Dimitris Rapidis

The Cyprus bailout deadlock came to remind us that the Eurozone establishment is something we had really over-appreciated 11 years ago. The idea behind the single currency structure was to decrease instability, increase growth and smooth structural deficiencies between member-states. Nowadays, the conclusion is that Eurozone is a forum of European member-states with no decisional power and Germany behaving as an authoritarian emperor imposing any decision in favor of its interests.

The Eurogroup’s Summit decision of the last week was going to destroy Cyprus’s economy, banking credibility, and certainly it was going to sweep the entire societal safety net. The Cypriot Parliament took a brave decision to deny by majority the implementation of the proposition / decision of Eurogroup, and was something Eurozone leaders -mainly Germany- did not expect. Especially, when somebody takes into account the political softness and compliance with any measure proposed by Germany, in the case of Greece’s bailout for instance.

One week later, the Cypriot President Mr. Anastasiadis decided to take a decision which can be characterized as at least unpatriotic – at the best biased, economically and humanly idiotic: to impose a haircut of 40% for the savings over 100,000 euros. Which is, finally, a proposition much worse than the initial proposition of Eurogroup talking about a haircut of something about 10-20% of such savings, and something lower for savings under 100,000 euros.

We still await for the reaction of the Cypriot society, and of the big depositors against this decision. I personally believe that this decision will take a long time until being finally implemented in practice. But let us first see what is at stake in practice:

1. Is Cyrpus finally saved or destroyed forever by this decision?

2. Why the EU mechanism that guarantees savings (i.e. EU directive 94/19) was not automatically implemented in the case of Cyprus?

3. Why the Cyrpus’s irrelvantly huge banking sector was that hard treated, when other countries’ banking sectors, namely those of Germany, Luxembourg, Netherlands, and Austria are also irrelevantly bigger than their GDPs but not at all touched and elaborated by Eurogroup? In other words, why Cyprus took all the blame for its huge banking sector as long as there are other countries having a much bigger “bubble” risk?

4. What about the fundamental principle of free market trade, services, and money flow inside Eurozone and the European Union? Why that fundamental principle was that easily skipped?

5. Is Eurogroup an institutional body that takes binding decisions for member-states or a consultation body with increased responsibilities?

I firmly consider these 4 questions as the most crucial ones somebody should ask himself before trying to ponder upon the Cyprus bailout plan. Furthermore, it is also vital to point out here that what is actually at stake is the democratic character of Eurozone, and further, of the European Union. In this respect, Germany and its “group of support”, namely Austria, Luxembourg, Netherlands, and Finland pretend to take such harsh action against overdebted states endeavoring to save euro by imposing austerity politics. But, ironically, austerity politics -which to my point of view is a clear euphemism- are already imposed in Greece in order to save the country from bankrupcy and therefore to save Eurozone’s establishment with the following outcome: increase of unemployment and poverty rates, complete lack of growth and investments, high taxation and additional wage and pension cuts. All these destroy the market, the people, and the national economy overall. Troika is now trying to impose the same policy in Cyrpus aiming to lower the national debt rate, by completely forgetting that austerity politics have completely failed in practice: Greece’s debt has been rocketed to sky levels and now it is completely unmanageable. Therefore, how troika is planning to save Cyrpus? By imposing the same failed policy?

After 5 years of a destroying policy plan, it is time to talk openly: the entire issue of austerity plan in Eurozone is nothing more than a well-organized, well-developed plan that has been implemented by Germany and its “group of support” in order to imbalance stability in Eurozone and gain significantly from this process. Let us all at least ponder over whether Germany wants stability in Eurozone or it is more a plan to exploit the natural resources of Cyprus, the tourist crossroads of Greece, Italy and Spain. The divergence between South and North in Europe is much more evident nowadays than ever before, even during the times when Germany was split between multipartite and communist systems before the fall of the latter.

And something to conclude with: the solution for Cyprus which entails a 40% haircut for savings over 100,000 can be considered as a precedent for future action inside Eurozone? In other words, is it anyone in Europe having over 100,000 in savings that can sleep well from now on?

The major aim of Germany, and the reason for imposing austerity politics, is to decrease banking, economic, and political stability and safety across Eurozone, and impose all depositors and funds to draw their money and investments from Europe and bring them in German territories.

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  1. Dimitris,

    A very interesting point of view and I would agree with most of your assessments.
    My only question is would the medicine and outcome have been the same if it had not been election year in Germany.

    There is absolutely no question that Germany is the EU / Euro zone ringmaster. If the Euro is in any danger do you think the fall back position for them will be to encourage Netherlands, Finland, Austria and possibly Luxembourg and Poland to join them in Euro Mk2?

    Every saver and company with any money must be worried sick that this could be repeated in other countries. What would you say the chances are of a run on the banks in Italy, Portugal and Spain if savers and businesses decide to find safer homes for their money?

    1. Thank you for your comment.

      First of all, I believe that the election year in Germany is completely irrelevant with the Eurozone crisis and therefore with austerity politics. It is clearly a new geopolitical game of influence inside the Union, but with deeper and wider dimensions globally. In this respect, it is not accidental that Germany was hodling the same tough position on budget balances even before 2013 (i.e. between 2009-12), a fact that proves it is not acting as “the master of Eurozone” in accordance with the German elections. This is the new role Germany wants to apply, and this is an horizontal, domestic game, also including other parties of Bundestag.

      There is additionally another issue, as you already mentioned. The bank crisis as unfolded in Cyrpus creates a legal precedent, which is the fact that from now on nobody with savings can sleep well at night. I firmly believe that Germany and its “allies” in Eurozone are definitely endeavoring to re-orientate money flow, whether this is savings or investments- to their lands and re-map the chart of banking safety. It is definitely a domino game, that only hard players can withstand.

      In this respect, as Spain, Italy, Portugal and Greece might fall into the same basket, there is only one option: to enforce lobbying politics inside Eurozone and to tie stronger commercial relationships in regional level in order to create a safety net of mutual liability.

      To the moment, the Eurozone we always used to believe in, it is nothing more than a Union of decision-makers from the one side, and experimental guests from the other side.

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