25 March, 2013

Cyprus: not the end

One area in which membership of the EU is extremely useful to a country like Cyprus is in obfuscating the norms of democracy. For the technocrats who got their own men into normally democratic Greece and Italy a little problem like the Cypriot parliament not liking the business of taking money from bank depositors was pretty straightforward. It was agreed that the parliament would pass in advance a series of easy boiler plate laws and leave the tricky haircut stuff until later. Then it turned out that one of the simple laws provided for the reconstruction of Laiki Bank and Bank of Cyprus, so they were put into liquidation without further reference to parliament but, unlike every other liquidation in the world, not all creditors within a creditor class were treated the same. Unsecured creditors under €100K were let off but those over €100K, identical in their rights, will have to take a serious bath. Depositors in other banks will be let off. Messy but, hey, the important thing is they didn't want this going through the democratic process.

The more you think about it, this democracy caper is all about ordinary people and who the hell cares about them in a modern elite-run society like Europe?

My big question is when the Greek Cypriot begging bowl makes a reappearance. There are other (bust) banks in Cyprus, there is the problem of what happens to the economy when the banking system isn't working and everyone wants to take their money out, and there is the problem of the Cyprus government debt which is going to rise but which they will have no income to repay. My guess is they are sorted until just after the German Elections this year.

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