The Corner

Cyprus, Not Great

People like to hang on to their savings. Even as Argentina’s ill-fated (and unsustainable) currency peg was approaching breaking point, a substantial majority of the Argentine population continued to support the link to the dollar. So it is with the euro. The currency has been  a catastrophe for the countries of the euro zone’s Mediterranean periphery, and yet most people there continue to support its retention. They don’t want to see the value of their savings take a (say) 30 percent hit.

So, if this polling data is accurate, it represents something new (my emphasis added):

LONDON (MarketWatch) — An overwhelming majority of the citizens in Cyprus would rather leave the euro zone than accept an unprecedented levy on bank deposits as part of bailout package, Greek daily Ekathimerini reported on Thursday, citing a survey by Prime Consulting. The survey found that 91% of the Cypriots back the government’s decision to reject the proposed bank-deposit tax, while 67% preferred a euro-zone exit along with stronger ties to Russia. Former Cypriot Foreign Minister Giorgos Lillikas said the international lenders’ suggested bank levy would destroy the country’s banking system, and a Cyprus exit could lead to a collapse of the euro zone, the report said. Cypriot lawmakers were scheduled to resume crisis talks on Thursday to come up with a plan to save the country from bankruptcy. The European Central Bank said it would suspend emergency help for Cyprus after Monday March 25, unless the struggling nation reaches a bailout agreement with the European Union and International Monetary Fund.

Interesting. Anger a people enough, and this is the sort of thing you will get…

But on the other hand, the WSJ reports as follows:

Hundreds of Cypriots, irate over a European plan to tax their bank accounts, marched through the streets of Nicosia, some hoisting signs depicting the German chancellor in full Nazi regalia. “Merkel U stole our life savings,” read one banner.

Ms. Merkel, who faces a general election in September, couldn’t have hoped for a stronger endorsement. The images, broadcast widely across German media, reinforce many Germans’ confidence that Ms. Merkel is protecting their money from fiscally wayward Southern Europeans, from Portugal to Spain, Greece and Cyprus. “Without German guarantees, there would be no rescue fund, yet these countries direct their criticism, open hatred even, at us Germans,” wrote Hugo Müller-Vogg, a well-known columnist for the mass circulation Bild newspaper, Wednesday. “If this weren’t about the future of Europe there would be only one appropriate response: Clean up your own mess.” Such views resonate in Germany amid growing public exasperation over being cast as Europe’s villain by countries that, in the German view, have benefited from Berlin’s largess. Germany may yet agree to a compromise with Cyprus to avert a collapse of its banking system. Yet, with the German public solidly behind her, Ms. Merkel appears to have little reason to back down.

As the WSJ points out, part of this is all about Germany’s attempt to crack down on Cyprus’ status as an offshore tax haven, Destroy that industry (and that may have already have happened) and the structural problems in Cyprus’s economy get worse, not better.

A reminder: One size does not fit all.

Meanwhile the efforts to resolve the mess drag on. Plans rise and fall, Plan A, Plan B, no one is any the wiser, and the ATMs whir…

Global Post:

Anxious Cypriots queued outside Popular Bank ATM machines on Thursday to withdraw their cash as fears rose that the country’s banking meltdown will mean its second largest bank closes forever.”It’s all about cash now. Only a gambler will take cheques in this situation,” said retired government official Phaedon Vassiliades as he withdrew money from the bank’s ATM at Ledra Street, a tourist hotspot in the capital.  

Behind the wheelchair-bound Vassiliades, a queue of anxious men and women waited for their turn to claw back as much money as they can.

“There are rumours that Laiki Bank (the Greek name for the Popular Bank) will never open again. I want to take out as much as I can,” Vassiliades, who lost both his legs in a car accident a few years ago, told AFP.

“I have nearly 60,000 euros as savings in this bank and some credit societies. I don’t know if I will ever get it back now. This is what I had and now it seems it is all gone.”

AFP reporters saw similar queues of worried Popular Bank depositors across central Nicosia amid reports that the government, struggling to halt a banking meltdown since an EU bailout package was first announced, was considering merging it with the Bank of Cyprus, the island’s largest…


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