No – it is not all Markel’s
fault
(A Cypriot woman wearing a mask of the German Chancellor, Angela Merkel,
takes part in a protest against an EU bailout deal. Photo AFP)
They might do better
to look in the mirror for a bit and wonder how things got so bad in the first
place.
For one, Cyprus has
been known as an off-shore tax haven for money laundering for years. As long as
this worked to the benefit of Cyprus, no one there complained too much, even
when the rest of the Eurozone did complain.
You cannot enjoy the benefits of hot or corrupt money and then complain about it
when something goes wrong.
For another, Cypriot
banks took much of the “non-resident Russian” money and used it to invest in Greek
government bonds. When the Greek
government bonds turned out to be a bad investment, the severely over-leveraged
Cypriot banking system began to implode.
Cypriot citizens might want to ask their government bank regulators why
they let the banks make such high risk investments.
Finally, the banking
system of Cyrus is, according to Eurogroup president Jeroen Dijsselbloem, five
times the size of GDP. Why did the
Government of Cyprus let this happen? The
answer is that they took huge risks in using overseas money to grow their banking
sector, but believed that nothing could go wrong and if it did, the EU would
bail them out.
As the folks over at
American Express say “Membership has its privileges.” When you read the fine print, however, you
also find out that membership has its costs and responsibilities as well. For Cypriots, they are now finding out that membership in the Eurozone can work both ways.
Hello Cyprus! Welcome to the reality of what happens when
you look the other way at unethical practices.
Other citizens in Europe and around the world might want to take a harder look at their politicians and bankers and ask them what they are doing. (Hello to Luxembourg!! You could find yourselves in the position with all of your "non-resident" money flows.)
Other citizens in Europe and around the world might want to take a harder look at their politicians and bankers and ask them what they are doing. (Hello to Luxembourg!! You could find yourselves in the position with all of your "non-resident" money flows.)
This is economics for
the rest of us – and unfortunately – it is economics for the average Cypriot
citizen that trusted his/her bankers and politicians. The savers will get fleeced and the debtors
will get bailed out. Ouch!
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