Wednesday, April 3, 2013

Quatremer on the Cyprus Crisis

Jean Quatremer has the best account I've yet seen of the colossal mishandling of the Cyprus banking crisis. For the first time we learn who did what at each stage of the unfolding crisis. The principal culprits: the Cypriot government and the Dutch finance minister Jeroen Dijsselbloem. And where was the French government input while all this was going on? If France tried to minimize the damage, Quatremer hasn't been able to find out how.

UPDATE: This other piece by Quatremer explains that France blocked the appointment of German finance minister Wolfgang Schäuble to head the Eurogroup, thus allowing the manifestly unqualified Dijsselbloem (an agricultural engineer by training) to slip into the post.


Mitch Guthman said...

I see nothing wrong with blocking the appointment o f Wolfgang Schäuble. Given Schäuble's track record and previous statements, I see no reason to believe that he would have handled anything better or even differently from Dijsselbloem. Blocking his appointment was clearly the right thing to do both for France and for the future of Europe.

On the other hand, I agree that Dijsselbloem is not someone who should have been appointed to head anything concerned with European economic policy.

Possibly Hollande might want to appoint people who would look out for the interests of France and the people of Europe instead of someone who looks after the interests of Germany and Davos man.

Art Goldhammer said...

Mitch, Schäuble is on record saying that he did not know that the original plan included taxing holders of small accounts (up to 100k euros) and that he did not approve of that idea. But somehow that plan was foisted on Cyprus without Germany's approval. Germany deserves plenty of blame, but in this case German instincts were sound. Dijsselbloem by all accounts handled things poorly.

Mitch Guthman said...


I certainly agree that if it was necessary to choose between the two evils, the choice was clear—as subsequent events proved. What I’m questioning is why it was necessary for France to choose between two unacceptable candidates, both of whom would be disastrous for France, instead of advancing a candidate more in line with the economic policies that Hollande advocated during his campaign. Why was the French candidate for this important post not an opponent of austerity?

Also, for me, the crucial points of disagreement with the Cyprus banking proposals didn’t involve making smaller depositors “pay in” so much as it was the idiotic imposition yet again of austerity in the middle of a depression and the obvious strain on the European banking system involved in forcing depositors of any size to take a loss. I believe this was a colossal mistake and has greatly increased the risk of catastrophic bank runs throughout the Eurozone.

Still, this episode is another example of something about the Hollande presidency I’m vaguely seeing but can’t quite put my finger on. There really seems to be no political core; nothing by way of political philosophy or deeply held beliefs that is animating him. It really is a presidency crafted in custard.