The Key to the Cyprus Story: French Decline
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  • There’s another aspect to France and the Cyprus situation: the French economy is also in decline, and Cyprus is a message to the rest of the eurozone that future bail-outs will require bail-ins.

  • ojfl

    I believe also the problem is the divergence of policies between France and Germany. Recall that during the election of president Hollande, he was opposed to the vague promises of fiscal austerity promoted by then president Sarkozy and supported by Chancellor Merkel. In that sense an alliance Franco-German got diminished right then and there. The further slide of the French economy has proven austerity was indeed the only solution to the French problem and acknowledging that, after significant victories in the legislative elections, would weaken president Hollande and probably weaken his legislative support, also causing further slide in the polls.

  • To tie nations like Germany and Greece and Netherlands and Cyprus with a single currency must rank as one of the stupidest ideas to come out of the human mind. Perhaps the EUrocrats had too much faith in Marxist philosophy, that by altering material conditions they can alter human consciousness. Give the Germans and Greeks a common currency and they will start acting similarly. How stupid !

  • Correct me if I’m wrong, but hasn’t an unrestrained Germany always been a condition that bodes ill for the rest of Europe?

  • Cyprus doesn’t need to pass a law. The laws regarding the chain of losses are well-established: uninsured creditors are uninsured. Period.

    • A taking is a taking. Why stop with little? Why not take all the uninsured money in the Russians’ accounts? Why, that’s even better than borrowing from the ECB at low interest rates.

  • Mark Michael

    Surprisingly for the Jim Lehrer NewsHour last night, they ran a long segment on Ireland and how they were slowly coming back from the Great Recession of 2008. They instituted real austerity 4 years ago and saw their GDP drop 3% in 2008, 7% in 2009, less than 1% in 2010, grew 1.4% in 2011, and 0.7% in 2012. The unemployment rate remains very high: 14.2%. Ray Suarez was the reporter. He noted that the government can once again borrow money on the private markets at reasonable rates; think he said 4.1%. Ditto credit-worthy private borrowers. Ten’s of thousands of new small businesses have started, often people laid off from a regular job – start a restaurant, pub, niche manufacturing company. Lots of Internet-related startups (Ireland has a highly educated workforce). The CIA World Factbook says Ireland’s prime interest rate is 3.1% today.

    The tourist industry is coming back because Ireland is a lot cheaper than it was during the boom times. Wages were forced to drop, since Ireland could not devalue the euro. Prices for ordinary goods and services dropped a lot also.

    Ireland had a huge bubble in its banking sector and its real estate market. Stupidly, their politicians paid off the banking creditors euro-for-euro. Made them whole – no haircut – put the entire burden on the Irish taxpayer. They have been slowly paying it down. They ran a trade surplus of $113.6B – $63.1B = $50.5B in 2012, which reduced the country’s net foreign debt by that $50.5B amount. (These #’s from the CIA World Factbook.)

    Ireland’s per capita GDP has dropped to $41,700 (2012 estimate in PPP), which is still several $2,000 higher than Germany’s $39,000.

    Ireland’s public debt is still too high: 118% of GDP. Its inflation rate was 1.3% for 2012. Also, the worst problem is that 14.2% unemployment rate, although I suspect that’s overstated – given the small startups, self-employed activity the NewsHour described as going on.

    Someone needs to tell a Paul Krugman to check out Ireland and how they did the opposite he tells countries in Severe Recessions to do – and appear to be succeeding, albeit slowly.

  • Mata_Moros

    Turkey doesn’t belong to Europe. It is not a European country.

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