Sovereign debt bubble thread

[Zanza]

We've heard about China participating in bailouts before as well and that never happened. I'll believe it when Putin actually puts up a few billion...

[Iormlund]

Russia stepping in is a definite possibility. There might be billions worth of gas in their waters and the Russians are very interested in getting their hands on them. Plus they would probably welcome the chance to gain another naval base in the Med in case the situation in Syria goes south for them.

[Valmy]

Tamas you can't have it both ways.

Sometimes the state needs to protect people from themselves

Which, granted, is hard to do in a Democracy.

[mongers]

Time for Putin to play a blinder ? 

Why not make a generous deal, secure access for Russian oil/gas companies to some of the future gas reserves, buy a bank or two in exchange and back the Cypriot government.
As a 'confidence building measure', agree to lease a naval base in Cyprus, just in time for when Russia loses their somewhat short term Syrian base as that regime goes down the toilet. 

[alfred russel]

Yes that part is no mystery at all. The question is why everyone else agreed to it.

You gave the answer yourself already: they considered an internal matter of the sovereign nation of Cyprus. If they had dictated something, surely someone would have hated that too and pointed fingers at Schäuble and Moscovici. Damned if you do, damned if you don't, I guess.

We are talking about a country that has 1 million people, which doesn't even qualify as a big city.

Maybe the Cyprus leadership and the supporting civil service are incompetent (and I mean in a different sense then the euro / North American countries we geenrally discuss)?

[Zanza]

Well, according to several posters in this thread the leadership and supporting civil service of another country with about 82 million inhabitants is also incompetent in handling the crisis, so why not let them decide by themselves if the other countries can only come up with disastrous policies anyway. Germany's policies in the last three years have been nothing short of lunacy and idiocy if you can believe e.g. Iormlund and Sheilbh. No need to compound that.

In the end, it's better if they by themselves make a bad decision than someone else making a bad decision for them.

[Agelastus]

If the level is set at or above the insured amount then it's no different than asking sovereign bond holders to take a hair cut as part of a bailout.

Functionally maybe you are correct; in terms of the perceptions of depositors both large and small? Not a chance that it will be seen like that. 

[Admiral Yi]

Functionally maybe you are correct; in terms of the perceptions of depositors both large and small? Not a chance that it will be seen like that.

They have a vested interest in presenting themselves as different from holders of sovereigns.  You on the other hand don't.

[Iormlund]

I don't see much competence in our elites, honestly. The ones up north are inept, the ones down south are inept criminals.

[Agelastus]

Functionally maybe you are correct; in terms of the perceptions of depositors both large and small? Not a chance that it will be seen like that.

They have a vested interest in presenting themselves as different from holders of sovereigns.  You on the other hand don't.

Really? I suppose you think I'm a hermit somewhere who isn't affected by self-inflicted bank runs and the ongoing shambles of the "Sovereign Debt Crisis"?

And I don't really buy your argument that there's no functional difference anyway. Give my bonds a haircut? Shit, I'm still stuck with them unless I can pass them off to someone willing to take a risk on them and willing to pay a decent enough price...which means I'm probably stuck with them and I just have to hope you don't haircut me again. You give my deposits a haircut? Fine, here's my however many days notice I need to tell you I'm moving it to a bank in another country, go fuck yourself.

So, what am I missing here?

[Admiral Yi]

Of course you're affected by bank runs, just as you're affected by the inability of sovereigns to finance deficits.  Don't see much difference there.

Don't see the other difference either.  Both are cases of lending money to institutions that are incapable of repaying those loans.

[Sheilbh]

Just for the record I don't blame Germany directly for any of this.

I agree that the structural problems of the Euro are to blame for all of this. And I've said before I can't stand the replacement of one morality tale for another that blames Germany (the Krugman response).

I blame Germany for setting the wrong direction on policy for the last 3 years. I also think their vacillating leadership (it reminds me of that line about Israel, actually a Goliath but attitude of a David) doesn't help allowed real damage to happen to economies for months while they deny they'd take certain steps, then takes them at a 4 am summit in the Lipsius and then causes further uncertainty by spending weeks clarifying what they meant at the summit. I also think that Merkel as a politician has failed to communicate well on this subject and I think that allowed the morality tale populism of some other politicians and parties to fill the vacuum - which in turn influences policy.

I'd be amazed if many Germans were aware that, for example, the Greeks have gone way beyond anything they promised in delivering austerity. That disconnect is damaging for the German government's ability to respond flexibility but is also I think a little harmful to the ideas of European solidarity - which this whole crisis has undermined in all countries and I think made the Euro-future a bit more uncertain.

We've heard about China participating in bailouts before as well and that never happened. I'll believe it when Putin actually puts up a few billion...

Russia's already loaned Cyprus €2.5 billion. They threatened to withdraw it if the EU plan was passed - 'unfair, unprofessional and dangerous' as Putin described it. Until last month Russia was talking about extending the loan an lowering the interest if the Cypriots needed it.

The only people who would obviously be in favor of a tax on mom and pop are Russian corruptocrats (since it would reduce their own haircut).  So the next question is who in the bailout process do they have the most influence on.  The natural answer IMO is Cypriot politicians.

To defend Cypriot politicians for a second, their financial sector is a big chunk of their economy. There's more than just corruption in wanting to keep Russians using their banks - or for that matter the many Middle Eastern and Indian companies who use Cyprus as an entrepot for their European operations. I've already read that most Russians are planning to move their money to Latvia now, but the overall effect of even taxing very rich depositors would be terribly damaging for that sector. It's probably gone anyway now.

I feel really sorry for Cyprus they were doing fine until the Greek haircut damaged their banks so much and, in the same year, a naval base exploded at an estimated cost of around 20% of GDP

[Iormlund]

IIRC the explosion took out their main power plant as well ...

[Sheilbh]

IIRC the explosion took out their main power plant as well ...

Yep. Wiped out 50% of power generation for a while.

[Admiral Yi]

And I've said before I can't stand the replacement of one morality tale for another that blames Germany (the Krugman response).

I blame Germany...

Maybe a quick proof read was in order Shelf.