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Cyprus: A Germanic Morality Tale

by Frank Schnittger Tue Mar 19th, 2013 at 09:31:12 PM EST

Cyprus is small enough not to be really significant in economic terms for the Eurozone as a whole. (Let's treat the strategic significance of Cyprus giving exclusive gas exploration rights to Gazprom or a Mediterranean naval port to Russia in return for a bail-out as a separate issue for now).

So the mostly German bankers who run the European Central Bank (ECB) decide this is a good opportunity to demonstrate to all and sundry the consequences of not playing ball with your creditors. The ECB refuses liquidity to insolvent Cypriot banks because the Cypriot Government refuses to implement the ECB bank bail-out plan. The banks have to limit withdrawals (say to 20k Max) because they cannot sustain the outflow of funds that would otherwise occur. The banks are declared insolvent and a liquidator is appointed. Bondholders/depositors are given shares in the banks in lieu of their investments over 20K and the banks re-open under new "ownership and management".

Russian "investors" (otherwise known a money launderers)  lose their shirts. Some bigger businesses become illiquid and may have difficulty trading. Small businesses and individuals are generally ok with 20K working capital but don't trust the banks as a place to maintain their working capital funds. A mattress/cash economy emerges. This works fine for small local cash businesses but business trading with other Eurozone countries cannot get credit and may have difficulty settling accounts with other Eurozone suppliers/customers. Cyprus may have to issue its own currency again but has difficulty getting it accepted by its trading partners. The larger economy grinds to a halt. The tourist industry almost collapses. Cyprus is effectively quarantined and "thirdworldised".   German Finance Minister Schäuble  has already said on ZDF TV: "The business model of Cyprus is no longer sustainable. Someone has to tell the Cypriots."

ECB central bankers look on with some satisfaction because this will teach the Greeks, Italians, Spaniards, Portuguese and Irish et al just what will happen if they don't play by the rules. They are happy enough the Russians got burned, but may cut a deal with Putin to stop the aforementioned Gazprom or Naval Port scenarios. NATO threatens a blockade if Russia does try to set up a naval base in Cyprus. Turkey decides this is  good time to consolidate it's position in Northern Cyprus by formally occupying and developing Varosha in Famagusta. Europe is once again on the brink of war.

All of this may seem ridiculous when you consider how small Cyprus is in the larger scheme of things. And then you remember that WW1 started because of the murder of a relatively obscure Archduke in Sarajevo. Once again the greed of central European elites threatens the security and prosperity of the continent as a whole.  Those who refuse to learn the lessons of history are condemned to repeat it.


Display:
With h/t to Migeru and ManfromMiddletown for their comments

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Mar 19th, 2013 at 09:33:29 PM EST
Can someone remind me how and when Germany gained de facto control of Europe? I'm reeling like I was in 2001 and 2008 and I can't entirely accept what I'm reading.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Mar 20th, 2013 at 01:56:16 AM EST
When the Euro was adopted without the ECB being made a proper central bank it left the well being of the other economies in the EMU dependent on the concern that Germany had for the overall welfare of Europe. That failed when Angela Merkel became the leader of Germany. Since that time all European monetary policy decisions have been framed around considerations of what would be sensible to a Swabian housewife, it seems.   (A broad caricature)   :-)

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Mar 20th, 2013 at 03:01:08 AM EST
[ Parent ]
More specifically, when you have a currency union and a central bank for that currency union, but you leave the supervision of national banks to national authorities you have a situation much like the 'attractive nuisance' of an unfenced swimming pool in which children are continually being drowned. National authorities can allow banks to engage in activity that generate risks far beyond the capability of the state to remedy, as with Ireland and now Cyprus. Cyprus has banking sector liabilities many times greater than its GDP. The only real way this can be remedied is for the issuer of the sovereign currency, effectively the ECB, to create the money required to solve the problem. The Fed routinely does this in the USA, and even for non-bank entities, as in 2008. But the ECB does not. This is largely out of deference to creditor status nations, especially Germany, who view the Euro as a currency that should be treated as though it were a gold standard, where you can't just print gold, as it were.

Many things were left unresolved with the creation of the Euro, on the assumption by most that Europe would, under pressure of crisis, move towards a full fiscal union. It has not and shows little prospect of doing so. Germany has the biggest economy in the EU and when there is need for money to cover the latest banking regulation FU they have increasingly refused to pony up unless very stringent measures are put in place.

Critics complain that German banks created much of the problems in Ireland and Spain, and German refusal to countenance Eurozone wide banking regulation and resolution regimes prevents both effective supervision and a proper resolution scheme. Germany takes the position that the problems the banks created were the fault of the national authorities, not the German banks, perhaps boys will be boys, and that the citizens of the offending nation are guilty sinners who must pay up. Meanwhile the demands for austerity are increasingly destroying the social contracts in southern Europe.  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Mar 20th, 2013 at 03:33:01 AM EST
[ Parent ]
I would like a better understanding of why the Cypriot banks are in such big trouble in the first place.

They offer relatively high interest rates, attracting large deposits, notably from Russia. What have they been doing with the money? Have they been investing it in ways which justify the generous interest rates? Or was it just a Ponzi scheme?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed Mar 20th, 2013 at 04:47:29 AM EST
[ Parent ]
Good question.

It was mentioned in another thread that they hold large amounts of Greek state debt with high interest.

I would also add the systematic insolvency Mervyn Kin talked about in 2008:

US embassy cables: Mervyn King says in March 2008 bailout fund needed | Business | guardian.co.uk

Since last summer, the nature of the crisis in financial markets has changed. The problem is now not liquidity in the system but rather a question of systemic solvency, Bank of England (BOE) Governor Mervyn King said at a lunch meeting with Treasury Deputy Secretary Robert Kimmitt and Ambassador Tuttle. King said there are two imperatives. First to find ways for banks to avoid the stigma of selling unwanted paper at distressed prices or going to a central bank for assistance. Second to ensure there's a coordinated effort to possibly recapitalize the global banking system.

We are still on first I think.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Mar 20th, 2013 at 05:20:06 AM EST
[ Parent ]
The Cypriot government killed their banks when they supported the Greek "Private Sector Involvement" plan, as the Cypriot banks hade large holdings of Greek debt. Thus Cyprus feels they are entitled to more support from the Eurogroup, which they are not getting.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Wed Mar 20th, 2013 at 05:44:41 AM EST
[ Parent ]
This is the crux of the problem. I also saw an article on the Cypriot bank balance sheets which showed very little senior paper outstanding. Prior to the Greek haircut, they were well capitalized--which is going to happen when your business is all about encouraging deposits, and loaning relatively little money out. They were essentially taking high interest bonds and passing some of the profits onto their customers. Such banks need to be regulated. I'm not falling for the Russian mob argument since that is a story that's more about avoiding taxation ala the Caymans and Ireland and a dozen other places. It's more about bad business practice.
by Upstate NY on Wed Mar 20th, 2013 at 10:43:48 AM EST
[ Parent ]
Nothing wrong with buying state bonds, taking deposits and passing along the interest that is not solved by having a central bank backing up said state.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Mar 20th, 2013 at 02:55:38 PM EST
[ Parent ]
Thanks for the refresher. Sometimes I dig into the economics threads here and there's just too much info to maintain a coherent narrative in my head.

What spawned my question is my realization that since Sarkozy left office every single piece of economic news coming out of Europe has been framed from the point of view of Berlin first with maybe a sidebar from the ECB and the media presumes to speak for the locals in question. In my lifetime only the US and USSR have had that level of power and it's just so shocking that this happened without any (yet) nation-state level shots being fired. I've seen this discussed here multiple times (in some form) but it's only now really hitting me with this latest round of social contract trashing.

Things are weird enough to where you could tell me someone was simply playing a long game with the setup of the EU itself and I wouldn't laugh. (I have a vague recollection that this has been not-entirely-jokingly discussed here too.) Maybe it's just the beginning of the middle of the corporate age.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Mar 20th, 2013 at 04:56:05 AM EST
[ Parent ]
but he had basically no say on what was done.
Hollande has not confronted Merkel (as many regret here) but he's certainly forced her to fully own her decisions, and that may be significant enough in the end.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 25th, 2013 at 12:33:06 PM EST
[ Parent ]
"but he's certainly forced her to fully own her decisions,"

giving her enough rope?

That doesn't really works. The decisions of the euro 17 are the decisions of all 17, now and a week ago. If the finance minister of Malta writes a article like a bemused but involved tourist that is one thing; but the second largest EU-zone country can't play the uninvolved visitor.

What was actually the french position during the cyprus deal? I don't know.

by IM on Mon Mar 25th, 2013 at 01:47:41 PM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Mar 25th, 2013 at 02:17:03 PM EST
[ Parent ]
Quatremer agrees with Jerome on this: Crise de la zone euro: Berlin au risque de l'hubris (25 MARS 2013)
Le problème de Berlin est qu'elle n'a pas su gérer sa nouvelle puissance. La crise de la zone euro étant avant tout une crise de confiance, elle s'est, contre son gré, retrouvé à l'avant-scène, seule sa signature ayant, aux yeux des marchés, de la valeur. Car, derrière l'euro, les investisseurs n'ont jamais cessé de chercher le mark... Aucun autre pays, et surtout pas la France, qui a un long passé d'instabilité monétaire et des comptes publics dégradés, ne pouvait prétendre à un tel leadership, pas plus que la Commission, à la fois dénuée de moyens financiers et de crédibilité politique, surtout depuis la présidence de José Manuel Durao Barroso que Merkel déteste. Si le couple « Merkozy », aujourd'hui défunt, a pu sauvegarder l'apparence d'une gestion commune de la crise, le refus de François Hollande de coller à la politique de la chancelière a fait apparaître les instances européennes pour ce qu'elles sont : un simple cache-sexe des volontés allemandes. Pour tous les citoyens européens, « Bruxelles », aujourd'hui, c'est l'Allemagne.
Eurozone crisis: Berlin in danger of hubris (25 March 2013)
Berlin's problem is that it hasn't been able to manage its new potency. As the Eurozone crisis is above all a crisis of confidence, Germany has found itself in the limelight against its will, and only its signature has value in the eyes of the markets. Because, behind the Euro, investors have never stopped chasing the Mark... No other country, and above all not France, which has a long past of monetary instability and degraded public accounts, could pretend to such leadership, nor the Commission, at once lacking financial means and political credibility since the presidence of José Manuel Durao Barroso whom Merkel hates. If the «Merkozy» couple, today dead, could safeguard the appearance of a common management of the crisis, the refusal by François Hollande to adhere to the Chancellor's policy has made European institutions appear as what they are: a simple fig leaf for German will. For all European citizens, «Brussels», today, is Germany.


guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Mon Mar 25th, 2013 at 06:17:49 PM EST
[ Parent ]
that we cannot absolve the others from their responsibility, in that they are failing to stand up to Germany (as has been recommended here for a while). But Germany (and the other hardliners like Finland, Slovakia or the Netherlands) are explicitly pushing for these policies and putting a lot of political capital in them (ie making these issues de facto vital national issues for them) - and they thus have a (slightly) bigger responsibility.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 25th, 2013 at 06:18:00 PM EST
[ Parent ]
Creditors have all the negotiating leverage, and it's unfortunate for us all that we have a spiteful, resentful bastard such as Wolf-pack Schäuble strategizing for the biggest creditor.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Mon Mar 25th, 2013 at 06:20:02 PM EST
[ Parent ]
Well yes. France is the second biggest country and the second biggest ESM creditor. So a strategy of keeping put of everything can't work. even if it works for Malta.

And as far I understand the repercussions in domestic politics in France it hasn't worked. "Strangler of cyprus"?

by IM on Tue Mar 26th, 2013 at 10:16:11 AM EST
[ Parent ]
France is demoralised. Those who voted for Hollande are disappointed with him, but generally don't have strong opinions on what he should be doing differently on the economic front. "TINA" and all that. Those few of us who genuinely hoped that he would tip the scale at the EU level against austerity and for stimulus, are of course more than disappointed.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Tue Mar 26th, 2013 at 10:28:32 AM EST
[ Parent ]
France has a pretty decent current account deficit. The chicken will soon come home to roost.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Mar 26th, 2013 at 10:46:24 AM EST
[ Parent ]
An aside take note of the Basel Institute rankings which compares the overall systemic corruption in a country. "The Overall Score, which ranges from 0 (low risk) to 10 (high risk), indicates a country's risk level in money laundering/terrorist financing based on its adherence to AML/CTF standards and other risk categories such as financial regulations, public transparency, corruption and rule of law."
Germany is, according to this measure,  institutionally much more corrupt according to this measure than Cyprus. Greece, on the other hand, is a leader in the EU...

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Wed Mar 20th, 2013 at 05:51:14 AM EST
Has NATO a reason to blockade a Russian naval base in Cyprus? The strategic value of Eastern Mediterranian has fallen because supertankers and large containerships can't use Suetz Canal.
by Jute on Wed Mar 20th, 2013 at 06:29:08 AM EST
At this stage they'll do it because the RUSSIAN BEAR IS COMING. And there's all that pressure on military budgets too. A nice bit of posturing in the Med should fix that - not to mention it's a pretty nice place to be posted. "Hm, I think we'll set up our command post in the resort hotel overlooking the nudist beach."
by Colman (colman at eurotrib.com) on Wed Mar 20th, 2013 at 06:35:10 AM EST
[ Parent ]
The key use of Cyprus now is for military staging areas for Middle East incursions, whether in defense of Israel or into Iraq, Iran. Turkey is no longer trusted in this regard. Thus, Cyprus still has value.

Russia rarely if ever shows interest in Med. outposts. It doesn't like to stir the waters especially when its natural resource objectives are met through using the Balkans.

However, Bulgaria has become ornery of late and is clearly listening to its EU brothers in obstructing Russia.

by Upstate NY on Wed Mar 20th, 2013 at 10:46:25 AM EST
[ Parent ]
Turkey is no longer trusted in this regard.

Ah yes, that would date from 2003 when Turkey unexpectedly turned out to be a democracy.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed Mar 20th, 2013 at 11:08:59 AM EST
[ Parent ]
"The business model of Cyprus is no longer sustainable. Someone has to tell the Cypriots."
----
Yeah right like Cypriots invented this "business model" and have been able/allowed to proceed with it for decades...C'mon. This "business model"/money laundering wouldn't exist on a small island of Cyprus if it wasn't for a "big guys" benefit...Cypriots should know that it will not last for ever and should prepare themselves for this moment...but...  

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Wed Mar 20th, 2013 at 07:11:10 AM EST
Eleutherotypia: Live blog: Cyprus in crisis
And news from Berlin, where Chancellor Angela Merkel says Germany wants a solution for Cyprus but insists there must be a plan to its bloated banking sector. Merkel sid she regretted but respected the decision by Cypriot  MPs to vote against a bailout package, adding that Germany will now wait to see what alternative proposal Cyprus offers to international creditors.
Of course Germany wants a solution [but] the current banking sector is not sustainable.


guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Wed Mar 20th, 2013 at 07:33:27 AM EST
[ Parent ]
ok I do not know how to post photos again...last instruction I had is not working...help

< img src="http://oi45.tinypic.com/29na51g.jpg"
width="400">

Here is a link

Cyprus today

http://oi45.tinypic.com/29na51g.jpg

Sorry maybe not appropriate but...

Science without religion is lame, religion without science is blind...Albert Einstein

by vbo on Wed Mar 20th, 2013 at 09:11:21 AM EST
Works if you remove the line break:


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Mar 20th, 2013 at 09:22:29 AM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Mar 20th, 2013 at 09:23:17 AM EST
[ Parent ]
In the end Cypriots will be pushed to do what is prescribed by EU (Germans etc)...We already saw this method in Greece and Italy...they will put in power those who will do it because democracy is just a word written on a toilet paper...I feel for Europeans...what a waste of time and history...

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Wed Mar 20th, 2013 at 09:19:28 AM EST
heh, it's true.

we just had a 'technocratic' (aka 'unelected') government for a year, (FAIL!), and yesterday i heard plans for a 'super-technocratic' government being on the cards.

after it will the 'super-max-technocratic' (aka more Goldman Suchs.)

cute, huh?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Mar 24th, 2013 at 04:22:40 AM EST
[ Parent ]
As often, I am obliged to point out that any government pushing for austerity in a depression is not technocratic but dogmatic.

All that macro has learnt (and though it falls far short of the precision of the natural science it is not mere guesswork either) points to the need for governments to increase spending (at least nominally -the fear of inflation even at such low levels has nothing to do with macroeconomic). A technocratic government would go against austerity.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sun Mar 24th, 2013 at 05:47:38 AM EST
[ Parent ]
consensus of the elite.

Where did those elite come from? Generally, from elite educational institutions, ENA here in France for the political class. Breeding ground and echo chamber of what will become elite conventional wisdom for the coming generation. Intellectual inbreeding, though no doubt it doesn't feel that way for the spawn.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Sun Mar 24th, 2013 at 08:17:21 AM EST
[ Parent ]
It looks like the X-Mines/CGT cogestion worked better than the ENA/MBA version...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 25th, 2013 at 12:35:24 PM EST
[ Parent ]
Hullabaloo
You see, the three oh-so-sovereign powers had some choices. Russia could have cracked down on the mobsters looting that great nation and sending the money offshore to Cyprus. But no. Cyprus could have told the EU it was leaving the Euro unless mob assets were frozen and a relatively small bailout for the real Cypriot people was given. And the EU could have chosen to take on the rich and powerful instead of the lashing out at average Cypriots.

But any of those options would have required taking on the power of multinational raiders on behalf of real people in the real economies of both their own and other nations. And as it turns out, nation-states are much more interested in protecting the riches of their wealthiest "citizens" than in doing the right thing by worldwide economies.

The world runs on an antiquated system destined for the dustbin. The situation in Cyprus is just the latest farce in this comedic cycle.

h/t gjohnsit's commenter at the orangerie.


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Mar 20th, 2013 at 07:45:16 PM EST
Does anyone besides me get the feeling that this is all good. That we don't have the power to stop the madness, but we don't need that power, it's self-destructing as we watch?

don't get me wrong, there's a shitload of pain being dealt. But...

Isn't the Emperor's nakedness becoming visible to more and more normal people, and isn't that some perverse kind of plus?

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Sat Mar 23rd, 2013 at 05:11:38 PM EST
They have lost the serious people. A large majority of the financial kommentariat is appalled. Only spiteful nationalists (and the 'burn the bankers' crowd) support the Troika.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sat Mar 23rd, 2013 at 05:41:12 PM EST
[ Parent ]
"burn the bankers crowd" supports the Troika?

But if they've (Troika) lost the serious people, isn't that really positive? Isn't that a base upon which to build?

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Sat Mar 23rd, 2013 at 06:04:27 PM EST
[ Parent ]
"burn the bankers crowd" supports the Troika?

Yes, because they believe the 'Cypriots are a tax-evading bankster people' story.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Sat Mar 23rd, 2013 at 08:28:46 PM EST
[ Parent ]
Well, yes.

But the Emperor has nukes. And it's difficult to imagine change without some metaphysical equivalent.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Mar 23rd, 2013 at 06:08:44 PM EST
[ Parent ]
the reasons there is Russian money in Cyprus are:
  • they don't trust their own government and want to keep money outside Russia;
  • Cyprus is an orthodox country and thus the Russians feel more at home there (but it's a nice place to visit, from Russia)
  • there is a double taxation treaty between Russia and Cyprus which makes investment into Russia from Cyprus treated favorably - this has become a simple way for Russians investing in Russia to do so via a foreign country to obtain some sort of protection against arbitrary confiscation (which Russia usually is more reluctant to inflict on foreign money)

These factors remain, even if the confiscatory event is going to make other places look more attractive for purpose one..

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 25th, 2013 at 12:40:12 PM EST
German rationalisations, courtesy of Spiegel:Euro Bailouts: Savers Be Warned - Your Money's Not Safe (March 25, 2013)
Not even savings accounts are safe, as was recently seen in Cyprus. Such deposits are actually guaranteed to up to €100,000, but the euro rescuers cared little about this as they desperately searched for funds. Cypriot small savers may have escaped this time around, but the realization remains, even beyond Cyprus, that a state teetering on the edge of bankruptcy will resort to all available means to raise money -- and a guarantee is only worth something as long as the entity that stands behind it remains solvent.

Nothing is safe from being seized by the state, no savings account, but also no house or apartment. The Germans experienced this after World War II, when they were charged an extra real estate tax in the form of compulsory mortgages. Governments have even banned the possession of gold during currency crises, forcing citizens to exchange the precious metal for the national currency.

So far, people in the debt-ridden countries of the euro zone haven't had such levies imposed on them. But why not? According to a recent study by Germany's central bank, the Bundesbank, for instance, Spaniards hold more wealth, on average, than Germans.



guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Mon Mar 25th, 2013 at 05:43:36 PM EST
Der Spiegel:
According to a recent study by Germany's central bank, the Bundesbank, for instance, Spaniards hold more wealth, on average, than Germans.

Would it be possible to look into this in more detail?

This is wealth, not income (disposable or otherwise), right?

Is real estate included? Most EU countries have a much higher home ownership rate than Germany. With the real-estate bubble not completely deflated in France & Belgium, this would skew the figures. Then again, how do you compute the "value" of a household's residence? Asking price at the nearest realtor's window?

Is this is "net wealth", i.e. with remaining debts owned to the bank deducted?

Are we talking average or median? And what does it say about inequality in German society, Spanish society, French society etc...?

In any case, this is very useful fodder for the "virtuous Germans" paying for the "feckless Southerners" arguments and I have no doubt this will get plenty of mileage in the Bilds of this world.

by Bernard on Tue Mar 26th, 2013 at 09:43:42 AM EST
[ Parent ]
Was the report published or leaked?
by Colman (colman at eurotrib.com) on Tue Mar 26th, 2013 at 09:51:27 AM EST
[ Parent ]
It spawned this comment in Süddeutsche Zeitung:

http://www.sueddeutsche.de/wirtschaft/euro-krise-nehmt-von-den-reichen-1.1631920

Take from the rich!

Spaniard and Italians are much richer then the helpers in the north. This result is shown by a new study of the european central banks. [...]

(My translation)

by IM on Tue Mar 26th, 2013 at 09:51:47 AM EST
[ Parent ]
Well, that was the expected result, was it not?
by Bernard on Tue Mar 26th, 2013 at 04:34:01 PM EST
[ Parent ]
And indeed Germany has a much lower house-ownership rate then the rest of europe. 60% and 40% or something like that. Since house ownership is lot of net wealth all over the west, that matters.
by IM on Tue Mar 26th, 2013 at 09:54:09 AM EST
[ Parent ]
Would it be possible to look into this in more detail?
Why bother? It's already become one of those zombie ideas that will never die.

Next up: Schäuble explains that deficit countries hate Germany because of envy.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Tue Mar 26th, 2013 at 10:00:35 AM EST
[ Parent ]
Looking out of the window, they probably envy our snow surplus.
by IM on Tue Mar 26th, 2013 at 10:02:16 AM EST
[ Parent ]
Clearly Schäuble understands that "they hate us for our freedom" wouldn't fly in Germany...

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Mar 26th, 2013 at 10:47:57 AM EST
[ Parent ]
Die Zeit: Schäuble nennt Kritiker Deutschlands "neidisch"

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Mar 26th, 2013 at 10:05:08 AM EST
[ Parent ]
Why should people be envious of a country that is poorer than yours?
by gk (gk (gk quattro due due sette @gmail.com)) on Tue Mar 26th, 2013 at 10:06:26 AM EST
[ Parent ]
Apparently Schäuble's theory is that this is like schoolchildren who are envious of the one with the better grades.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Mar 26th, 2013 at 10:45:27 AM EST
[ Parent ]
Migeru:
Why bother? It's already become one of those zombie ideas that will never die.

I know, but I can't help myself wondering: where's the catch?

You want to keep this zombie ideas detector trained :)

by Bernard on Tue Mar 26th, 2013 at 04:36:04 PM EST
[ Parent ]
The catch is that German policy has been beating down the German people for the past decade or two, so obviously they haven't been able to accumulate much wealth. The problem is one of redistribution within Germany. Does anyone think that the spoils from plundering Italian household wealth will be shared with the lower income groups within Germany?

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Mar 26th, 2013 at 04:46:09 PM EST
[ Parent ]
Migeru:
Does anyone think that the spoils from plundering Italian household wealth will be shared with the lower income groups within Germany?

Apparently, enough Bild readers to re-elect Merkel, Schäuble et al...

by Bernard on Tue Mar 26th, 2013 at 05:28:51 PM EST
[ Parent ]
@miotei
@MigeruBlogger @dlacalle once Germany can tax people in the south it will be happy to distribute, not before that. Again read Ingham
Ingham being this.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue Mar 26th, 2013 at 06:20:14 PM EST
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