Will Cyprus cause the collapse of the Eurozone?

[DaveB]

Ah yes.

The Kray supercomputers wot nail your head to the floor.

Nah, that was the Piranha Brothers, mostly Dinsdale.

[DimPrawn]

Cyprus should do an Iceland.

Cyprus's choice: Iceland or Greece? – Telegraph Blogs

[doodab]

Such programs can never understand things such as market sentiment, or fundamentals, or gut feel. They can only trade the technicals.

They don't need to. They can use rand() if they want to randomly lose money.

[doodab]

I reckon they'll exit the euro and start printing their own money again. The Germans will back pedal. The russians will be a bit miffed at having their euros turned into cyprodollars.

It's the only sensible choice. Their financial services industry is lost either way.

[darrenb]

Does Germany really want a stable EU economy? Keep a sense of crisis, and the value of the Euro stays low. Keep the Euro low, and Germany can export more. Germany is a huge exporter.

Nothing more guaranteed to keep a sense of crisis than attacking the property rights of savers. I think this was Wolfgang Schäuble's idea.

[suityou01]

Does Germany really want a stable EU economy? Keep a sense of crisis, and the value of the Euro stays low. Keep the Euro low, and Germany can export more. Germany is a huge exporter.

Nothing more guaranteed to keep a sense of crisis than attacking the property rights of savers. I think this was Wolfgang Schäuble's idea.

Factual POTD

[Mich the Tester]

My thoughts are that Cyprus will be allowed to go bankrupt by Europe as the result of a political based decision. This will cause an electronic run on banks perceived to be at risk to a similar event. (Spanish/Italian/Greek)., this could cause contagion to the rest of Europe and further.

Possible. Any business that uses accounts in Cyprus now has to get its money into a safer place; Germany might be a safe haven, but heavily taxed, the UK might be a safe haven as it's outside the Euro, or of course Switzerland. The result of all this political wrangling and prevarication will probably be at least one more country whose economy doesn't function and descends into chaos, more money going to Swiss banks, and possibly bank runs in Italy and Spain.

What I don't get is this; the EU heads of finance, the ECB and the IMF are for the most part not low-IQ people. Most of them ARE intelligent, even if we sometimes think they aren't. So how is it that with all these guys in the room, apparently they didn't stop to think that the plan would lead to bank runs? Have finance ministers learnt nothing at all from the Lehmans collapse or indeed the last 5 years of trouble?

OK, so Cyprus needs reforms; I think the Cypriots probably realise that themselves now, after all they won't want this to happen to them again. But forcing the reforms, forcing heavy taxation and capital controls before providing the funds is going to make things worse. As I said earlier, it seems to me that if you're having a heart attack, just hope you're not found by an EU finance minister; sure, he'll resuscitate you, but he'll slit your wrists at the same time. Or alternatively, he'll first make you fill in a long declaration to show that you'll lead a healthy lifestyle afterwards.

Save the patient first, then sort out his lifestyle, and don't mix up those two steps or try to turn them back to front.

[eek]

Re: Will Cyprus cause the collapse of the Eurozone?

The problem I've seen over the years is that intelligent people can think but rarely think through the consequences and potential subsequent steps

[sasguru]

The problem I've seen over the years is that intelligent people can think but rarely think through the consequences and potential subsequent steps

Unlike thickos like you, you mean?
Well at least you have just enough self-knowledge not to put yourself in the intelligent category.

[DodgyAgent]

What I don't get is this; the EU heads of finance, the ECB and the IMF are for the most part not low-IQ people. Most of them ARE intelligent, even if we sometimes think they aren't. So how is it that with all these guys in the room, apparently they didn't stop to think that the plan would lead to bank runs? Have finance ministers learnt nothing at all from the Lehmans collapse or indeed the last 5 years of trouble?

O.

The people in charge of these institutions live in gilded environment that have no idea of how wealth is created (or they have lost all perspective) many of them have only ever worked in some sort of public or monopolistic institution. They have little respect for money or markets and have reached a point where they think that they are so huge and important that there should be no change.

they are however intelligent enough to work out that if Cyprus does go bust and then becomes a strong economy again (like Iceland) it will send unwelcome messages about the Euro.

For these people the most important thing is the Euro if that collapses then it is the end of their gravy train lifestyle and the beginning of them becoming laughing stocks. The financial crisis is in may ways a god send because it is pulling the rug from under the feet of the anti democratic ruling elites.