This was not supposed to happen: by now the Greek insolvency “can” should have been kicked, and the Greek government, realizing the money has run out for both the government and the banking system, should have folded to Troika demands, and allow the Troika money to return repaying obligations to the Troika in exchange for more spending cuts.
Instead, the “game theoretical” approach of bluffing until the end, and beyond, has put both countries in a corner from which neither knows how to escape, and with the “final deal deadline” passing this weekend we now have quotes such as this from the EU:
- OVERTVELDT: GIVING IN TO GREECE WOULD UNDERMINE EU CREDIBILITY
Just when it appeared the news cycle had moved on from Cyprus, the island nation came splashing back yesterday with news from the European Commission: Nicosia will be made to sell around three quarters, or €400 million (US$5.2 million), of its excess gold reserves. (“Excess?” Who has too much gold?)
What’s the big deal? ask some. When a person or nation is in a financial pinch, assets have to be liquidated.
True. But with Cyprus it’s not that simple. From the outset of this crisis, Cyprus has not been in control of its own destiny. Sure, Cypriot President Nicos Anastasiades was in on most, though apparently not all, of the discussions. Cyprus’s parliament voted on this and that, and ultimately “agreed” to the bailout agreement. But it was all smoke and mirrors. In the end, Cyprus was compelled to agree to a ruinous bailout package created and prescribed by Germany in consort with the European Commission, the European Central Bank (ECB) and International Monetary Fund. Now we learn from the Trioka that as part of the bailout agreement, Cyprus will have to sell the majority of its gold.
The important point to note is that this decision was effectively made by Germany and its ECB/EC/IMF allies, AND NOT CYPRUS. Continue reading