By BASIL A. CORONAKIS
April 2 2013
The economic crisis of Europe is at a dead end.
Incompetent leaders, a distorted financial system, large and inefficient administrations in most member states, dysfunctional trade unions, flourishing local cartels and widespread corruption, are the main reasons of the crisis. As European leaders are themselves responsible for the crisis generating reasons in their countries, it is obvious that they cannot resolve the problems they have created.
They are all part of the problem and thus they will not try to resolve it. On the contrary, they will all try to maintain it as is with further temporary remedies (more controls, more taxes, more confiscation of citizens' assets) having in the back of their minds that in politics, there is nothing more permanent than the temporary.
However, such a situation cannot last forever and after the new element, the confiscation of assets (Eurogroup decision for Cyprus), has pushed the crisis beyond the point of no return, we understand that only two alternatives are left for the future of the euro and Europe.
A large event such as war or a popular revolt and for us Europeans large events are unpredictable. A war will be decided by others, i.e. USA, China, Russia and a popular revolt (with only precedent being the French Revolution) as it will be a “bottom-up” large event.
The second alternative is the rapid self-depletion of the obstructive structures created by the Euroidiots in their naïve efforts to save Europe and the ruling financial elite. This is what has begun to happen after the recent looting of the Cypriot deposits.
The “wise” decision of the Eurogroup to give a haircut to private deposits in Cyprus, introducing the concept of getting the citizens to pay with their savings the price of the corruption of their leaders (because this is in essence is the end result of the Eurogroup’s decision), gave birth to three different euros.
We do not believe that what is now happening was premeditated. Because if it were premeditated it could be controlled. It happened because Wolfgang Schaeuble, Jeroen Dijsselbloem and Olii Rhen (in this order) cannot see beyond their nose. It was a bloody mistake which now they cannot correct.
Indeed, the Eurogroup decision for Cyprus has automatically split the euro into three new currencies.
First the euro that ordinary citizens they know. The one which is deposited in the various banks on Europe and can be simply transacted by bank transfer to beneficiaries or used through plastic. This is the official euro and so far its value is “one to one.”
Second comes the euro of the blocked time deposits in Cyprus. The value of this second euro is less than “one to one.” Indeed as time deposits cannot be freely unblocked, even if one pays a penalty, they can be used as collateral for private loans in the free market certainly at an interest rate higher than the interest given by the bank to the blocked deposits. Such interest differential, to be best of our knowledge, varies from 5 to 20%. This is why the value of the this euro is less than “one to one.”
Confidence is an abstract concept, which takes time to build but is can be lost in no time. And this loss is what the Eurogroup has initiated with its naïve decision for Cyprus. People began losing faith to the European banking system thinking “Yesterday Cyprus, tomorrow Spain, after tomorrow France and from there the sky is the limit.” Under this thinking the “cash euro” was born.
The “cash euro” is the third new currency, which people all over Europe, starting from the South and the Southerns living in the North, begin collecting and saving under the mattress gradually as confidence in the European banks is fading out.
This may not be that bad, as it could trigger the beginning of the exit from the crisis in a human and natural way.
With ordinary people turning to hard cash, there will come a moment when most of their transactions with other ordinary people, merchants and providers, will be in the black. Realistically, once a transaction is in cash in times of stagnation and income losses, the first collateral damage will be VAT and the second will be part of the income tax of the seller. Indeed, with businesses at low and shops closing one after the other all over Europe, if one is given to opportunity to survive at the expense of paying VAT, why he should think it twice? As to the buyer, who when purchasing on debit or credit card does not think of the VAT, in the case of counting cash to pay do you think that will think twice to keep in his pocket the VAT?
With the new “cash euro” reality, if the Eurogroup does not manage to restore the confidence of citizens to the European banking institutions, a lot of small firms will emerge all over.
State budgets will be loosing VAT, big retail conglomerates will be loosing business, but the bottom line will be that the black economy will begin soaring, contributing to the exit of the economic crisis.