Tag Archives: Cyprus

Euro Skepticism

Euro Skepticism

Two prominent, high-profile individuals, both ardent observers of the eurozone, told reporters on Sunday that the single currency will soon be a thing of the past. Paul de Grauwe, a Belgian economist lecturing at the London School of Economics told a Finnish daily that the euro’s woes will eventually bring it down. He added that the blame rest solely on the austerity minded Northern bloc, comprising Germany, Holland and Finland. De Grauwe blamed the tough trio for its save and cut policies and argued that these policies do not correspond with the high expectations the trio’s has for the ailing southern European nations. Bernd Lucke, another skeptic and the founder of Germany’s first eurosceptic party, told The Telegraph on Sunday that Germany has had enough of the single currency. Lucke argues that the euro divides Europeans and will do more harm than good. Unlike de Grauwe, Lucke is a politician whose niche in the debate is quite clear, but de Grauwe wants to see the euro succeed. Motivations aside, both agree that the euro is doomed.

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Economist Predicts the end of Euro

Economist Predicts the end of Euro

A world-renowned Belgian economist, Paul de Grauwe told Finnish daily Helsingin Sanomat on Sunday that the eurozone will self-implode within 10 years. De Grauwe said that eurozone decision makers, led by Finland, Germany and Holland, have made a number of serious mistakes in managing the current crisis. These countries have demanded steadfast economic growth from ailing economies while swearing in the name of austerity. De Grauwe said that such demands have been unreasonable because Northern Europeans have applied strict economic policies on their own economies thus preventing southern eurozone members from flourishing. According to De Grauwe, Germany and Finland should not be proud of their budgetary discipline, but instead, should spend and stimulate.

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Super Mario to the Rescue?

Super Mario to the Rescue?

The euro fell earlier on Thursday as investors were anticipating ECB chairman Mario Draghi’s policy suggestions to revive the ailing single currency following substandard attempts to save Cyprus. Draghi said in a recent press conference that ECB’s monetary policy will remain accommodative.

“In the coming weeks, we will monitor very closely all the incoming information on economic and monetary developments, and assess the impact on the outlook for price stability,” Draghi said to reports on Thursday.

Most investors did not expect Draghi to make significant changes which could have either potentially boost the euro or create a backlash and thus possibly deepen the recession.

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IMF to Give Cyprus €1bn

IMF to Give Cyprus €1bn

As part of the €10bn troika rescue package, International Monetary Fund contributes 1 billion euros. IMF president Christine Lagarde told the press that the monetary fund will give Cyprus a three-year loan to assist the country with efforts to restructure the ailing island nation’s sickly banking sector. Lagarde said that “the IMF has reached staff level agreement with the Cypriot authorities on an economic programme that will be supported by the IMF jointly with the European Union and the European Central Bank”. As part of the bailout, Cyprus’s second largest banks, Laiki Bank will be shut while Bank of Cyprus will have to go through serious restructuring.

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In Austerity We Trust

In Austerity We Trust

Reuters reported on Tuesday that a German parliamentarian - closely associated with Chancellor Angela Merkel – wants to see more cooperation between triple-A countries Netherlands, Finland and Germany. The parliamentarian in question, Hans Michelbach from the Christian Social Union (CSU) said that the three countries should stand together to strengthen the ailing currency union. Micelbach’s comments came during fierce speculation over the euro’s future.

The highly controversial Cyprus bailout, which Micelbach seemed to praise, raised questions about the tangibility of the currency union, especially in the face of growing discrepancies between the zone’s northern and southern members.

The parliamentarian used some tough language to describe France and Italy by referring to the European giants as “problem children”, reports say. He affirmed Germany’s commitment to its two natural partners, but lamented France’s president Francois Hollande for his socialist experiments and argued that such policies could lead to serious problems.

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Euro Bounces Back

Euro Bounces Back

The euro bounced back from its four-month low on Tuesday morning as investors were anticipating data from the eurozone’s factory output. Eurozone PMI data is expected to be released later today. The single currency gained strength against the dollar, but Thursday’s European Central Bank meeting led by Mario Draghi will likely be the real determinant of the euro’s general direction. Moreover, concerns over the ongoing crisis in Cyprus continue to worry investors. The eurozone’s handling of the Cypriot debacle has been disastrous and it will take time until confidence in the euro returns in full strength.

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Targeting Fat Cats

Targeting Fat Cats

Wealthy depositors with funds in the Bank of Cyprus are facing massive losses as the small island nation is struggling to keep its ailing banks afloat. According to the bailout conditions, depositors with over €100,000 in their accounts will receive Bank of Cyprus shares in exchange for the initial 37.5 per cent haircut. However, recent reports suggest that the cut might rise to 60 per cent in light of the worse than expected banking crisis shaking Cyprus. Many foreign depositors begun to withdraw funds from Cypriot accounts as soon rumours about the rescue package started circulating. Cypriot leaders have signalled that despite of the cots, the country is determined to stay in the eurozone.

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Cyprus Reopens Banks Amid Tension

Cyprus Reopens Banks Amid Tension

Cyprus reopened banks on Thursday, first time in almost two weeks, after a decision to close the country’s banks amid fears of a massive outflow of cash. The local police had a hefty presence as they prepared to protect the banks, prevent riots and secure that the $6.3 billion cargo shipped from the European Central Bank - to meet depositors’ demands that enough cash was available - was delivered to the banks safely.

Under the bailout terms, the tiny island nation’s two largest banks will go through massive restructuring, impacting the country’s economy significantly. Earlier this week Cyprus and the Troika hammered out a deal, securing a $20.5-billion bailout. According to the terms, depositors with accounts over $130k on Cypriot bank accounts are required to chip in to foot the costs of the rescue package.

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A Disjointed Eurozone

A Disjointed Eurozone

At an event titled Finland in Changing Europe, the country’s prime minister, Jyrki Katainen outlined some of his ideas for the European Union and the eurozone. He spoke about the need for solidarity and coherence, while warning about the consequences of extremist viewpoints. Katainen stated that he has no particular vision for the union or how it should evolve going further.

Nevertheless, the prime minister seemed adamant about the meaning of solidarity which he did not see – to paraphrase – simply as an act of kicking the can down the road and putting out fires, but rather, as an act of deepening security cooperation between the member states.

Moreover, Katainen argued that the idea of enforcing peace, a view subscribed to and advocated by the founders of the European Union, is longer sufficient to keep the union together and other, additional forces must guide decision making in the future.

For the audience, Katainen’s views were a reflection of the eurozone as a whole: a rigid system imposed on a disjointed union of countries with different cultures and values.

The problems with the single currency are manifold. However, the main issues circle around competing political interests. Even if the member states would agree to establish a standard to which each and every country would commit to, it would be impossible to achieve a crisis-free zone.

For instance, EU and the eurozone are seen largely as matters of foreign policy among Europe’s various constituencies The problems with the euro are still secondary to other, seemingly more pressing issues such as unemployment, education and taxation. Therefore, when politicians are forced to balance between the foreign and domestic interests – which do not always converge – they often end up bowing to one and mooning the other. In an ambitious and idealistic union like the eurozone, such a model cannot be sustained.

For Katainen and other eurozone advocates, it would be helpful to understand what the moral basis of the eurozone is. Imagine a big family in which people are related to one another by blood, but do not get along. Indeed, blood-relations do not guarantee a harmonious relationship, but shared values do - or at least make cooperation possible.

The eurozone decision makers would be well-advised to come together to determine whether the values of the 17 member states are similar enough to sustain a zone in desperate need of harmony, stability and a unified vision of the future.

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Euro Down Despite Cyprus Deal

Euro Down Despite Cyprus Deal

The single currency hit a new 4-month low against the dollar as Cyprus bailout implications are still unclear. Investors worry that the rescue package terms for Cyprus will set a precedent and ultimately become a blueprint for future bailouts. Cyprus is expected to finalise capital control actions on Wednesday following the country’s acceptance of the bailout conditions. During trading hours in Europe, the fell to $1.28175. German bonds were high due to the uncertainty surrounding the details of the Cypriot bailout. Investors have shown great dubiousness over the eurozone’s future and it’s unlikely that we will see massive euro rallies in the near future.

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