Although the world of finance by itself is quite foreign to me, I find the writings of this Philip Atticus of a high quality, especially his observations of the interaction of politics and press (on Cyprus). Furthermore, I think his assessment of the Eurozone/EU is, unfortunately, quite realistic. The level of mismanagement in the Eurocrisis is just staggering. I think the EU by itself has accomplished a lot of good and important things but the monetary union has not been one of them. This is quite a reversal from my student time, when I was very pro-Euro. I guess I didn’t read Paul de Grauwe’s handbook on monetary union well enough.
The Eurozone has proven to be an emperor without clothes. The political hostility by Germany, France and others; the lack of basic understanding of financial operations and banking confidence; the very real effort to demonise Cyprus and Russia; the stubborn insistence on seizing deposits; the deliberate threats of Eurozone exit: these are not behaviours which will soon be forgotten.Moreover, they are behaviours which appear ingrained, and which have been fully transmitted to national populations via what can only be described as a yellow press.It is impossible to see how the Eurozone will deal with its deep-rooted competitive distortions given these political reactions. Rather than addressing an issue calmly and rationally, they stir up the worse nationalistic instincts of a European population already beset by economic crisis. Their “solutions” contain the roots of the next crisis. If the Eurozone is unable to solve a EUR 17.5 billion refinancing scheme, how will it solve the EUR 2 trillion national debt of Italy?Ironically, this bail-out does absolutely nothing to solve the many “problems” attributed to Cyprus by the Eurozone. In the list below, I present the many reasons German politicians found to vilify Cyprus over the past week, and the impact of the current bail-out:[…]The entire spectacle of European—and particularly German—decision-making in the case of Cyprus is characterised by incompetence, hypocrisy, hysteria, and the loutish behaviour of a schoolyard bully. Rather than solving any issues in Cyprus, it has undermined the trust of international investors in Europe itself, and established the conditions for the next financial crisis in Cyprus, which will almost certainly relate to BOC recapitalisation in the face of deposit flight.In Cyprus as in Greece, the European leaders have done everything possible through their statements and decisions to destroy international trust in a European Member State. And as with the example of Greece, it appears that these same European leaders have learned nothing.We look forward to the next European crisis.