She Who Pays the Piper

by Andrew Stuttaford

I don’t think I’m alone in having lost just about all track of where things now stand on Cyprus.

This much, however, is clear (via Business Insider)

“[Cyprus] must realize its current business model is dead.”

That’s what Merkel said about Cyprus this morning, according to Luke Baker at Reuters. After the ructions of this week, there’s virtually no chance that the island can keep its oversized banking sector, ultra-low taxes, and massive deposits from rich Russians.

She who pays the piper . . .

Currency union. Democracy. Choose one (at least if you cannot pay your bills).

And quite what Cyprus — with its model trashed — is going to do now, other than wait for the next bailout, is a mystery.

Meanwhile, the Russian failure to take more advantage of this situation is a mystery. Neo-czar Vladimir Putin must be having an off day. The mere fact that he has been presented with the opportunity that he has (see Edward Lucas’s somewhat lurid Daily Mail piece on that topic) is a reminder of how much of a destabilizing force the single currency has been. Some observant folk will notice that this is exactly the opposite of what was promised. Other observant folk will notice that this is par for the course.

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