With a blog post entitled “THE CYPRUS HEIST GOES THROUGH: And it’s an Orwellian masterpiece“, you could say that this is an unfair summary of the situation:
Somewhere, George Orwell is spinning in his grave — although he wouldn’t be even remotely surprised by the 1984-style nonsense being hailed as a compromise by the Troikanauts and Nicosia’s embarrassed leaders.
This is the deal: the levy is
called something elsescrapped, and none of the deposits below €100,000 will bestolenincluded.The new
lunacyidea sees Laiki Bank closed. The entirety of its €4.2bn in deposits over €100,000 will be placed in a “bad bank”: why you would put healthy deposits in a bad bank eludes me, but we’re really just moving the stash around here: the bad bank’s resources will be confiscated. We’re talk a 100% haircut for all these savers.And don’t be fooled by the Berlin propaganda about Russian money-laundering. First up, being a rich Russian doesn’t automatically make you a crook; and secondly, nowhere near all — possibly under half — are Russian anyway: UBS, several Israeli banks, a number of French banks will have depositor’s money taken out of them to pay for the ambitions of Brussels-am-Berlin.
There’s more: all the bondholders in Laiki also take a 100% haircut.
[. . .]
Entirely appropriate however was the choice of Wolfgang Schäuble to face the cameras and ‘explain’ why none of this would need the approval of the Cypriot Parliament. Just “approved by the 17 eurozone finance ministers comparatively quickly, after about two hours of further deliberations”. As to why it needed FinMin approval (but not that of the citizens’ representatives) get a load of this for jargonised bollocks:
“This plan will not require the approval of the Cypriot parliament because the losses on large depositors will be achieved through a restructuring of the island’s two largest banks and not a tax.”
In Cyprus the word you hear most often is ‘betrayal’. There is an acceptance that Cyprus made mistakes but the people feel punished,
— Gavin Hewitt (@BBCGavinHewitt) March 25, 2013
Update: I think Tyler Cowen gets it exactly correct here:
The capital controls will have to be strict. What will the price of a Cypriot euro be, relative to a German euro? 50%? I call this Cyprus leaving the euro but keeping the word “euro” to save face. And yet they fail to reap most of the advantages of leaving the euro, such as having an independent monetary policy.
