As the crisis in Cyprus unfolds, citizens are beginning to place blame on Cyprus' tightly knit elite. Some citizens are demanding the finance minister and central bank governor step down. Also on Monday, a prominent banker in Greece, Andreas Vgenopoulos many of whom say he is in the center of the crisis in Cyprus had defended himself against allegations that he had wiped out personal and business debts and approved loans taken out by political and financial leaders for a favor. Since the imposed capital controls that began last week, the country has closed its second-biggest lender, Cyprus Popular Bank and is moving the banks remaining healthy assets to Bank of Cyprus PCL. Big depositors at the two banks face losses of anywhere from 40% to 80% on their deposits, according to government estimates.
The newest allegations, which surfaced over the weekend in the Greek and Cypriot media are now focusing on the few days before the financial crisis erupted. On Sunday, a Greek newspaper called Proto Thema published a list of what they claimed was 132 companies that pulled money out of Cyprus Popular and sent it abroad days before the central bank blocked transactions out of the country. Other allegations come from euro-zone officials who say that money was leaking out of the country in the days after Cyprus had its initial bailout on March 16.
While the media will continue to make allegations at specific actors or bankers involved in the euro zone as the culprits to the crisis there will also be ensuing political implications between politicians of conflicting ideologies. The governor of the central bank, Panicos Demetriades, appointed by the former prime minister’s communist party, an unofficial request by conservative president Nicos Ansasiades to resign over the bailout foreshadows political tensions to come over the economic policy of the country.
It is important for the people of Cyprus to keep things into perspective and understand how financial crises of this magnitude are the result of complex financial mechanisms rather than just one politician’s failed policy or one banker’s risky investments. There is a strong incentive for politicians to dramatize the event to improve the likelihood of legislation passing in favor of their constituents. At the same time politicians will warn of the negative consequences that come with a bailout, In Cyprus’ case conservative politicians warming of deficit consequences and the contraction of the financial sector in which Cyprus had to agree to in order to receive the bailout. I hope citizens of Cyprus navigate through the political muck and tune out the political rhetoric.
Briefly reading the American Banker article reminded me of what we discussed in class on Tuesday: pin-pointing the person or institution responsible for the crisis is difficult if not nearly impossible. Furthermore, the Cyprus crisis certainly did not occur as a result of the island's sole actions--involvement with the EU following its crisis has surely created the situation we're seeing today. For example, there are several articles surfacing of how Cyprus's economic situation is a result of Merkel and the EU, not the Cypriot banks, while others are strongly claiming the opposite. Almost five years after the 2008 crisis, we're still trying to find the direct cause. While most know of the "complex causality" of the situation, the media, state actors, and citizens alike are still attempting to find the "silver bullet" most likely in an attempt to explain the crises and prevent further ones from occurring in the future.
ReplyDeleteI think asking for people to recognize the true complexity of situations of this magnitude is a pipe-dream that will never happen. Citizenry always looks for the easy answer. And the answer is normally fed to them by politicians who would like to muster greater political power by blaming their enemies. It is interesting to see the same dynamics play out in Europe that we have had over here - blame seems to be flying around. In the end, there will probably be no simple answer for why the crisis has occurred of who is to blame. This financial crisis is another example of complex causality.
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