Tag Archives: Cyprus

Financial Secrecy Index

The lower the number, the worse it is. Switzerland is number one, Luxemburg number 3 and Germany number 9. Cyprus is number 20. So what about that ‘tax haven/financial secrecy’-meme?

Dreaming of a Dutch Sandwich


Philip Atticus – important article about the logical fallicies around the mismanagement of the Cyprus-bailout

This article places a big part of the blame for the mismanagement of the Cyprus bailout on Germany (especially the SPD, and the meme that ‘all Russian money in Cyprus is mob money’), the ECB and EU regarding banking regulations and the bailouts of Spain and Portugal and more in general, it places blame on those who misrepresent the situation of Cyprus re taxes, debts etc. I mean, the example given is the ‘Dutch sandwich’ which is a tax-avoidance structure. Why isn’t Germany upset about that or about the companies that use it? Furthermore, as a link regarding the situation of Luxemburg financial assets mentioned, if the proportion of GDP and bank liabilities is a measure all of a sudden, when are Schäuble and others do anything about Luxemburg or e.g. the City of London, or Switzerland? Obviously the answer is: because the ratio of GDP and bank liabilities is not a useful measure in any case.

Jeroen Dijsselbloem is ‘disappointed’ about the Cypriot no-vote

Via the Dutch Trouw-newspaper, a short reaction from Dutchfinance minister and Eurozone Chairman Jeroen Dijsselbloem (my translation):

‘The Eurozone has fairly quickly and in great unity submitted a proposal to Cyprus [i.e. the bail-out plan]. Now really the responsibility is theirs to accept the proposal in terms of its requirements. The large capital is in the banks of Cyprus. The banks are now in trouble, so it is clear and unavoidable that their capital is looked at [for the bail-out].

Dijsselbloem said he is ‘disappointed’ about the vote but ‘At the same time we did an offer on behalf of the Eurozone.  That offer is still valid and its requirements/conditions as well. The ball is really in Cyprus’ court now.

So in short, the message to Cyprus is to accept this proposal for bail-out or else….

Quite amazing how the Eurozone can’t admit it made a mistake.

Now ‘Armageddon’ supposedly starts – in Cyprus at least

This just in – Cypriot parliament rejects bailout package, not a single yes’-vote.

Things will start to get interesting – is the Cypriotic government going back to the negotiation table or do they say ‘Sod off’ to the Troika? There has been heavy pressure on Cyprus from at least the IMF and the ECB, not to mention Germany. Like I said yesterday, it seems that Germany is becoming more like an insecure bully than a benevolent hegemon, and here are some links to illustrate that.

‘Cyprus – been there, seen that.’ Rather cynical piece, especially regarding the role of Germany.

‘Cyprus – it is not about the numbers’ About the meaning for the Eurozone and German elections of Cyprus.

‘Germany Just Taught The Rest Of Europe Some Tough Lessons About Who’s Really In Charge’ This is unfortunately a very clear message.


Another concise view of the potential effects of the Cyprus-bailout

On Bloomberg there is yet another analysis of the potential consequences of the Cyprus-bailout. Among them is the damage this has done to the project of building a banking union and the potential for bank-runs whenever a country gets into trouble (Portugal comes to mind for this in the near term). To quote Ed Harrison:

My view? It was inevitable that we would be in crisis again. The austerity world view of crisis resolution is completely at odds with the capacity of the euro zone’s institutional architecture to handle a crisis. And so, we keep doubling down on the same policy of austerity in exchange for reforms which has created the downward spiral to begin with. I wish I could be optimistic here. But I think it is going to get worse. I hope I’m wrong. And I certainly hope that periphery depositors still have enough faith in the euro to ride this one out. If the Cyprus panic metastasizes, it will get ugly.

OK, politics is difficult, and I understand that Merkel wants a) to be re-elected, b) needs the Social Democrats for passing this bailout and c) Germans have a totally different view of economic reality and its solutions re: the crisis than what is sensible and (factually) true. But is clinging on to power and not telling voters the truth really so important to throw yet another economy under the bus? Like Yanis Varoufakis says, we need a benevolent hegemon (Germany) – see this post:

Germany should take another leaf out of the New Dealers who put it on the road to recovery all those years ago: Europe needs its own New Deal, funded by a new class of public finance instruments. Germany can realise such a Recovery Program centred around the European Investment Bank. The EIB already has a proven track record of creating a liquid market for debt instruments that fund successful projects. In collaboration with, and supported by, the European Central Bank, an EIB-ECB partnership has the capacity to energise mountains of hitherto idle savings on pure banking principles, with minimal involvement of member-states and no need for Treaty changes.

All it will take is a German resolve to shift from panicky authoritarianism to a hegemonic, to an enlightened self-interestedness.

But at the moment we are stuck with ‘panicky authoritarianism’ or maybe even plain stupidity or evilness in the view of a wrong understanding of what ails Europe. Germany wake up, we need you!

Wise words from Larry Summers

On Reuters’ website. In one short piece, the core of the whole problem: intra-EU trade imbalances, which caused the banking system of the EU to (nearly) collapse –  in Greece, Ireland and now, Cyprus. And let’s not forget the state support for the German Ländesbanken, several Dutch banks, a host of French banks. The key point is that Germany’s giant trade surplus was possible because of the institutional set-up of the Eurozone, i.e. the interest setting by the ECB created the possibilities for cheap loans in ‘the periphery’, which were often provided by French and German banks on the prowl for profit.

The only thing that can rescue the Eurozone is a great correction to the trade imbalances, which Yanis Varoufakis could be accomplished by a Surplus Recycling System between surplus and deficit countries. This exists for any country – the Finnish Helsinki region pays for the poor northern regions of Finland, similarly the rich ‘Randstad’ region in the Netherlands coughs up the funds to support the North-East of the Netherlands.