Daylight robbery in Cyprus will come to haunt EMU … One's first reflex is to gasp at the stupidity of the EU policy elites, but truth is that most EU officials handling the Cyprus crisis know perfectly well that their masters have just set the slow fuse on a powder keg – and they can only pray that it is slow. The decision to expropriate Cypriot savers – even the poorest – was imposed by Germany, Holland, Finland, Austria, and Slovakia, whose only care at this stage is to assuage bail-out fatigue at home and avoid their own political crises. – UK Telegraph
Dominant Social Theme: This Cyprus thing was a terrible mistake.
Free-Market Analysis: Did the Eurocrats miscalculate? This is the message now being sent by a number of respectable mainstream columnists as well as alternative journos.
There is perhaps some truth to it. Ambrose Evans-Pritchard – who wrote the above excerpted article – points out that German Chancellor Angela Merkel is facing both bailout fatigue at home and an upcoming national election.
The politicians running other Northern European countries are as wary as Merkel of asking their constituencies to pay for the Southern PIGS bailouts. And thus the decision was arrived at to demand that Cyprus pay for itself.
Here is how Evans-Pritchard puts it:
What is clear is that Angela Merkel will not risk defeat in the elections in September by ceding a single vote to Social Democrats determined to hold her feet to the fire over a bail-out for "Russian oligarchs, money-launderers, and tax evaders" in Cyprus, or by ceding votes to the new anti-euro party Alternative fur Deutschland. She will look after her own political interests, and all the rest is humbug.
It is a fast-moving story. The Cypriot parliament may throw out the deal. It may be rejigged so that depositors under $100,000 pay less than the 6.75pc levy agreed, and those above may pay more than 9.9pc.
The creditor powers appear to think that the contagion risk is manageable now that the ECB has its bond rescue mechanism in place for Spain and Italy. But they made just such an assumption when they imposed a haircut so cavalierly on private investors in Greece, only to precipitate a full-blown crisis across Club Med. And don't forget, the reason why Cyprus has gone belly up is because of the knock-on effect on Cypriot banks from the Greek haircuts.
So according to mainstream journo Evans-Pritchard, the Cyprus proposal was a "mistake." And actually, it is certainly looking that way, given that the Cyprus parliament has for now (at least as of this writing) rejected European terms and officials are shuttling back and forth to Moscow instead.
This brings up an interesting point. Not only can Russia provide funds to Cyprus, but if the EU objects, Russian leader Vladimir Putin can threaten to withhold necessary supplies of oil and natural gas from Europe. What Cyprus officials have called "blackmail" goes two ways.
How bad is the damage? Evans-Pritchard writes what we too have written, that the euro and even the EU will have a hard time recovering from this miscalculation.
The EU creditor states have at a single stroke violated the principle that insured EU bank deposits of up $100,000 will be guaranteed come what may, and in doing so they have more or less thrown Portugal under a bus.
They appear poised to seize large sums from Russian banks – €1.3bn from state-owned VTB alone, and therefore from the Kremlin – prompting the condign riposte from Vladimir Putin that the action is "unfair, unprofessional and dangerous."
They have demonstrated that the rhetoric of EMU solidarity is just hot air, that they will not force their own taxpayers to share a single cent of clean-up costs for the great joint venture of monetary union – in which northern banks, insurers, pension funds, and indeed governments, were complicit.
Their refusal to pay is entirely understandable in one sense – and if I were a German taxpayer, I would not care to swallow these losses either – but then the leaders of these creditor countries can hardly expect the world to believe that they will in fact do whatever it takes to hold EMU together. Quite obviously, they will not.
The sooner this is made clear, the better. The sooner they take the proper course of withdrawing from EMU and organise the break-up the euro in the least disruptive way, the sooner Europe can recover.
We have already seen the EU solidarity mask slip a few times, not least in the repeated retreats over Greece, and again when German-led quartet resiled from last year's summit deal to let the ESM bail-out fund take some of the weight of recapitalising banks off the shoulders of the Irish and Spanish states.
Evans-Pritchard is calling for – predicting, really – the breakup of the euro. And not just a Grexit, either. Where we depart from Evans-Pritchard's analysis has to do with the deliberateness of the Cyprus gambit.
But to simply write that it was a miscalculation is to miss the point. As we have continually pointed out, the globalist elites of Europe have every reason to want to DEEPEN the European crisis.
For one thing, East and West are being forcibly brought into economic balance. The East (and Africa) is on the way up and the West is on the way down. In the Middle East, countries with independent central banks are being confronted with insurgent hostilities that are obviously being coordinated by the West.
The path is being set for new alternative currencies and more regionalization. Behind all of this lurks a world currency and perhaps a single metals standard.
Evans-Pritchard predicts in his article that if Brussels doesn't figure out a way to counteract the spreading panic generated by the Cyprus "miscalculation" then any "green shoots" of European recovery will be pruned and trust in the euro and even the EU itself will be vastly diminished.
It does not occur to Evans-Pritchard, at least not publicly, that a continued diminishment of the European economy – the local one at least – is a preferred option for those who seek an increasingly pan-global sociopolitical system and a cowed and accepting electorate.
Whether this is an intelligent strategy remains to be seen. We believe, if we are correct in our analysis, that it would have worked better in the 20th century than the 21st when more people are aware of these grand manipulations.
