Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The Lesson From Cyprus: Europe Is Politically Bankrupt

Politics / Euro-Zone Mar 27, 2013 - 11:48 AM GMT

By: Raul_I_Meijer

Politics

Over the past week, Europe, or rather the present EU leadership, has done damage to itself it will never be able to repair.

It seems to escape everbody, but that doesn't make it any less true: people from Portugal to Spain to Italy to Greece to Cyprus and Ireland are worse off today than they were when they first adopted the euro. Moreover, their economies are all getting worse as we speak and projected to plunge further. The once highly touted blessings of the common currency are by now lost on most of southern Europe; for them, the euro has been a shortcut to disaster.


Until Cyprus, the EU had always maintained two prime objectives (and spent €5 trillion over 5 years to prove it): keeping all members in the eurozone, and guaranteeing all bank deposits under €100,000. These objectives exist from now on only in words. Brussels has threatened to both grab deposits of small savers and throw Cyprus out of the monetary union. Two watershed moments in one.

The membership of the European Union, the subsequent introduction of the euro and the seemingly endless flow of credit that came with these "privileges" provided the region with a temporary illusion of increasing wealth and new-found prosperity. Today it knows that none of it was real, or earned; it was all borrowed. It's time to pay up but there's no money left. It needs to be borrowed. From the European core and its banking system.

The EU's financial scorched earth strategies have left its Mediterranean members with highly elevated unemployment rates, fast rising taxation levels, huge cuts to pensions, benefits and services and above all insanely high debt levels, personal, corporate and sovereign. And now, as ironic as it is cynical, their savings. The only thing that keeps the nations from going bankrupt is more debt, largely in the form of ECB loans.

What sets Cyprus apart from the other victims of Brussels' expansion hunger is the timing. The country (actually only the Greek-Cypriot 59% of the island of Cyprus) was only allowed entry in the EU in 2004, and it didn't introduce the euro until 2008. At that point, total bank assets were already well over €80 billion, or a very unhealthy 450% of GDP, and kept on rising with a vengeance. Four years later, in early 2012, the EU/ECB/IMF troika forced €4.5 billion in losses on the Cyprus banking system through the haircut on Greek sovereign debt. Now, one year after that, the same troika forces Cyprus to cough up €5.8 billion. No great math skills required: Cyprus was essentially pushed under the bus in order to - temporarily - save Greece.

The EU, with all its 1000s of highly paid employees and its multiheaded leadership structure, time and again fails to do its overseeing job, and then conceals this by turning around and bullying the victims of its failures. Of course they knew what state Cyprus was in when it switched to the euro, and the country should never have been allowed to enter. And of course the EU and ECB leadership knew all along what happened in Cyprus between 2008 and now, or at least should have. It's their job to know. Hence, the leaders should be fired either for not knowing or for knowing and not acting. They just cost taxpayers yet another grab bag full of billions, and they should be held accountable for that.

The problem is they're not accountable to anyone for anything they do, other than in name. Or put it this way: people like Van Rompuy, Barroso and Olli Rehn are not accountable to anyone but themselves, each other and Angela Merkel's entourage. There's a great word in the English language to describe their attitude; the ancient Greek "hubris". Add a side dish of arrogance and incompetence and you have a lethal combination.

By the way, here's how European democracy works: when the whip comes down, everybody will do what Berlin wants. Germany has some 24% of the EU population, and Angela Merkel's ruling party (through a coalition) has maybe a third of all votes. That means perhaps 20 million Germans, or at best 6% of the 332 million people in the Eurozone, decide what goes and what does not.

Hubris makes stupid (or, granted, it could be the other way around). That's why we saw the following over the past week:

1) The announcement of the initial Cyprus plan, the one that included a 6.75% tax for all deposits below €100,000. It doesn't matter that it's no longer in the final plan, the "deposit grab" genie has left the bottle and will never return. It's like breaking an egg; restoring confidence is no longer an option. No European small saver will feel safe again for decades, and many will take much of their deposits out of their banks, which will push banks over the edge, requiring more bailouts, rinse and repeat.

The troika, joined by German finance minister Schäuble, went out of their way to put all the blame for this on the Cyprus government (the ball was in their park), but given the obvious potential consequences (the devastating loss of trust), they should never have allowed either the responsibility or the blame to be there; it was theirs to take. That they didn't, leads to point 2:

2) Brussels and Frankfurt can neither oversee nor control the consequences of their actions. The trust issue is just one of many topics that have made this clear. And as long as the present leadership structure remains in place, what happened in Cyprus will keep on happening, because:

3) They don't care. They don't care that the entire southern part of their union is falling over the edge. They don't care what happens to the people in the streets of Nicosia, or Porto, or Sevilla, their jobs, their savings, their well-being, their children. They're not accountable to those people. They're untouchables as far as democracy goes in all but the most cynical definition.

Imagine you're a cleaning lady or a primary school teacher, or you have a small grocery store or a bakery, in a town somewhere in Spain or Italy or Portugal. At home, you've already been hit with huge tax rises and budget cuts. But there's one thing you can count on to stand between you from things getting real bad: the savings in your bank. And then you see on TV what's happening in Cyprus. Where people had the same deposit guarantee you had, until from one day to the next they didn't. What would you do with what's left in your bank account?

People with bank accounts in Cyprus no longer have access to their money. They'll be stuck in a repeat of Argentina's early milennium capital controls for months. People in Spain and Portugal still have a choice. Maybe not for long, because at the first hint of capital flight to the backyard bank, control over your own money will very rapidly become a thing of the past.

The only reason for Europe's Mediterranean nations to remain in the eurozone and the EU will be bullying from Brussels and Berlin. It's this bullying from the core, from those who preach union above all else, which will be the undoing of the entire project, but after a lot more pain of the same kind that now hit the Cypriots will have spread north (the rot won't stop).

Unless first one country and then inevitably others - soon - decide to leave, say thanks for all the fish, and (re-)build their own nation. That would be by far the best choice for all of southern Europe. Staying in the union has nothing positive to offer anyone anymore, except for those presently in power in Brussels and in the capitals of the rich core nations. The dissolution of the union is inevitable. Unfortunately, given the hubris in the core, so is the bloodshed that will pave the way there.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2013 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Raul Ilargi Meijer Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules