Friday, 22 March 2013

Where art thou, Eurofudge?

Has it really comet his this? Ever since 2009 the favourite nibble across Euroland has been delicious eurofudge. Everywhere from Italy, to Spain, Ireland, Greece and Portugal there has been plenty of fudge; enough to sate even global appetites and keep the euro bandwagon well fed and on the road.

But now tiny Cyprus could see and end to fudge distribution and dark day for the euro-fudge industry - another tale of woe for European industry.

Of course, Euro-Fudge is resilient and production runs over the weekend have been known to many times unblock seemingly difficult conditions.

This time though, perhaps it is different? Cypriot politicians face the prospect of voting to nick all the money from their pension funds AND from some rather unsavoury Russian types - normally the sort of people who you would try very hard never to meet, let alone cross.

Or they can go for just stealing money out of everyones bank account at the Eurogroup's behest.

Or they can abandon the euro, print new Cypriot pounds and see what happens as their banks collapse.

If you had to vote on any of the above what would it be? All maybe of direct personal consequence to your financial and physical well being too. maybe they will panic and do the wrong thing.

Maybe Euro-fudge will come to the rescue, I think a Country leaving the Euro would be a bad precedent for the europhiles to accept as it would surely lead to more over time...


Blue Eyes said...

If I was a man on the Cypriot Omnibus I would be calling for "the rich" to take the haircut. That Newsnight pundit with the 'tache was on the radio saying that if under 100,000 euros was guaranteed they would have to take up to 35% of the rest. I can't imagine there's much left anyway. Are we really to believe that the banks have closed down all withdrawals for a whole week?

From an economics point of view, what Cyprus should do depends on their economy. Are they self-sufficient in food and power? If so they can ditch the Euro in the way that Iceland ditched the international market for a while. The only problem with that is that we are back to stealing everyone's Euros as surely all money in accounts would be re-denominated.

I think probably the fudge way out is to enact some sort of solidarity tax. But I don't know what the population numbers are like and the per capita of 6 billion might be huge.

As a single currency sceptic I think it might be healthy for a country to leave. Pour encourager les autres.

Ryan said...

The problem as I see it is that the Cypriots in this case are not to blame for what has happened.

The national debt as a % of GDP was quite reasonable in Cyprus until the Cypriot banks got into trouble. The Cypriot banks got into trouble because they were forced by the ECB to take a 75% loss on bonds they bought from the Greek government. Those government bonds had been considered "as good as cash" by the international investment community.

So basically the Cypriots are being forced to pay for a mistake made by the ECB. Not only that, the ECB seems to have decided that the Cypriots must pay overnight, rather than over a 20 year period.

What the hell kind of game are the Germans playing here? Is Merkel trying to prove to her own people that Eurofudge is really the way to go because playing hardball might actually be grossly unfair in some cases? I just don't get it. Seems like the Cypriots are the least to blame for what has happened in Cyprus, but they are being made to carry the largest share of the blame. No wonder they are apoplectic with rage. I would be too.

If the EZ doesn't cave in, I can only see this ending up with Cyprus pulling out of the EZ and monetising the bad Greek debt held by their banks. Any other approach puts a large part of the problem on the shoulders of the citizens and they clearly are in no mood to shoulder any of the blame for what has happened. Who can blame them?

Blue Eyes said...

I hadn't appreciated that, Ryan, that is very interesting. I think the German angle is worth thinking about as well. Merkel is fighting an election. In Britain we think of bad politics being a housing subsidy when the PM is looking fragile or the nationalisation of a car factory during a general election, but bankrupting an ally?!

hovis said...

Leave the Euro, print and be damned, if I'm going down, might as well take the rest of the F****rs with me.

Talking of oh so profligate Cyprus have you seen these:

Head 'em up an' mov'em out said...

Yup, I agree with Hovis - get out now; somebody has to be first to get this bandwagon rolling.

Blue Eyes said...

So you know how the major central banks now have deals with each other so they can "print" each other's currencies in times of need...

Budgie said...

Cyprus will neither leave the euro, nor be ejected from it.

Only the Brits see the euro as the problem, the continentals (particularly the EZ elites) are blind to it. If you can't see a problem, you can't fix it. So the eurofudge will continue.

Mr Ecks said...

It can't continue forever--they will fall--and all us EU haters need to be there to put the boot in.

Budgie said...

Mr Ecks, I sincerely hope so. But hope wavers at the sight of utter ruthlessness.