Jonathan Fryer

Posts Tagged ‘Petros Fassoulas’

Cyprus Banking Crisis

Posted by jonathanfryer on Monday, 18th March, 2013

Thoughtful piece from Petros Fassoulas of the European Movement on Cyprus, the banking crisis and the EU:

18 March 2013
Is the Cyprus deal the lesser of all evils?
In case anyone thought that the bank and sovereign debt crisis that has engulfed certain parts of the eurozone has produced all its dramatic twists, events this weekend came as a rude awakener. Eurozone leaders agreed early on Saturday morning a deal to bailout and restructure the Cypriot banking sector.
Bank in LimassolThe most controversial part of the deal sees a tax levied on depositors to raise about 5.8 billion euros, to add to the €10 billion committed by the Eurozone and (probably) IMF. A 9.9% levy will be imposed to deposits over 100.000, while deposits below 100.000 will face a levy of 6.75%. So for the first time depositors, who were considered sacrosanct until now, are forced to share the cost of a bail-out. A lot has been said about how this decision was reached. The blame shifts depending who one talks to, but the Financial Times give a good account. It seems that considerations about the future of Cyprus as an off-shore financial centre played a role when deciding how widely to spread the pain among depositors in Cypriot banks. It was feared that taxing only non-resident depositors would scare investors away. So the main bone of contention (in an overall contentious decision) is that smaller depositors are put on the firing line, in a move that is seen as unfair and dangerous. Asking working people and pensioners to sacrifice their savings in the service of a failed banking sector is indeed cruel. But WSJ’s Simon Dixon makes a fair point, there is an element of fairness when asking locals to contribute to the bail out of their country’s banking sector, especially when that sector represents such a huge part of the country’s economy.
Many argue that it should not have come to this at all, that depositors should have been spared all together. But as Hugo Dixon of the Reuters argues the Eurozone and the Cypriot government had very little choice. Imposing a haircut on government debt, like it was done in Greece’s case, was not possible because most of the country’s sovereign debt is held under English law (making a Greek-style restructuring hard) and the remaining is held by Cypriot banks, making a hair-cut self-defeating. Hence the decision to impose a tax on depositors, many of whom are non-resident, predominately Russian and in many cases suspect of money-laundering. It would have been a hard task politically to explain to taxpayers across the Eurozone why they should contribute more to a bail-out that would have, to some extent, helped Russian oligarchs.
Cyprus euroThe most important thing that one should consider is what would be the cost of an alternative. In the absence of a bail-out deal (one that the Cypriot government had delayed long enough) Cypriot banks (which are already under ECB life-support) would collapse, taking the Cypriot economy with them. Lest we forget that the banking sector in Cyprus is more than 5 times the Cypriot economy. The one good thing that can come out of this is the de facto reduction of Cyprus’ banking sector to a size closer to the EU average, as the Eurogroup statement, that followed the bailout agreement, calls for. As we have seen in other European countries like Ireland and the UK, an oversized financial sector holds huge risks for the host country, especially for one whose economy is as small as that of Cyprus. To a large extent this is a banking crisis, rather than a “euro-crisis” and no matter what the structural inefficiencies of Eurozone’s governance (and European politicians inability so far to separate bank from sovereign debt) what Cyprus is faced with is the collapse of a banking sector that grew too big for its own good and made far too many bad decisions.
There is still a lot to play for, not least a parliamentary vote to approve the bail-out deal. Until then there is time and room to reconsider how the burden will be spread among depositors, and there are many proposals on the table on how to shield small depositors and reduce their contribution to the bail-out pot of money. Some reports talk about reducing to 3% the levy imposed to deposits up to €100.000. One last thing. The situation in Cyprus shows that in an interconnected world we are not immune to what happens “over there”. Capital as well as people are mobile, the banking sector interconnected and as a result banks and people’s savings are affected, irrespectively whether we are part of the Eurozone or not. The fact that British citizens who live and hold deposits in Cyprus will have to be part of the bail-out levy shows how important it is for the British government to be as involved as possible in Eurozone governance and EU-wide efforts to address the systemic faults of Europe’s financial sector.
Petros Fassoulas, European Movement

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Cameron’s EU Schizophrenia

Posted by jonathanfryer on Thursday, 24th January, 2013

I have to agree with Petros Fassoulas of the European Movement UK that there was something distinctly schizophrenic politically in David Cameron’s much hyped Euro-speech. Read Petros’s verdict below:

 

A speech of contradictions.
David CameronThis has been a speech of contradictions. The Prime Minister tried to be all things to all men  and managed to fail on every possible count.

He stated that Britain should remain a member of the EU but he proudly listed all the things Britain is not part of. He said he wants an EU with the Single Market at its core but then declared his intention to unpick it, water it down and reduce it to a collection of bilateral agreements, based on the lowest common denominator. He exclaimed his wish to work with his fellow European leaders to reform the EU but then put a gun (or is it a water pistol) to their head. He argued that Britain should defend its interests and promote its vision of European integration but then raised serious questions as to whether Britain will continue being an EU member. He claimed to be speaking for the benefit of the EU as a whole but he was addressing a small portion of his own party alone, defending his own job.
His schizophrenic tendencies aside Mr Cameron is going about this entirely the wrong way.
If he is truly committed to Britain’s membership of the EU and wishes to ensure that the Union works even better for the benefit of all its member states he should join his European partners and engage constructively in efforts to continuously improve how the EU works. Trying to renegotiate Britain’s membership of the EU, in effect unpicking the Single Market, the very thing he professes he wants to strengthen, can only achieve the opposite result.
EU leaders have been for a while warning against such cherry-picking, stating clearly that a special kind of arrangement, tailor-made to afford a certain member state with all the benefits of EU membership but exonerate it from all its responsibilities and commitments is not possible. They have been quick to repeat that warning after the PM delivered his speech and caution that such an approach endangers rather than strengthens the EU and the Single Market. They are hence in no mood to indulge Mr Cameron in his descent towards Wonderland.
With a “renegotiation” unavailable, one is left wondering what the Prime Minister plans to put to a referendum. Having promised something he is not able to deliver he is actually putting Britain’s EU membership in real danger.
A Prime Minister confident of his position, responsible towards his people and honest with his partners must be working towards keeping Britain within the EU rather than putting its membership of the biggest common market in question. He should join other EU member states in common efforts to make the most of the EU, rather stand on the side-lines, threatening to unravel the process of European integration. If he wants others to take seriously his vision  of the EU, he should not force them to question whether Britain will be a member in a few years’ time.
This is a time for leadership and statesmanship and Mr Cameron’s speech proved that he is not able to display either.
Petros Fassoulas, European Movement

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Cameron’s EU Strategy

Posted by jonathanfryer on Tuesday, 8th January, 2013

A stringent and well-justified criticism of UK Prime Minister David Cameron’s dangerous strategy in relation to the EU, by Petros Fassoulas of the European Movement UK:

EM euroblog

Cameron’s EU strategy lies where arrogance meets absurdity.
David CasmeronSeldom does a Prime Minister display such lack of diplomatic common sense as David Cameron does when it comes to his EU policy. From lecturing in a patronising fashion from the side-lines to exercising an ineffective and unnecessary veto, Mr Cameron has managed to alienate and baffle in equal measure his European partners. But this time he has gone as far as to exclaim that he is “entitled” to threaten fellow EU Member States while they are engaging in a process of reform of the EU and the Eurozone. It beggars belief why he has chosen to employ such arrogant behaviour, at the very moment when Germany’s Finance Minister warned that the UK cannot blackmail its EU partners. The irony is that Mr Cameron has repeatedly stated that the wellbeing of the Eurozone is in the UK’s interest. He professes that the Eurozone needs to reform if it is to ensure its wellbeing. But in the same breath he says that he is prepared to block those reform efforts. There is something schizophrenic about his approach to EU policy-making.
 
So, he is adamant that the UK’s contribution to this process of reform will be limited to using it as an opportunity to “take back powers from Brussels” and create a new relationship with the EU, using a veto if necessary. He has based his approach to EU membership on that attempt and he then plans to put its outcome to the British people for a vote.  But this strategy is doomed to fail, as previously argued. There is very little chance that the UK’s EU partners will allow it to abandon its Treaty commitments while affording it all the privileges of Single Market membership. The Single Market Act (and all the implementing regulations and directives) is a complicated set of rules, which ensure a level playing field for all participating states. Trying to unpick those agreements means the unravelling of the Single Market itself. What is to stop other Member States from asking exemptions from areas they consider cumbersome, areas dear to the UK? It’s like opening Pandora’s Box, which will undo the Single Market and cancel the many benefits it affords its members.
 
Employing threats while the EU is dealing with issues of an existential nature limits even further the chances of winning allies and achieving his objectives.
 
UK EUSo, the Prime Minister will return empty-handed after having failed to “repatriate” powers and change the UK’s terms of EU membership. Even if other members states feel sorry for him and give him some token powers back they will never be enough to satisfy all those Europhobes in his party, UKIP and the tabloid press who he has been trying to appease with fantastical notions of “power repatriation”. He will then have to put to a vote that failed outcome and be forced to campaign against EU membership, since he has repeatedly stated that, even though he believes that the UK should remain in the EU, the status quo is not acceptable. Here lies the absurdity in his strategy. His failure will be complete.
 
Instead the PM should be joining other EU leaders in their efforts to improve the way the EU functions, deepen and widen the Single Market and improve those EU policies that need amending. A winning strategy is made up of constructive engagement, building alliances, providing a vision for the EU and participating in efforts to make that vision a reality. Threats, blackmail and the pursuit of self-interest belong to an area of national conflict, an era the EU replaced long ago with supranational co-operation and consensus building. Mr Cameron should read his history books before making his much awaited speech.
 
 
Petros Fassoulas, European Movement UK
 

 

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