Συμβουλος του Τσιπρα θα είναι και αυτός ο Κρουγκμαν
και η αποψη του Ελ-Εριαν που αναφέρει
και η αποψη του Ελ-Εριαν που αναφέρει
European hardliners have been increasingly worried about the complacency that has spread in struggling countries following the dramatic involvement of a “whatever it takes” European Central Bank. This weekend’s decision serves as a wakeup call to other struggling European economies, which wrongly believe that the solution to their problems has been outsourced to the ECB.
These are all valid reasons. As such, I am puzzled less by the decision to extend PSI to depositors and more by how it has been done. Specifically:
By choosing to include all deposits and not just the large ones, thus penalizing all segments of the population, officials opted for a highly regressive approach that also undermines the traditional construct of deposit insurance schemes around the world.
By limiting the levy on large accounts to just 9.9 per cent, officials will raise insufficient funds for Cyprus while encouraging remaining deposits to flee the country, thus increasing the likelihood of a second PSI down the road.
If this is correct, the specifics of this weekend’s agreement risk becoming part of the problem rather than a solution for Cyprus.
In Cyprus, they would fuel a private liquidity implosion and more acute credit rationing. They would also risk triggering a disruptive political backlash and social unrest.
In Europe, they could well undermine the recent tranquil behavior of depositors and creditors in other vulnerable European economies – in particular Greece, Italy, Portugal and Spain. Despite assurances from European officials that Cyprus is “exceptional” and the measures are “unique,” this weekend’s actions have increased the risk premium. They will also add to the disillusionment of an increasing of Europeans with the traditional political order and parties.
More generally, the actions will test the faith that global investors place in central banks’ ability to offset political surprises and, thus, enable and protect an endogenous process of economic and financial healing. Since this comes at a time when many risk markets’ assets appear technically over-bought, they could also prompt pullbacks in asset prices.
European officials were right to look for a bold approach for Cyprus. But in compromising excessively on critical design elements, they risk ending up in the disruptive muddled middle: not going far enough to solve the country’s problems, and not being sufficiently careful in containing potential negative externalities.