Shock: Germany Mulls Cyprus Solution to Solve Grexit?
By Staff News & Analysis - March 16, 2015

German Chancellor Merkel Examines the Model of Cyprus As a Solution for Greece … The model of Cyprus might be the best solution for Greece in order to force the government's implementation of the structural reforms it has already agreed to with the country's creditors. This is what the German magazine Der Spiegel estimates, citing information from the Chancellery. – Greek Reporter

Dominant Social Theme: Banks need to be bailed out? Take the funds from their depositors. Simple enough …

Free-Market Analysis: Now the Cyprus episode begins to become clearer. What the EU needed was a precedent, and apparently Cyprus sufficed.

We've written about Cyprus before, some two years ago when the Cyprus default was ongoing. In an article entitled, "Yes, Cyprus Was Aimed at Sinking Tax Havens," we suggested the following:

In hindsight, the Cyprus incident will be seen as yet another attempt to consolidate power on behalf of Brussels and the European experiment. It was also, tangentially, a rescue of Cyprus's financial system on the backs of large bank clients …

We've also argued that these manipulations are ill advised and that those involved with them are underestimating their control over the increasingly fractious tribes of Europe and of the larger financial economy.

The arrogance that is being revealed now is no doubt deliberate and apparently intended to inject further chaos into an already chaotic situation. The result of such chaos is inevitably to be the further weakening of Western financial institutions in order to pave the way for increasingly centralized and globalized currencies.

This perspective seems to be increasingly valid if Merkel and the Germans are really contemplating doing to Greece what the EU did to Cypress.

We can't imagine the social explosion that might take place if Germany began reducing the equity of accounts in Greek institutions for the purpose of reimbursing European facilities, including German banks.

Yet on this account we've been incorrect before. Eurocrats it seems will try almost anything to ensure a broader and deeper revenue stream. The social and human cost doesn't seem to matter despite avowals otherwise.

Greece has been virtually crucified on the cross of austerity. In Spain some 50 percent of young adults could not find work at the height of the financial crisis, and the situation is not said to be much better now.

Portugal, Italy, France … all these countries and others have suffered from the extensive and ongoing economic slump in Europe – one that has soured the economies of the UK and the US as well.

But this doesn't seem to stop the money grab. Now Germany is to go down the same route:

German Chancellor Angel Merkel is now convinced that a 'Graccident' (a Greek exit from the Eurozone by accident), is no longer a risk … The Cypriot government was forced to accept the creditor's proposed program and this is what Merkel and her advisers see as a guide for Greece too. According to the article, Greece might need a "warning shot" in order to implement the program.

The mechanism itself is fairly clever. The Greek population is in almost open revolt against EU demands. They voted for a party that vowed to resist further EU incursions on the aggregate Greek pocketbook. But that doesn't seem to be working out so well. Not so far, anyway.

The EU, in fact, has a good deal more influence over Greek institutions, including government, than the larger Greek populace. Greek banks have deep ties to other European institutions. And even this new Greek government is seemingly more civil to its EU negotiating partners than might have been expected given its initial rhetoric.

We've covered this in the past: It's our suspicion that the Greek government might not stand in the way of a Cyprus-style attack on Greek shareholder savings – and that the Greek banks would likely go along with one.

This is the way raw political power works in the West in the 21st century. The people's will, often mentioned and lauded, tends to be ignored when it comes to fiscal realities deemed important by the powers-that-be.

The uproar would be tremendous. But so long as the money grab was seen to emanate from Brussels rather than Germany, the chances are that Greek institutions would consider going along with it. Would they have a choice?

And what would happen next? The convulsion would probably ruin the prospects of the current administration and might well wrench Greece out of the euro and the EU entirely.

This is apparently the calculation being considered now: Whether a Grexit would further undermine EU and euro solidarity and have ramifications that would extend to Spain and other Southern European countries.

After Thoughts

If Merkel and Brussels do decide to move ahead with a "Cyprus solution," the European Union will undergo its most profound crisis yet. The ramifications are startling … and profound.

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  • disqus_1Op5S8jvui

    A lot of ifs but we will know in the next few months. The world is certainly in a George Orwell super state all across the globe. If Greece can pull a little David vs Goliath remains to be seen.

    • Nah, this is the Devil in the details pulling the puppet strings on both sides, for the purposes DB is talking about..

  • Chris Hulme

    The Greeks voted to default on their debts AND remain in the Eurozone.
    They can’t do both!
    They should either decide to leave or accept the EZ solution!

    • “The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome will become bankrupt. People must again learn to work instead of living on public assistance”.
      – Cicero
      , 55 BC

      Can’t do better than this; but I thought the Romans learned their stuff from the Greeks! Have they all forgotten so much for so long that the words of wisdom of their protégé have been lost in the sands of time?

      The Greeks will have to leave the EZ sometime, and back their new currency with gold and land (seabed), however little, and convert their debts into perpetual ‘war’ bonds like Consoles to be settled in the due course of time when they have developed their local gas fields. Business as usual can be maintained by normal issue of government bonds which the buyers will know will be redeemed on time and fully backed by hard assets. This is much like the Weimar Republic did in 1923/4 with the Rentenmark. No worries.

      • What a terrific quote from Cicero! But, things are different this time : )

  • “We’ve also argued that these manipulations are ill advised and that those involved with them are underestimating their control…”

    I think they meant OVERestimating their control…?

  • tom nogaro

    i park my car wednesday nite in your overnite parking lot and pay you. thursday i come to retrieve my car. you tell me you went bankrupt last nite and your creditors seized my car to pay them back and to keep you in business to borrow more from them. nice model.

    i walk home where neighbors urge me to set fire to the town with them. being a rare reasonable person, i save my pennies for a new car and get out my bike in the meantime.

  • DB: “Free-Market Analysis: Now the Cyprus episode begins to become clearer. What the EU needed was a precedent, and apparently Cyprus sufficed.” – Ah, but we are not just observing the EU in action here, we are in fact observing the policies of the One Bank, which have already been codified into law in the US and around the world!! Cypress is not merely a model for Greece and Greek Banks, it is a model for every nation, and all the banks of the world, including – you guessed it! – the bank where you keep YOUR money. If you leave your money in the banks, you will receive no interest – in fact you may be charged negative interest, until that is not enough and you are “bailed in” to save your bank! Dare to withdraw your money in cash, and you are engaged in “money laundering”! Lets just turn all of our money over to the One Bank right now, shall we? Anyone leaving deposits in a Greek Bank can expect to be bailed in. Now this is true of any bank, anywhere. Go to bed Friday night, wake up Monday morning: bank closed, you are bailed in, have a nice day!

  • dave jr

    It is hard to believe this “solution” would be announced. Who would leave their money in there? Whoever it is, this must also be prearranged.

  • 2prickit

    Business cycles are not curable by setting up a gate keeper institution where the wealth that invests in prosperity is converted (theft)
    into an elastic token of exchange; as if currency were a rubber band. Grab onto your end of the rubber band, silly, in this game of Tug-0-War; yet the illusion upon which the Federal Reserve was is founded leaves for its victims to possess some imagination: to see the result from stretching a paper token. There never was an attempt at contraction of the elastic beyond banking depressions made to “justify” foreign interventions (war). The lie is enforced with Internal Revenue Service, authorized in preparation for the passage of the Federal Reserve Act on Christmas recess of congress 1913. And see now the IRS has gone international. And who could ever imagine that “elasticity” stretching from Washington DC to enrapt the entire world. That is quite some imagination. Now even paper tokens are being converted into debt (theft) just for “owning” them. When local banks are subsidized from income tax or simple print, pulp or digital, the realization stymie’s this persons desire to be civilized, at all.

    • 2prickit

      Socrates warned against the deceit of the Sophists:

      “…although these people know nothing, they all believe they know something; whereas, I, if I know nothing, at least have no doubts about it. As a result, all this superiority in wisdom which the oracle has attributed to me reduces itself to the single point that I am strongly convinced that I am ignorant of what I do not know.”

      ― Socrates

  • Bill Ross

    “The uproar would be tremendous.”

    That will be “the seen”, “a sound and fury, signifying nothing”. It will be “the unseen”, real, cumulative choices / actions that does the predators (and us) in:

  • Fabian

    Generally speaking, a bail in is the way things should work. I’m not here posting an opinion about the politics between Greece and the EU/Germany. What people don’t understand is that when they deposit money in a bank, they loan money to that bank. Through this loan, the bank becomes the OWNER of the money. The client lose ownership of the money and only gets a claim against an equivalent value in exchange (and sometimes, maybe some interests for his/her efforts). This transfer of ownership is essential to the functioning of the system otherwise the bank would have to ask permission to the client each time it wants to lend or invest the money. Government guarantees or FDIC organizations are a perversion of the system. The client/saver should be responsible to whom he or she lends his/her money and live with the consequences. It looks like this is the direction taken in the OECD and many countries have adjusted their laws in this sense. By the way, this is the way things work legally in Switzerland. The Spar and Leihkasse in Thun went bust in the early 90’s and the savers lost about 70% of their savings in the bankruptcy process. Of course when something similar would have had happened to UBS’s depositors in 2008/2009, they were bailed out. And there lies the problem and the hole we are digging ourself into. Capitalistic moral high ground is invoked when the matter is the concern of Greek banks but when the same happens to an important German bank, plenty of tax payer money is found to avert this systemic risk.

    • Few in the general public understand this.

      • Praetor

        They should. But, they don’t. And that is the trillion dollar question. What made people forget how things work. The savings and loan debacle, should be the great example. Bankruptcy is bankrupt, no more money to pay owed debt. People have just become dumb!

      • Me Again

        I wonder if there is a minimum deposit level which is safe in Greece? In the UK I think it is £80,000 in any single account, per depositor or something of the like. This is clever in itself. If they stick to their thresholds there will be no bloody revolution since the poorer folk won’t even reach the threshold and they are unlikely to man the barricades for those with much more money than themselves.
        However, any person with at least one working brain cell will have removed their money from danger by using multiple accounts under the threshold or in foreign deposits/investments.
        So working in circles here, if they get nothing from the rape, then they’ll move their parameters lower, move them too low and there would be blood on the streets.
        Wonder if they’ll go for private pension funds? If they do that in the UK, I WILL be out there with my trusty poleaxe and it will be shoved up a bankster’s backside, and I wouldn’t stop at one.

    • Outstanding post Fabian. The only issues I have with the current system as you have described it is (1) “too big to fail” (as you clearly note), and (2) that the banks have NEVER made it clear to the public the nature of their deposit. A signed disclosure form should be required, once you have fully disclosed the nature of a bank deposit to your customer, the bank can be held harmless. But most of us have grown up with the full expectation that our deposits are held in trust by the bank, that the bank has a fiduciary responsibility to return our deposit in full and on demand, and that FDIC will insure us “in the event”. FDIC of course is beyond insolvent if only 10% of banks fail. The combination of a lack of due diligence by the public, lack of disclosure by the banks, and phony FDIC re-assurances has got us to where we are today. Most people will be shocked and outraged when they are bailed in, which, IMHO, is inevitable at some point. Maybe a true hyper-inflation could avoid world wide bail-ins but I see no other way. What a Hobson’s Choice! Any color you want my dear friend, as long as it is black.

      • Fabian

        Thanks Gregg. I wrote here as a Swiss but I think the US law is similar. I’m sure that you can find the nature of the deposit somewhere, in small prints, in the numerous papers you sign when you open an account. Furthermore, be also extremely wary with your securities deposits. Commonly securities held for your account with a broker belong to you. They wouldn’t be part of bankruptcy process. However, there is a close in the contract that allows the broker to lend your securities (it’s a profit center for the broker). Then if something bad happens, your securities may become part of the bankruptcy process.

        • Great advice! For myself, I feel it is now time for me to rely on cash-in-hand and hard assets. The house of cards is too wobbly for me to sleep at night, if the bulk of my assets are in the digital domain.

      • John

        I don’t see how there could be a bail in as long as you have a half of the population armed. That could be one of the main reasons for the strong government/media push for gun control (Thru their drills gone live/false flags).

    • Randy Hitt

      So why put your money in a bank as opposed to a credit union?

      • Fabian

        I don’t know. I read good things about CUs but I suppose their limitation is their small network. But in the US you’ve FDIC that guarantees your deposit up to $ 250K if I recall well.

        • James Clander

          “But in the US you’ve FDIC that guarantees your deposit up to $ 250K if I recall well”
          Yes but ONLY a few billion $$ to Guarantee ALL the Banks etc — so its a BS cover.

          • Fabian

            Yes the FDIC fund is “underfunded” if a major crash happens. But the digital printing press own by the FED can work 24/7. And that’s certainly what would happen; the FED will bail out the banks (unless unfriendly to the powers in place like Lehman) and indirectly the account holder.
            There was though an interesting case during the last crisis; IndiMac if I recall well. Ben started to drop interest rates way before the financial crisis started. The banks diligently followed suit and CD rates began to drop strongly. However IndiMac still advertised very high rate like 5% when the market was around 2%. A lot of retirees in the LA area deposited all their savings, above the FDIC limit, with this bank and lost the uncovered amount when the bank went bust.

      • Praetor

        The old saying, goes. Possession is nine tenths. Banks, Credit Unions it matters not. Custodial possession of property (money, land, you name it) is presumed to be the rightful owner, unless you can prove otherwise. The institution that has the money will pull out the book you signed, and say see you gave us that money and you said, we could do whatever we wanted too, with it. You are trusting them to handle it with fiduciary responsibility, if they where planning on doing that, they wouldn’t have you sign that book (contract). Its called trust!!!

  • Joelg

    EU was a clever way of assembling a European Empire along the lines of the old Austro-Hungarian Empire. Directed History: 1) the real Greek alternative, Golden Dawn, was kicked out of the Greek government, jailed and persecuted; 2) This left the Socialist strawman as the faux-alternative for Greek outrage. A setup, if ever there was one.

    Smart money, which includes former Greek government officials, has no doubt already moved their money outside Greece. Which leaves behind small deposits for confiscation; people and local businesses who have nowhere else to go and no other alternatives to banks to conduct business transactions. Only one result possible from these bail-ins, and that is a further economic contraction as money is sucked out of Greek consumer economy and transferred to EU and German banks et al. All that will be left is for Greeks to sell themselves into slavery as indentured servants. Only problem is how to transfer control of Greek National Assets, which requires Enforcement Muscle.

    Hence, the need for the European Union to create its own army (called for recently by European Commission President Jean-Claude Juncker). EU army could enforce debt payments, national asset transfers and indentured servitude contracts. And, of course, in case a real alternative like Golden Dawn should wage a real revolution, an EU army to do to Greece the same shock-and-awe bombing back to the Stone Age that NATO did to Serbia and Libya. Since NATO could not openly bomb and destroy a member country like Greece, a separate EU army is needed for debt-related enforcement. Greece would be treated like a renegade province in the EU Empire, and the Greek terrorists (resistance) would get the East Ukraine treatment. Evil Eu Empire must thus keep Greece at all costs, otherwise the looting and pillage of Greece could not proceed. Greek Socialists make good accomplices in fleecing the population and nation of all its assets and imposing equality via bail-ins and EU occupation armies. Naturally, the EU troops can be repurposed to Afghanistan, Syria, Ukraine/Russia, Poland or wherever else for purposes of Various Holy Wars against the Enemy du Jour. This avoids NATO attacking a fellow member, as Greece will be a renegade province like the Southern States of the Confederacy were considered Renegades by the Northern States and subjected to burning of their cities and a scorched earth countryside policy.

  • Alice

    I read all of these posts and simply shake my head at how effective the global central banking cabal is with propaganda and endless distractions. Question: Where did the banks get the “money” they “loaned” to Greece? Where did the Federal Reserve get “$85Billion “dollars” per month! to “lend” to the U.S. government? Phrases like “creating money from debt” or “creating money out of thin air” are not understood by the People. If you go to the bank to borrow $10,000.00 the bank will determine whether or not YOU can actually labor to pay THEM $10,000.00 plus $2,500.00 in interest. If they believe you can accomplish this feat your loan officer will ask you to sign a “loan agreement” then simply pull up your account on their magic computer and type in the digits; $10,000.00. That’s it. It costs the bank nothing to “lend”. It’s a scam. Very simple. I suppose that is why it has worked so well. Let’s take that up to the top of the food chain. The Fed does not have $85Billion dollars. The Fed doesn’t have squat. However, they do have a magic computer and they also simply type in the digits. Someone should tell the Greeks they don’t owe the banks anything. Someone should also tell the Americans and all the rest of humanity which is being sold on the total lie they are “drowning in debt”… there IS no debt. It’s a con. Until you hear a politician or finance minister say these words, you know they are lying. They know they are lying. The People do not understand what money is or how this fake paper “money” is created by traitorous ‘governments’ empowering utterly corrupt central banks to completely dominate humanity at the point of a gun paid for with nothing more then digits on pieces of paper.