Cyprus: the test case

An insider’s explanation of how the insane Cypriot situation came to pass and who was chiefly to blame for it:

As well as the full EU summit on Thursday and Friday, Anastasiades, a
London-educated 66-year-old, was to attend the first full eurozone
summit for 14 months late on Thursday. A senior EU policymaker said: “There will be a little discussion of Cyprus, but no decisions.”

A senior EU diplomat predicted: “Nothing much will happen. It’s the new president’s first summit.”

it turned out, the centre-right Cypriot leader was given a 12-hour stay
of execution until the early hours of Saturday on what, highly
conveniently, was a Cyprus bank holiday weekend. He went home with a
€10bn euro bailout and a eurozone taboo-busting obligation to
expropriate every saver in every bank in Cyprus….

The IMF has long insisted on keeping the cost of the bailout well below the €17bn needed because of its fixation on ensuring medium-term debt sustainability. Lending Cyprus what it needed would have tipped the scales of sustainability.  The German government, months away from a crucial general election, was also very reluctant to see its taxpayers’ money lent to secure the savings of wealthy Russians whose deposits are estimated to represent almost a third of Cypriot accounts.

The panic about banks closing down on Tuesday came from Asmussen, who warned the Cypriots that no deal meant no emergency liquidity help from the ECB, meaning the two biggest banks on the island could collapse.

“I was present,” said Sklavos. Asked who pushed the hardest for the levy to be slapped on depositors, he said: “Wolfgang Schaeuble.”

“It was a fait accompli. They had made their decision before the meeting had even begun. They don’t care. They want Cyprus to be the guinea pig. They want to see if this thing works. If it does, then perhaps Spain or Italy will be next. If it doesn’t, then who cares about Cyprus?”

And who is Wolfgang Schaeuble? He is the German Minister of Finance, Helmut Kohl’s heir presumptive, and the most ardent EUnik in the CDU.  He was pushing the bank heist because he knows that Germans are going to be increasingly supporting anti-EU parties in the upcoming elections and feared the bad press of forcing the German taxpayer to bail out Russian savings accounts.