Friday, March 22, 2013

Is the Crisis in Cyprus Real – Or Just a Monty Python Sketch? – And What’s With Germany Suddenly Having ‘Principles’

We Report – You Decide

The European community, led by Germany, is trying to bully the small island nation of Cyprus.  The banking system in that country, largely through its own fault, is near a state of total collapse.  Europe is being asked to bail it out, which seems reasonable since Europe has bailed out much, much larger banking systems in countries like Spain.  But political considerations have raised their ugly heads.

Germany in particular is taking the high and mighty road, despite absolutely no basis for doing so given the history of the 20th century.  Unlike any other situation, Germany is demanding Cyprus pay part of the cost of the bailout.  This is like asking an unemployed person to pay his or her own unemployment insurance benefits.

For reasons only understood if one understands bullies, Cyprus needs to raise 5.8 billion Euros to get a 10-13 billion Euro bailout.  The original plan was to tax bank deposits, in effect to take part of everyone’s bank account.  This was as unacceptable as it was idiotic.  

Petros Giannakouris/Associated Press
An employee of Laiki Bank, center, reacted during a rally outside the Cypriot Parliament on Friday.

With anger and anxiety growing across Cyprus, Mr. Anastasiades’s new plan would scrap a tax on bank deposits. Experts warned, however, that the deposit-tax plan might need to be revisited unless the government found other means to reach the goal of raising €5.8 billion to satisfy Cyprus’s creditors and unlock the full bailout funds.

So what’s the new plan?

The plan sent to Parliament would nationalize pension funds from state-run companies and conduct an emergency bond sale to help raise the €5.8 billion. Gone was any reference to a deposit tax, which Parliament roundly rejected in a vote Tuesday.

But that plan offends Germany.

Before concrete details emerged, German leaders made it clear they would not back a deal that involved nationalizing the state-owned companies’ pensions, a measure that is rejected in Berlin as more socially dangerous than even the original plan to tax smaller savings.

In a closed-door meeting with members of her junior coalition partner, the Free Democrats, Chancellor Angela Merkel made clear her impatience with the government in Cyprus, stating that “under no circumstances can we give up our principles,” the public television network ARD reported.

Now it’s nice that Germans have principles.  It would have been even nicer if they had those principles back when, say, they were murdering 6 million or more Jews, Eastern Europeans and other peoples.  It would be nice if they had those principles when some gratitude is required for the postwar aid given to Germany or the protection West Germany had from Soviet occupation.

As for the Cypriots, they are doomed no matter what.  Even if they get a bailout the economy will be devastated in the short term.  So the recommendation is that they leave the Euro, set up their own currency and suffer the consequences.  They will suffer almost the same if they don’t, but this way they will have the satisfaction of standing up to bullies.  And who knows, maybe Russia, which has a lot of wealthy citizens at risk here will do something. 

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