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Reply #41


Response to DemReadingDU (Reply #39)

Mon Mar 25, 2013, 11:58 AM

41. ZeroHedge: "Cyprus a Template For EU"

3/25/13
Perhaps the best example of a "word out of place" comes from the new Eurogroup head, Dijsselbloem, also phonetically known as Diesel-BOOM, who just may have ushered in the next, next wave of the Eurozone crisis:

"Cyprus a Template For EU"

Er... wasn't it a special case, inside a unique case, wrapped in a one-time case? We will ignore the rather hilarious Freudian slip, and focus on what he was explicitly talking about with Reuters, which is the resolution model which was just put in place in Cyprus:
.
.
Translation: it now officially sucks to be an unsecured creditor in Europe. In other words: an uninsured depositor.

Why this ad hoc dramatic shift in the European approach to bank solvency, which if anything makes the link between bank and sovereign closer than ever, and crushes all that Draghi achieved in the summer of 2012?
Simple: because what Cyprus allowed was the effective usurpation of democracy - the only reason the Cypriot bailout "passed" (at least so far) is because it was structured as a bank restructuring, a financial system "resolution", not a tax, and thus not in need of a parliamentary, democratic vote. Because as Cyprus also showed, votes to deprive depositors of cash, whether insured or uninsured, simply won't fly. Hence the shift.

However, there is a problem: it means that depositors are now fair game everywhere, and that the ESM or EFSF, with their unlimited scope but "democratic" impleention pathway, are on the backburner.
And now, the scramble to pull uninsured deposits out of banks everywhere begins. Thanks to the new Eurogroup head.
"You ask for miracles, Theo. I give you Diesel-BOOM"

And now, every European depositor is going to their local financial dictionary to look up the definition of General Unsecured Claims, only to see a picture of... themselves.

http://www.zerohedge.com/news/2013-03-25/word-out-place-sends-europe-tumbling

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LineLineReply ZeroHedge: "Cyprus a Template For EU"
DemReadingDU Mar 2013 #41
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