest, capital gains and these chiselers are paying far less taxes than the workers.
That is why are local, state, and federal coffers are hurting along with the banksters raping and pillaging taxpayers coffers through these municipalities investing in stock market and wall street financial trickery.
It is a shame that what are ancestors built, the commons, is be threatened by these crooks.
Rex Cheung Philadelphia, USA
Looks like Cyprus because of its sovereign debt will put their natural resources on garage sale soon, President Xi is out shopping right now. Cyprus seems to be ripe for another communist China purchase in addition to their aggressive takeover of many assets in European countries with sovereign debts since 2008. Just a couple days ago, NYT reported that PRC was trying to build a naval base in Iceland, PCR must be salivating over Cypriots' natural resources now seems nothing can save Cyprus from China.
Garak Tampa, FL
So the Germans are angry that they have to bail out other nations. Where was that concern when Germany's economy benefited from exports to the other members of the Euro Zone? Where was that concern when Germany was gung ho on expanding the Euro Zone? Or setting it up in the first place?
The Germans insist on austerity even though they know it only makes matters worse. Even though that is not the precise technical issue with Cyprus, the lesson is clear. It's clear that German policy on this crisis is not rational. It is emotional, wanting to make others suffer for the sins Germans perceive them to have committed. When you act based on emotion, you don't think through the consequences. As this article explained, that is what happened here. Cyprus is a drop in the bucket in financial terms. The EU could recapitalize the Cyprus with pocket change. Yet Germany wants to make a point, wants to punish Cyprus for its sins, all without rationally thinking through the consequences.
After Cyprus, the promise of deposit insurance in the EU is open to question.
BC Canada
Whenever I see articles about the troubles in Europe, it seems that the focus is on how the EU could quickly return to prosperity by bailing out failed institutions. But is there not a worry that the corruption and bad policies of those failed institutions would then be allowed to continue on and create future crises? Greece, in particular, seems to go through a cyclical pattern of economic crises created by bad & corrupt policies.
Maybe the best thing Europe can do is to clean house, however painful it might be over the 5-20 year horizon, so that long-term prosperity becomes possible. Maybe pundits should think about the long-term structure of the EU economy and society when passing judgement on policy, rather than taking the short view.
Len Manhattan
Cypriot banks were not the only banks in Europe holding Greek bonds, nor were they the largest holder. Unfortunately when the banking sector is four times the size of a country's GDP there is no possibility the government will be able to back it up if it runs into trouble -see Iceland 2008. The Cypriot banking industry was a disaster waiting to happen -if it wasn't the Greek bond haircut something else would have sunk this top heavy ship and the country right along with it.
Niciun comentariu:
Trimiteți un comentariu