If at the age of 20 you aren’t a communist, you have no heart.
If at the age of 30 you aren’t a capitalist, you have no brain. Usually attributed to Winston Churchill
And if at the age of 40 you haven’t left the European Union, you have neither heart nor brain – a suggested modern update to the above Churchill quote.
The weekend action by the idiot bureaucrats running the EU has been pilloried in a lot of places, and caused a bit of a shock in the markets on Monday before ”normal” service resumed on Tuesday when all kinds of morons started purchasing ”risk” assets once again. But I am getting ahead of myself, so let’s go back on track and secure some background first.
It has been well known for many months now – well-nigh two years, if you want to count – that Cyprus would need a bailout to fix its decrepit banking system; along the lines of the same munificence granted to Greece a couple of years ago, and every quarter ever since. The bailout had been postponed by the intransigence of the European Union on the subject of extending bailouts to all and sundry – apparently the Teutonic types were getting a little miffed at being pick-pocketed on every street corner in the south of ”their” continent.
All that was well known; as was the general irritation with the EU banking system being misused in pockets by money laundering oligarchs from Russia particularly through banks in Switzerland and Cyprus. However, the EU could really do nothing special about Switzerland seeing as that little country didn’t have a debt problem and wasn’t a member anyway. Cyprus though was always a little different; firstly because of the tenuous relations with Turkey – a putative future member of the EU that is much resisted by Germany and Greece – and secondly and perhaps more importantly because it served as the ”safe” conduit for Russian oligarchs to wash their billions into the European banking system.
The Cypriots somehow contrived to lose a few bucket loads of that deposit money, and with typical southern European insouciance had also built up a government-sponsored welfare system that wasn’t so much extravagant as unfathomable. The usual southern European reasons – populist governments, shaky morals and tax evasion – were all present in good measure.
Over the past couple of years, the ever obliging Russians under Dmitry Medvedev and later Vladimir Putin ponied up some funds to keep the wheels churning just enough to keep things going (or to facilitate movements of their own ill-gotten funds, according to wags) but eventually, lost interest.
This isn’t the first time that Russians went on a date, did the dirty and then forgot to call next morning though – after all, who can forget what happened with Iceland in 2008 and rumors of the US$4 billion deposit from the Russian central bank that would turn the country around, leaving egg on the face for all of Europe in the subsequent banking crash.
Oh yes, I did mention ”who can forget” and ”Europe” in the same sentence without conjoining the two? How silly of me.
To the Molotov cocktails of dallying with temperamental Russians we add two other factors – bear with me: this being Europe, everything needs to be made as complicated as possible, for what else will all the citizens do other than talk the ears off their fellow citizens the following day (instead of going and doing an honest day’s work, for example)?
The first was the recent elections in Italy when the populace decided it couldn’t choose between a boring hero (Mario Monti) or a sniggering villain (Berlusconi) and so decided to vote for a clown (Beppe Grillo). The Germans weren’t amused, particularly as they have their own elections to elect a new chancellor coming up just after the summer.
Put all that in the pipe and smoke it and what you have is a bunch of bureaucrats deciding to expand their remit once again: remember the times when they expanded the remit of the European Central Bank to print money, purchase government bonds, introduce capital injections and issue guarantees? This time around, they were told by their political masters to do something that assuaged the feelings of the German voters, who felt that their hard earned tax money was being frittered away to save banks in distant countries without seeing anything in return.
So they came up a doozy – let’s whack the depositors in Cyprus. In effect, let the honest folks who save money for a rainy day and don’t spend not just their own but also their neighbor’s money get to pay for their neighbors’ follies. The ostensible reason was to raid non-EU citizens, namely the Russian depositors; but of course the real reason was to sock it the prudent (not the rich, mind you because of they wouldn’t keep their money in Cyprus, just the financially prudent).
A quick evaluation of a bank’s balance sheet shows depositors at the top of the liability chain, followed by bondholders and interbank loans, and then lastly equity holders. The wonderful bureaucrats from Brussels – many of whom have never worked a single day in the any sector that actually added tax revenues to any government – didn’t know about their legal niceties of course: they wanted to make the ”Russians” pay and that was that – dang the consequences on laws, banking regulations, promises, guarantees and rules.
That is why this is big, marking as it does a departure from the usual inanities of EU practices to something altogether more sinister, and forgive the expression – ”directed”. If in the name of social justice for Europeans, a bunch of anonymous Russian depositors could be targeted today, what stops anyone from targeting say Muslims tomorrow and Chinese investors the day after?
Step back a bit and suddenly the historical crimes perpetrated by socialist societies on ”other” peoples become all too apparent, and tragically also predictable.
Once unleashed and in the face of the stinging criticism from all over Europe, the faceless bureaucrats went into the usual ”what’s the big deal”, ”its only for Cyprus, nowhere else” and all the other usual damage-control measures that are designed for people with frozen brains. As always, they miss the point.
Many years ago, I wrote that Western civilization would destroy itself as it tried to negotiate its way out of the financial crisis (see Principal over principle, Asia Times Online, June 6, 2009). As luck would have it, the self-destruction has begun pretty much exactly where Western civilization was born – the same places the waves of the Aegean lapped at passing ships and the first port of entry away from the mainland of those ships – Greece and now, Cyprus.