IvanM

Cyprus thought being the Russian mobsters laundry of choice was a good idea. Then when Europe refused to bail them 100% they scurried off to Moscow. The people who will lose the most won't be the thieving bankers who gained the most. The mobster money left a while a go precipitating the crisis. Enough Cypriots voted to live off mobster money. The GFC was not their fault but you can chose who you sleep with.

OzTennis

Who can choose? Government controls who and who can't deposit money? Bankers? Certainly not customers. You will find that the Cypriot collapse had more to do with exposure to the Greek crisis than the withdrawal of Russian funds although that was very important. Read up on HSBC and other British banks fines on money laundering related to drugs and other illegal billions deposited in their banks. 'You can choose who you sleep with'?

e.g. http://www.reuters.com/article/2012/...8BA05M20121211

IvanM

In Britain, as elsewhere, a blind eye was turned whilst the dollars rolled in. Cyprus became an offshore tax haven. Cyprus became dependant on banking more so than most. Finally with Cyprus the Eurozone woke to moral hazard. How many more countries will Germany bail out? Where does it all end? Too many countries should not be in the Euro and the GFC exposed that. The structure of the Eurozone caused greeces issues. The GFC just exposed the stupidity of allowing debt dependents in.

astera

You cannot blame everything on the GFC.

Greece and Cyprus are two examples of petty economies that couldn't sustain the level of life that people were leading. Greece thought it could get away with it for a while longer by falsifying economic data on a government level (do it on a private level and you are in prison for a long time) and cheating their way into the Euro. Then yet more fiddling with the books to keep borrowing more and more to sustain an unsustainable level of life.

Take retirement age for instance. Germans having to work years longer but Greeks being able to retire much earlier? Just one example of the merry lifestyle down there.

Greeks and Cypriots need to start looking forward to a much lower lifestyle than before as nobody is going to pay for them any more. Acting as a financial parasite to defer reality is no longer on the cards.

astera

Well-said. Cyprus became the Bank of Russia and thought this would be the key to their prosperity. That recent trip to Moscow to ask for help was probably met with very high demands as Russia was certain that Cyprus was up against the wall and would say 'yes' to almost everything. Wouldn't be surprised it Russia was even after a piece of the island as an exterior territory on some 100-year lease or something like that... not to mention taking over one of the banks completely. I bet they now wish that they had been less arrogant in their approach and worked something out.

Apparently the 37.5% "deduction" is going to hit Russian money hard as their money didn't really have where to go, and most of it was there when the key was turned in the lock. Of course Putin is now furious at Germany for making Russia a co-sponsor of the bailout, but then he's learning the hard way exactly where his place is when it comes to European politics. All Europe needs from Russia (and less so each day) is oil and gas. And to be honest Russia is more dependent on selling it than Europe is on buying it.

IvanM

It's a sovereign debt crisis. The GFC just revealed it for what it was and still is.

OzTennis

Some of this gets back to the EU and whether it is getting too large, has the correct vetting procedures in place (e.g. it is well known that Greece had '2 sets of accounts' and presented the good set when joining the EU) and whether it is getting too large to be functional, whether you can have a single currency for over 25 countries and so on.

It's easy to pick on Cyprus and Greece and forget what is going on elsewhere - eg UK.

I did say 'there but for the grace of god' - look at the state of the UK economy and the banking sector and it isn't a lot different to Cyprus/Greece. You have the same corporate greed driving irresponsible risk taking and accepting clean or dirty money.

Take away financial services and what of any great significance is there to export? Name a motor manufacturer (apart from Morgan) still in British ownership? Ditto steel - all gone to India. London used to be the world's #1 financial centre - 4 years post GFC 3rd and falling. LIBOR scandals (bankers actually getting together and fixing the rate at which they lend trillions to each other), payment protection insurance and endowment mortgages mis-sold, toxic loans (Northern Rock gave 125% loans! Buy a house, no deposit, get a car as well, don't care how much you earn, I get commission on issuing loans). On and on it goes. No different to what is described for the so-called economies punching above their weight.

The UK taxpayer bailed out RBS, Lloyds, Northern Rock etc to the tune of over £100 billion and last year at RBS alone returned a £23 bill loss on that to the taxpayer (at the same time giving over 100 employees a salary of over £1 mill plus > 100% of salary bonuses - and they say they have to reward 'talent' otherwise it goes elsewhere; the 82% taxpayer ownership which gets no say in this says please go elsewhere!). Mervyn King reported a few months ago that RBS and Lloyds are still undercapitalised because of the size of the bad debts not written off and fines and mis-selling compensation not paid and they could be looking for further injections. The B of E also said that it is unlikely the taxpayer will get back the bulk of the bailout - latest estimate was £66 bill will be written off (divide that by the UK population and you get a decent debt per head mostly caused by bankers largesse and lack of controls).

The Bank of England has already provided £375 bn in 'quantitative easing' to banks by purchasing some of their paper and giving them cash in return. The result is expected to be (B of E hopes) that banks don't need depositors money as much so give lower interest rates on savings, will lend more at lower rates (yet to happen, ask businessmen how easy it is to get a bank loan), the £ will be driven down (that's happened), this will make exports cheaper and the world will pounce on British exports (hasn't happened, what's to sell apart from mainly the services of the financial sector).

The one saving grace in a way is that an opt out for the UK in not joining the Euro was part of the Maastricht Treaty. At least there is sovereignty over the currency - even if it is worth about half what it was not so long ago (vs A$).

I therefore think it's a bit rich Brits bashing Greeks and Cypriots

IvanM

Uk not in Eurozone. Bigger difference than the size of Ozts post and big reason UK not begging to Germany. Debt GDP ratios rather different as well.

OzTennis

This is an intelligent forum I see - mention size of posts rather than make constructive points. I'll move on.

astera

I'm with you on the banking front - this is where things have truly gone wrong in way too many countries. Greed, casino-type speculation, ridiculous bonuses, it's all there. And you even have the likes of Credit Suisse taking part in this, so pretty much everyone was on the gambling bandwagon.

Funny thing is that the banking community and the likes of Madoff were lobbying to ease gov't controls over the financial industry, claiming that this is what is keeping this industry burdened and hampering growth! LOL. :d Personally I think this industry should have the living daylights regulated out of it. The approach of letting them off the leash has proven to be the worst idea possible.

When it comes to the UK and the Pound I disagree on the sovereignty issue. The Euro is big, it's not easy to manipulate and it can defend itself against global speculators. The Pound gets kicked around however the global financiers see fit. So you can either join the safety of the Euro umbrella and at least be protected, or you can stick to a small currency and get whacked.

When I lived in the UK the exchange ratio was 2 Euros to the Pound. Now it's 1.20. I'd hate to think how many retirement plans have gone down the drain for those looking to move somewhere warm, though to their luck Spanish properties have also taken a big hit. I guess another by-product of the severe weakening of the Pound is that UK properties have held on and that the bubble hasn't burst.

IvanM

Its the worldwide brains trust of economic intelligence n ere. Onest guv.

OzTennis

Agreed, sovereignty means to a certain extent the fate of your currency is in your own hands but there isn't a lot of control over its destiny due to the nature of the global economy. I well remember the memorable day we moved £'s to A$'s at £1 = $3.02 and for a decade thereafter we averaged $2.61. $1.45'ish today and so thoughts turn to moving the other way! If you look back through the archives on the forum you will see how many were predicting the pound would head northwards rather than southwards when it got down to the (then) psychological barrier of $2.50.

astera

The Australia Dollar is one of the most volatile currencies when world markets start shaking. If you look at the charts from mid-2008 you can see the AUD in complete freefall, something you will rarely see for a country where the economy hasn't gone down the tubes. It's incredible what a beating the AUD took back then.

Considering how strong the currency is today I think shifting over to something that will weather the storm the next time things start shaking would be a wise move. And it will offer the chance to buy back into the AUD at a much better rate when that happens.