The Western Media’s War Against Cyprus And Russia

This about Economy, tagged , , , , , , was written by for on March 21, 2013

If you ever manage to get a troupe as diverse as Latynina, Mark Adomanis, the Cypriot Communist Party, virtually every financial analyst, Prokhorov, and Putin united in condemning your crass stupidity and cack-handedness, it’s probably time to stop and ponder. But it’s safe to say that’s not what the Troika – the European Commission, European Central Bank, and IMF – tasked with managing the European sovereign debt crisis is going to be doing any time soon. They seem to be living in la la land.

Here is the low-down. Contrary to German/ECB propaganda, Cypriot public finances, while nothing to write home about, are not in a catastrophic state. The debt to GDP ratio, far from ballooning out of control like Greece’s, was actually lower than Germany’s as late as 2011! This was despite Cyprus being steadily hammered by the global financial crisis and the massive explosion at a naval base in 2011 that cost it about 10% of its GDP.

cyprus-debt-dynamics The main problem was in its financial sector. Although it should have been safe on paper, Cypriot banks had the bad fortune to have had many operations in Greece – which hemorrhaged money as Greek debts were restructured under EU guidance. These involved painful austerity, but the principle that bank deposits would be inviolable held across the PIIGS. But for Cyprus, the Eurocrats – egged on by Schäuble in particular – decided to make an exception, demanding a “bail-in” as part of any financial rescue package. For the ultimately trifling sum of $6 billion, they were prepared to erode basic principles such as sanctity of property that the EU is founded on.

According to Edward Scicluna, the Maltese Finance Minister, his Cypriot counterpart Michalis Sarris was for all intents and purposes brow-beaten into accepting the deal – a 6.75% levy on deposits of less than 100,000 Euros, and 9.9% on everything above that – that the country’s parliament would later decisively reject. The Europeans, according to him, were dead-set on “downsizing” Cyprus’ supposedly overgrown financial sector and in particular its status as a tax haven and alleged center of Russian money laundering. After 10 grueling hours of discussions, Sarris finally conceded, and as soon as that happened, “Schäuble demanded that all wire transfers to and from the Cypriot banks would cease forthwith.”

In other words, they wished to destroy Cyprus’ financial system, and it seems certain that they have succeeded in this. As soon as the banks reopen (now delayed until at least May 26th), who exactly will continue to keep their deposits in a Cypriot bank?

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Interview with Craig Willy (Letters from Europe)

This about Politics, tagged , , , , , , was written by for on May 16, 2011

After a year long hiatus from interviewing Russia watchers, I decided it was time to get back in the game. As it happens, my attention first fell on a Europe blogger – and not just any incisive, counter-intuitive scribbler whose intellect and analytical acumen is matched only by the number of themes he is prepared to expound upon, but also someone who has experience in politics (work in both the US Congress and the European Parliament), journalism (with the EU policy news site EurActiv), ideological adventurer (started off very neocon, but Iraq War and education fixed that), and a fellow rootless cosmopolitan (having been raised in France and briefly in the US, and studied at the London School of Economics). I am talking of none other than Craig Willy, who writes the irreverent (and informed) Letters from Europe.

Craig Willy: In His Own Words…

What first sparked your interest in blogging and Europe, and how did the twain meet?

I’ve been in love with history, politics, thought and argument since I was maybe 14. I remember very clearly telling a friend at the time that I wanted to “be paid to say my opinion”… Perhaps not the easiest career path and not one I persistently pursued!

Blogs don’t provide money, usually, but they are an absolute liberation for the aspiring writer: costs are zero, middlemen are eliminated, and you can reach every person on the planet who has Internet. How could I not blog? I started my first blog in 2004 and I don’t think I’ve changed the mix of more analytical pieces with humor, including on Euro-nonsense.

I have always been interested in Europe as I was born and raised here (specifically in France and the UK). I have been interested in the EU insofar as it seemed to represent Europeans reclaiming their power in the world and historical agency. It usually fails in this respect and hence I used to find the United States of America – its historical role, politics and foreign policy organizations – much more interesting. I now think all areas of the world are worthy of study. The US is probably over-written about and, being based in Brussels and involved in EU journalism, I can genuinely add value writing about European affairs. If I wrote about the US I would be just another opinion. I also think Europe needs more pan-European writers: it is a very real entity but it has no public space.

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The Endgame Begins

This about Economy, tagged , , , , was written by for on February 13, 2010

A year ago I predicted that there will be a “decoupling from the unwinding“, as “emerging markets” by and large ride out the temporary shocks of declining Western demand for their exports (China) and the interruption of Western credit intermediation (Russia) before resuming growth. This is one aspect of the trends leading to the imminent demise of Pax Americana, which will be replaced by “the age of scarcity industrialism” / “a world without the West“. We are now entering this Empire’s endgame.

After briefly stalling in early 2009, China’s economy roared back to life on the back of massive credit loosening to build (or overbuild) infrastructure and industrial capacity. Though not the most efficient use of resources, it did have the advantage of 1) maintaining growth, 2) forestalling the social unrest that would rise up if it wasn’t, and 3) at least Chinese investments went into building up their real economy (amongst other things, it became the world’s largest producer of wind turbines and photovoltaic panels in 2009), instead of the pork and oligarch welfare programs more characteristic of the US “stimulus”. And though Russia’s GDP contracted by 7.9% in 2009 – far higher than expected by most commentators, largely thanks to the dependence its big corporations acquired on continuous flows of intermediated Western credit – it began to slowly recover from mid-2009, industrial output is now rising at a fast clip, and investment banks are predicting growth of 4-6% for 2010. The other two BRIC’s, Brazil and India, didn’t have too many problems at all since they had neither a big credit nor trade dependence on the submerging Western markets.

In the long-term, I argued that the brunt of the crisis would fall on the “submerging” Anglo-Saxon markets, thanks to their “charades over “quantitative easing” (translation: printing money), transfer of toxic “assets” onto the public account”, and unsustainable fiscal stimuli. Today, the American political system is for all practical purposes broken. Republicans won’t agree to tax increases, Democrats won’t agree to cutting entitlement programs. The legislative process is reverting to that of the 17th century Polish-Lithuanian Commonwealth, when a single veto could (and did) prevent anything being agreed on in their Sejm, or parliament. (Hint: the ultimate consequences weren’t good for Poland).

The inflated hopes and expectations accompanying Obama’s accession to power were indeed, just as I suggested on his election, “greatly constrained by financial and institutional realities”. He is a weakling President, alternating between meaningless populist rhetoric and pandering to the Wall Street oligarchs; scorned by the left as Bush II with gloss, and condemned by the right as a foreign Marxist Islamofascist: his policies and outreaches failing at home and abroad, rejected in his own heartlands, these outcomes are engendered by and in large part made inevitable by his hopelessly pollyannish belief in his own messianic powers of compromise and persuasion.

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