Quotulatiousness

March 25, 2013

The Cyprus “deal” decoded

Filed under: Economics, Europe, Russia — Tags: , , , — Nicholas @ 09:04

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 else scrapped, and none of the deposits below €100,000 will be stolen included.

The new lunacy idea 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.”

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.

March 24, 2013

The domestic economy of Cyprus is slowing to a stop

Filed under: Economics, Europe — Tags: , , , , — Nicholas @ 10:09

In the Telegraph, Colin Freeman looks at how the banking crisis is impacting ordinary Cypriots and retired EU citizens in Cyprus:

Last weekend, the small Mediterranean island was plunged into the epicentre of the eurozone crisis when Brussels finance chiefs, led by Germany, demanded a levy of up to ten per cent of savers’ deposits in return for a 10bn euro bail-out of the country’s ailing banks. The move left many of Cyprus’s 60,000-strong British community facing heavy losses on retirement nest eggs — and as the week rolled on, that looked like being just the least of their worries.

On Thursday, unhappy at the Cypriot parliament’s rejection of the deal, Europe’s Central Bank then threatened to cut financial life support for the island altogether, a move that would have led to its banking sector collapsing, and savers losing not just a percentage of their money, but all of it. It was only thanks to a last-minute agreement hammered out on Friday night, which is expected to restructure the country’s banks and restrict the levy to deposits of more than 100,000 euros, that all-out chaos was averted. For now, anyway.

[. . .]

Since last weekend, when all of Cyprus’s banks were shut to stop a run on withdrawals, work has ground to a halt, as the repair man has been unable to buy in the materials he needs from suppliers, who are all now demanding cash. The job symbolises the malaise of the wider Cypriot economy, built on shaky foundations, and now in a state of paralysis, with thousands of shops, businesses and restaurants unable to operate properly because of the financial uncertainty.

“None of my food and drink suppliers are taking bank payments any more,” said Yiota Vrasida, 43, who owns a café in the winding streets of the capital, Nicosia. “We can keep going until this weekend, but that is about it.”

[. . .]

“Nobody will want to leave so much as 10 euros in any Cypriot bank any more,” said Dino Karambalis, 49, an IT worker, standing at the end of a 30-people-long queue at the Laiki Bank, where he had 90,000 euros in savings. “They say this levy is only for Cyprus, but why should anyone believe that? This is undermining confidence in the euro as a whole, and in the whole EU project itself. I was pro-European before, but not now.”

This weekend, the Cypriot parliament sought to reassure smaller savers, saying those with less than 100,000 euros would face at most a levy of less than one percent. State television also talked of a one-time charge of up to 25 percent on savings of over 100,000 euros held at the Bank of Cyprus. With that in mind, capital controls will be imposed to stop a run on the banks when they reopen next week.

But whatever new measures come in, some damage has already been done by declaring savers’ accounts to be fair game in the first place. Britain’s Business Secretary, Vince Cable, warned on Friday that it could lead Northern Rock-style runs on banks all over the eurozone in future.

March 22, 2013

Cyprus: the state of play on Friday

Filed under: Economics, Europe — Tags: , , , — Nicholas @ 08:35

In the Telegraph, Thomas Pascoe summarizes the situation in Cyprus as of Friday morning:

As it stands this morning, there is a Plan B on the table after parliament voted down the proposal that every bank deposit in the country be subject to a deduction. The new plan only affects those with deposits over €100,000; however, it will require those depositors to take a loss of up to 40pc. As part of this package, the nation’s two large banks will be saved. However, the structure of the deal requires that one of the pair, Laiki, will be split into “good” and “bad” banks, with large depositors left to chance it in the bad bank.

A word on the thinking behind it. While you and I perceive deposits as secure money (and I have argued that to touch them is an abuse of power), technocrats in Brussels take a different view. They tend to view deposits in the technical sense of being loans to banks. You give the bank your money in exchange for interest, and can call the loan at any time (provided not everyone else is doing the same thing, which is the situation now). The bank loans most of your deposit on again. When countries struggle with too much debt, those who have loaned them money get “haircuts”, or less back than they gave. Following this thinking, the EU’s argument is that if we lend money to failing banks, we too must take a haircut to keep them solvent.

[. . .]

So the compromise deal is an ugly one, involving a precedent (confiscation of deposits) which will cast a pallor over the entire European banking system. But the problems are equally great with any other solution. If the banks are left to fail, depositors lose everything except the scraps recovered by administrators. To argue that they, and the country, must be funded directly by the EU, requires the continued willingness of Germany to act against its own economic interests and support an entire continent on its shoulders, impossible without fiscal and political consolidation which no electorate would assent to at present (not that they are asked, usually).

In my opinion, there is no faster way to destroy confidence in your retail banking sector than stealing the money from depositors with no recourse. I have no idea why the European Union is so hell-bent on crushing the banks, but perhaps they have some looney-tunes notion that they can supplant the existing bank system with something directly operated by the ECB or the EU itself.

March 21, 2013

The choices for Cyprus don’t seem to include saving the banks

Filed under: Economics, Europe — Tags: , , , , — Nicholas @ 11:04

In Forbes, Tim Worstall sums up the real problem facing Cypriots:

There’s a very large portion of the European political elite who believe, take on faith (for there’s certainly no convincing real world evidence about it) that the creation of the euro is part of the inevitable creation of the European State. And as such it is entirely irreversible. It’s not just that people once in the euro shouldn’t leave it: it’s that it is simply inconceivable that anyone ever would leave it. Either wish to leave it or be allowed to leave it.

Wherein lies the danger to said European dreams and it’s tiny Cyprus that poses said danger.

As both Krugman and Yglesias point out, the Cypriot banking system is bust, gone. Even if it needn’t have happened this way having the system closed for at least a week is going to lead to bank runs when they finally reopen. The economy is most certainly going to stutter if not be deeply depressed as a result of that banking system going. Given that a substantial part of the economy is about offshore finance, and that that’s not going to survive the banking system crash, there will also, whatever else happens, be substantial declines in GDP.

It’s most certainly true that leaving the euro will cause all of those things to happen. But if they’re going to happen anyway then why not leave the euro? Why not bring back the Cyprus Pound? That is, do an Iceland?

[. . .]

But here’s the thing: there’s still that religious insistence among the federasts that the euro is irreversible, a part of the future of the politics and economy of the continent. And if Cyprus does leave and does recover without too much paid then what reason for Greece, or Spain, Portugal, to stay in? If going bust and going back to one’s own currency is, as Iceland showed (although they kept, rather than went back to), less painful that the austerity required to stay in the euro then, well, why stay in the euro?

March 18, 2013

Cyprus to offer small depositors a slightly less nasty haircut

Filed under: Economics, Europe — Tags: , , — Nicholas @ 10:05

Megan McArdle on the most recent “concession” by the Cypriot bank regulators:

Cyprus seems to have realized what I wrote yesterday: violating your deposit insurance guarantees is a better way to start a bank run than to stabilize a banking crisis. After Cypriots rushed to withdraw their money ahead of the new rules, the Wall Street Journal reports that the government has cobbled together a new proposal: small depositors will pay a 3% “tax” on their accounts (instead of 6.75%); medium depositors (those with between €100,000 and €500,000 will be taxed at the same 10% they were supposed to pay before; and those with more than €500,000 will pay 15%.

That may check the runs on the small accounts. Now the question is: what about the big ones? Will the foreign depositors view 15% as the simple cost of stashing their money out of the watchful eye of their own government? Or will they seek a new haven?

If the foreign money runs, it seems unlikely that Cyprus will be able to bail out the banks again; this desperate bank levy is, after all, what they were forced to do just to raise the $5.8 billion that the EU and the IMF demanded they contribute to the bank rescue. But the higher Cyprus raises the levy on large accounts, the more likely it is that the foreign money will flee to somewhere less shaky.

By “less shaky”, one has to assume a non-European bank…

Update: Cyprus has extended the “bank holiday” to Thursday.

March 17, 2013

Cyprus delays emergency parliamentary session over banking haircut

Filed under: Economics, Europe, Government — Tags: , , — Nicholas @ 09:50

Apparently not all the politicians in the Cypriot parliament are on-board with the mandatory levy on savings accounts:

Cyprus’s parliament has postponed until Monday an emergency session to vote on a levy on bank deposits after signs that lawmakers might block the surprise move agreed in Brussels to help fund a bailout and avert national bankruptcy.

In a radical departure from previous aid packages, euro zone finance ministers want Cyprus savers to forfeit up to 9.9 percent of their deposits in return for a 10 billion euro ($13 billion) bailout to the island, which has been financially crippled by its exposure to neighboring Greece.

The decision, announced on Saturday morning, stunned Cypriots and caused a run on cashpoints, most of which were depleted within hours. Electronic transfers were stopped.

[. . .]

Many Cypriots, having contributed to bailouts for Ireland, Portugal and Greece — Greece’s second bailout contributed to a debt restructuring that blew the 4.5 billion euro hole in Cyprus’s banking sector — are aghast at Europe’s treatment.

Cyprus received a “stab in the back” by its EU partners, the daily Phileleftheros said.

But it and another newspapers highlighted the danger of plunging the banking system into further turmoil if lawmakers sat on the fence.

March 16, 2013

More on the Cyprus banking situation

Filed under: Business, Economics, Europe — Tags: , , , , — Nicholas @ 11:44

At Forbes, Tim Worstall explains why the mandatory levy on bank accounts is an epic facepalm:

There’s nothing particularly bad about making depositors carry some of the load of a bank failure. Indeed, it has something to recommend it: if it happens occasionally then people will take more care over where they put their money and what the banks do with it.

However, there’s a very great difference between allowing depositors without government insurance to take losses and actually reneging on the previously promised government insurance. And it’s that second that they’re actually doing here. [. . .]

Under the system until yesterday all depositors in Cypriot banks were insured up to the value of €100,000 with any one bank. Today that solemn and governmental promise has been shown to be false. And not even the European Union nor the European Central Bank are going to make them stick to it. Indeed, very much the other way around. The EU and ECB are insisting that the Cyprus authorities breach this deposit insurance provision.

As I say, there’s nothing wrong with making uninsured depositors take some of the pain. Certainly nothing at all wrong with making those with large deposits take a haircut. The problem is when government has said “we’ll insure this” and when push comes to shove they say “err, no, we won’t”. And the problem with this is that it makes all future EU deposit insurance worth that much less.

The Cyprus “rescue” includes nasty haircut for savings held in consumer banks

Filed under: Economics, Europe — Tags: , , , , — Nicholas @ 11:23

The BBC reports on the way Cypriot bank accounts are being levied as part of the “rescue”:

Cyprus may be one of the eurozone’s tiniest economies — its third smallest — but for the next 48 hours or so, it may be the single currency area’s most important.

The point is that there could be serious repercussions for other financially over-stretched economies, such as Spain’s and Italy’s, from the nature of Cyprus’s 10bn-euro (£8.7bn) bailout — which includes, for the first time in any eurozone rescue, losses imposed directly on depositors in banks.

These losses, running to almost 6bn euros, stem from an emergency levy of 9.9% on bank deposits over 100,000 euros (£86,600) and 6.75% below that.

The levy serves as a caution to lenders to banks that they should take care where they place their funds and avoid banks which overstretch themselves — as Cypriot banks did.

But precisely the same arguments — for what is known as a “bail-in” by private-sector creditors — were put by liberal-market purists at the peak of the banking crises in Ireland and Spain.

In the end, eurozone governments were terrified that if lenders to Spanish and Irish banks were punished, there would be a devastating domino effect of withdrawals of funds from banks in other weaker economies — a domino effect that would jeopardise the survival of the eurozone.

So, reckless lenders to Spanish and Irish banks were not punished.

There’s a strong possibility that savers in other European countries with weakened banking systems to draw the correct conclusion quickly … and start pulling their money out of the banking system. And also expect the EU to react with draconian currency restrictions. It’s a potential banking sauve qui peut.

March 11, 2013

Best comment on the EU move to penalize Microsoft over web browser choice

Filed under: Europe, Humour, Law, Technology — Tags: , , , — Nicholas @ 09:06

From “Purp” at Ace of Spades H.Q.:

In other news, the EU plans to fine Microsoft $700M dollars because European users are apparently too stupid to figure out they can download other browsers for free. Porn and bootleg software? Mad skilz baby, mad skilz. Browsers? Not so much…huh? what? where am I? what is this thing, why does it beep? Help, I’ve fallen down and can’t get up.

The fine works out to around $50 for each machine in violation that was shipped by OEM’s. The EU says they’re cutting Microsoft a bargain cuz they could have been fined $7B, or $500/machine. Either way, its a pretty harsh shakedown caused by Euro-users (apparently) being lemming like incompetent imbeciles who are unaware other stuff exists. Its truly a wonder they manage to find the power switch…or maybe the EU sends out specially trained techs to turn on computers for people?

March 10, 2013

British Tories float the notion of leaving the European Convention on Human Rights

Filed under: Britain, Europe, Government, Law — Tags: , , , , — Nicholas @ 09:45

It’s not a declared aim — yet — but when a senior government minister even mentions this as an option, you have to assume it’s being discussed:

The Conservatives would consider leaving the European Convention on Human Rights if they won the 2015 election, the home secretary has said.

Theresa May told an event organised by the ConservativeHome site the party would also scrap the Human Rights Act.

She said it restricted the UK’s ability “to act in the national interest”.

A private poll by ex-party treasurer Lord Ashcroft, meanwhile, suggested the party would lose 93 marginal seats to Labour if the election was held now.

The BBC understands Mrs May was putting forward ideas for the next Conservative manifesto, and such a move was not current government policy.

[. . .]

Mrs May told the gathering she was sceptical whether the convention limited human rights abuses in other countries and suggested it restricted Britain’s ability to act in its own interests.

“When Strasbourg constantly moves the goalposts and prevents the deportation of dangerous men like Abu Qatada, we have to ask ourselves, to what end are we signatories to the convention?” she said.

“Are we really limiting human rights abuses in other countries? I’m sceptical.”

She said that “by 2015, we’ll need a plan for dealing with the European Court of Human Rights”.

“And yes, I want to be clear that all options — including leaving the convention altogether — should be on the table.”

March 9, 2013

More on EU proposal to ban all forms of pornography

Filed under: Europe, Liberty, Media, Politics — Tags: , , , — Nicholas @ 10:37

In the Telegraph, Bruno Waterfield follows up on yesterday’s story (linked here):

Controversy has erupted over next Tuesday’s European Parliament resolution “on eliminating gender stereotypes in the EU”, meant to mark international women’s day, after libertarian Swedish MEPs from the Pirate Party spotted the call for a ban in the small print.

While not legally binding, the vote could be the first step towards European legislation as the EU’s assembly increasingly flexes its political muscle within Europe’s institutions.

The proposal “calls on the EU and its member states to take concrete action on discrimination against women in advertising… [with] a ban on all forms of pornography in the media”.

Kartika Liotard, a Dutch left-wing feminist MEP, is seeking “statutory measures to prevent any form of pornography in the media and in advertising and for a ban on advertising for pornographic products and sex tourism”, including measures in the “digital field”.

The MEPs are also demanding the establishment of state sex censors with “a mandate to impose effective sanctions on companies and individuals promoting the sexualisation of girls”.

March 8, 2013

EU politicians perform modern day King Canute act

Filed under: Europe, Liberty, Media, Politics — Tags: , , , , — Nicholas @ 09:55

Yup. They’re standing up for equality on the internet by calling for a ban on online porn:

MEPs are being urged to back a non-binding resolution that calls on the European Parliament to, in effect, ban pornography from the internet. A group of Euro politicos hope the web filth block will bring about a “genuine culture of equality” online.

A motion was tabled this week by the EU’s committee on women’s rights and gender equality. A report titled Eliminating Gender Stereotypes in the EU urged all members of the European Parliament to support the draft resolution.

The panel stated that a policy to put an end to stereotypes portrayed in the media would “of necessity involve action in the digital field”. The committee added that the EU would be required to coordinate action to develop a “genuine culture of equality on the internet”.

February 18, 2013

Opening the food testing can of worms: “We don’t test for hedgehog either”

Filed under: Britain, Europe, Food, Health, India, Science — Tags: , , , — Nicholas @ 10:20

Tim Worstall on some of the issues with demands that all British beef for human consumption be tested for horsemeat:

Now let’s turn to that meat problem. We’re going to test something to make sure that it is indeed what it says. Most of the time, usually, we’d go looking for beef DNA and on finding it say, yup, that’s beef.

But now we’re talking about trace amounts of other species. Some of this horse contamination is someone deliberately substituting, yes. But a lot of it, those trace amounts, is someone not cleaning the pipes between species being processed. Or the knives even. Which leads us to something of a problem.

How many species do we test for? Some minced beef… or pink slime perhaps. Do we test for beef and horse? For beef, horse, mutton, pork, chicken, duck, goose? What about rat and mouse? For I’ll guarantee you that however much people try there will often be the odd molecule of either one of those in there. Sparrow? That’s more of a problem with grain processing but still.

For example, one lovely story about vegetarianism. Those (umm, OK, some) who have moved from the sub-continent to the UK. They carry on eating the (possibly Hindu caste based) vegetarian diet they are used to. And they start falling prey to all sorts of dietary deficiencies. Anaemia, there have even been reports of kwashikor (a protein deficiency). The grains and the pulses of the sub-continent have rather more insect and other residue in them than our more modern processing and storage systems provide.

People don’t test for hedgehog DNA in meat supplies, no. But how many species should they test for?

February 12, 2013

Rules for the masses, but not for the bureaucratic elite

Filed under: Bureaucracy, Business, Europe, Law — Tags: , , , , , — Nicholas @ 10:33

The European Union’s rules on gender equality appear to apply to everything in the EU except the EU’s own bureaucracy:

Part of the aggrandised myth EU institutions like to propagate about themselves is that they are pioneers in promoting tolerance, gender equality, and diversity in the workplace. Read the promotional literature and you will find effusive descriptions of liberal workplace revolutions and the achievements of Soviet-style five-year plans. Yet, like the Soviet Union, there is an embarrassing mismatch between the trumpeted idealism and the reality.

Since its creation in 1967, DG Employment (Directorate-General for Employment, Social Affairs and Inclusion at the European Commission) has nominally been responsible for fair employment conditions in the European Union. Rising levels of workplace equality in member states (for which DG Employment take an undue amount of credit) are woefully incongruous with the situation of EU civil servants. Women occupy 19 per cent of senior management positions; compare this with the often decried 35.9 per cent of women in the top levels of the UK civil service.

Yet it is figures like the UK civil service’s that prompt EU proposals on affirmative action. One set of proposals has recently been discussed in the European parliament, for example, which if passed will introduce gratuitous and complicated legislation across the continent. That bureaucracy breeds bureaucracy is unsurprising, but it is hard to take seriously calls for equality from an institution endemically opposed to the concept.

The only European agency where women in management positions outnumber men is in the Institute for Gender Equality (the administration is 95 per cent female). Incontrovertibly, out of all the agencies, this is the one with the strongest prerogative for tackling equality in its workforce. But the message is clear: shout about equality to the world and create a dummy institute to anyone holding a mirror up to the EU bureaucracy itself. So far, the commission is on its fifth ‘action programme’ to tackle inequality within its institutions, taking the same form as every one that has come before it; vague guidelines forgotten until lobby group pressure becomes too annoying.

January 3, 2013

Comitology and the EU

Filed under: Bureaucracy, Europe, Government, Humour — Tags: , — Nicholas @ 10:58

Alexandra Swann notes that the great C. Northcote Parkinson predicted the EU’s decision-making mechanics with great accuracy:

If we listen to Daniel Guéguen, Professor of European Political and Administrative studies at the College of Europe, the Europhile madrassa, the equation spells the downfall of the European Union.

Guéguen has worked as a Brussels lobbyist for 35 years; he is a full time federast and one of the remaining true believers in the EU. Given his commitment to the EU project, when he deems its system of governance, comitology, “an infernal system” perhaps it’s time to listen.

The concept of Comitology was invented by the incomparable Professor C Northcote-Parkinson in his seminal work Parkinson’s law of 1958. It was meant as a satire but, like many of the best jokes, they either get elected or, in this case, embedded in the bureaucracy. Here is the Professor explaining the comitology and his equation:

    x=(mo(a-d))/(y+p b1/2)

    Where m = the average number of members actually present; o = the number of members influenced by outside pressure groups; a = the average age of the members; d = the distance in centimetres between the two members who are seated farthest from each other; y = the number of years since the cabinet or committee was first formed; p = the patience of the chairman, as measured on the Peabody scale; b = the average blood pressure of the three oldest members, taken shortly before the time of meeting. Then x = the number of members effectively present at the moment when the efficient working of the cabinet or other committee has become manifestly impossible. This is the coefficient of inefficiency and it is found to lie between 19.9 and 22.4. (The decimals represent partial attendance; those absent for a part of the meeting.)

This beautifully encapsulates the terrifying silliness of what is going on in the tubular steel and stripped Swedish pine chairs of Brussels, and for anyone with an interest in transparency or good governance, it is a serious concern. After all, under various estimates upwards of 75 per cent of our laws, the laws that govern the minutiae of our lives are made in the sterile Committee rooms of the Breydel, Berlyamont, Justis Lupsius and other buildings in the EU quarter of Brussels. That this cosmic joke now governs our lives is just a factor of the brobdingnagian reality of our membership of the EU.

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