More than the bouffant hair, the handbags, the power suits and pussybow blouses, it was the voice that lingered.
For anyone growing up in the UK in the Eighties, Margaret Thatcher’s voice was unforgettable. Proceedings in the House of Commons were not televised until 1989 and, until then, TV news had to make to with displaying pictures of Parliament and playing audio of the debates, which often consisted of Thatcher swatting away her opponents with her polished vowels.
That memorable voice, though, was the product of elocution lessons, which were part of a wider effort to make Thatcher more appealing. This was not the only illusion of the Conservative leader’s time in power.
One cannot question that when she became prime minister in 1979, Thatcher took over a country in a steep decline. The economy was tanking, inflation was rising, industrial relations were mired and a general post-colonial malaise had descended over the UK. Getting out of this mess was an immense challenge.
At the beginning of last week, Cypriot politicians insisted they would not choose a “suicidal” option for their country. By the end of the week, they picked one that would inflict mortal wounds instead.
Nicosia’s handling of its unprecedented predicament has been cataclysmic. But the approach adopted by the European Union and International Monetary Fund to Cyprus’s problems has also been disastrous. The eurozone has been building up to an omnishambles moment throughout the debt crisis and it finally struck in a small island state in the Eastern Mediterranean.
The agreement arrived at in Brussels early Monday, following hours of talks involving Cypriot officials, eurozone finance ministers and EU and IMF chiefs, is being billed as the least worst option after all sides took successive wrong turns on the way. That may be the case but it will be little consolation to thousands of Cypriots who have lost a big chunk of their deposits and face uncertain times ahead.
Posted in Economy, European Union
Tagged Cypriot bailout, Cypriot banks, Cypriot economy, Cyprus, Demetris Christofias, EU, euro, European Union, eurozone, Nicos Anastasiades, Troika, Wolfgang Schaeuble
The Eurogroup agreed on Monday night to allow Cyprus to change the make up of its controversial deposit tax. Instead of imposing a levy of 6.75 percent on savings under 100,000 and 9.9 percent on those above 100,000 – as agreed in Brussels in the early hours of Saturday – Nicosia can play around with the numbers, just as long as it raises the arranged amount of 5.8 billion euros.
Cyprus’s new but already beleaguered President Nicos Anastasiades is proposing that bank customers with deposits under 20,000 euros should not be taxed at all, while keeping the levy the same for the remaining depositors. Cypriot MPs have already shown a reluctance to approve the tax, mindful of the impact on depositors but also the long-term damage it could do to the island’s banking system and economy.
However, what’s happened over the past few days and what’s likely to happen in the days and weeks to come has little to do with numbers. It is much more about perceptions. Even if a financial meltdown is averted in Cyprus this week, the decision to tax depositors there in order to reduce the eurozone and International Monetary Fund contribution to the island’s bailout has sown the seeds for a future eruption.
Posted in Economy, European Union
Tagged Cypriot bailout, Cyprus, deposit tax, euro, European Central Bank, European Union, eurozone, Greece, International Monetary Fund, Nicos Anastasiades, Troika
The Eurogroup’s decision on Friday to impose a one-off tax on depositors in Cyprus may mark a turning point in the euro crisis. Only, the single currency’s decision makers might soon realize that in taking this particular turn, they also ran out of road.
Under pressure from several members of the eurozone – Germany in particular, if reports are accurate – the new Nicosia government agreed that deposits above 100,000 euros would be taxed 9.9 percent and those under 100,000 at a rate of 6.75 percent.
This is an unprecedented decision for a eurozone country. It is also one whose potential consequences reach much further than an island in the eastern Mediterranean. It threatens to cause the transmission system between the economic and financial sectors on one side and the political and social on the other to seize up. Without this, the euro cannot be propelled forward. It cannot function.
There is a dirty little secret at the heart of the euro crisis and it concerns Europe’s banks. Many politicians and much of the media have focused their attention on the role sovereigns – particularly in southern Europe – had in triggering uncertainty and economic instability in the single currency area but the part banks played in laying depth charges at the euro’s foundations has been largely absent from public debate.
Yet, most places you look, eurozone banks have left their mark through a mixture of risky practices, undercapitalization, and over-exposure to government bonds and the US subprime market. Ireland is the most obvious case, where taxpayers have been asked to stump up about 70 billion euros to bail out reckless and troubled lenders. Spain has just asked for a 40-billion-euro bailout for its banks, which fuelled an unsustainable property boom through cheap credit in the previous years. The most prominent example of the short-termism and entangled interest that led to this imprudent lending was Bankia, formed by the merger of seven savings banks, or cajas, in 2010.
Bankia has so far absorbed 19 billion euros of taxpayers’ money, shed 50 billion euros of assets as part of a restructuring and cut 6,000 jobs. French-Belgian bank Dexia found itself in a similar situation. France and Belgium have so far spent about 15 billion euros rescuing the lender and provided up to 85 billion euros in state guarantees after it was caught short by its reliance on short-term financing in 2008 and then to Greek debt in 2011.
Posted in Economy, European Union, Greece
Tagged Bank recapitalization, Bankia, Banking union, banks, Dexia, ESM, euro, euro crisis, European Union, Greece, Ireland, Single Supervisory Mechanism, Spain
On October 26, I had the privilege of addressing the Chicago Council on Global Affairs. My subject was the Greek crisis: what else? However, I decided it was an opportunity to go beyond the basic account of the woes in Athens and give an informed and attentive audience greater insight into what led Greece to this point.
Unsurprisingly, when talking about Greece we rarely look beyond the last three years but it is of vital importance that we start to appreciate what happened in the lead-up to the crisis. It is time to assess the economic, political and institutional mistakes that were at the heart of the country’s collapse.
This is a favourite topic of discussion between myself and Yiannis Mouzakis and we hope to soon announce a joint project on exactly this subject.
In the meantime, I hope you have the time to read the speech (it’s rather long) and post your comments. Keep in mind that it is an overview and cannot in any way be considered a comprehensive account – there’s only so much you can fit into 25 minutes. The text contains a few paragraphs, mainly on domestic political issues, that I had to cut out of the speech due to time restrictions.
If it suits you better, there is audio of the event available here, courtesy of the Chicago Council on Global Affairs, who I’d like to thank again.
If you prefer to read the speech yourself, then please do so while adopting the voice of an accomplished public speaker (unlike myself) and perhaps throw in a few humurous anecdotes of your own. I’m thinking Peter Ustinov might be good example to have in mind.
Much as it is an honour for me to be speaking at the Chicago Council on Global Affairs today, I’m fully aware that I’m here because of a word – a Greek word – that carries many negative connotations: crisis.
Over the last three years, you won’t have read a newspaper article, seen a TV report or listened to a radio program that referred to Greece and didn’t use the word “crisis.”
And for good reason too: the problems triggered by the Greek debt crisis have sent the country’s economy into freefall, destabilized its political system and thrown its society into turmoil. Beyond Greek borders, the crisis has threatened to destroy the euro, pull apart the European Union and cause global financial havoc.
Posted in Economy, European Union, Greece, Greek politics
Tagged Austerity, current account, euro, European Union, eurozone, Greece, Greek crisis, Greek economy, Greek politics, International Monetary Fund
In a sense, there can be no faulting the Norwegian Nobel Committee’s decision to award the European Union the 2012 Peace Prize. Its current economic turmoil aside, the EU has been a remarkable example of political integration that has advanced the idea of common interest in a region bedeviled by war.
“The union and its forerunners have for over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe,” the committee said in its statement. Many people for whom uncertainty and fear had become the norm were able to enjoy stability and prosperity thanks to the principle promoted by the EU, not just as an institution but as an idea, through which a united vision of the future could be shared.
There have of course been some notable exceptions. The EU’s stance during the collapse of former Yugoslavia, for instance, has created a bloody stain that time will struggle to remove. Nevertheless, if viewed as a lifetime achievement award, the EU will perhaps justifiably feel that it deserves the peace prize. The question, though, is does the accolade also signify that the EU is nearing the end of its lifetime?
Posted in Economy, European Union, Greece
Tagged EU, euro, European Union, eurozone, Eurozone periphery, Extremism, Greece, Nationalism, Nobel, Nobel Peace Prize