There is this one episode in the Tom & Jerry serial wherein Tom sets up an elaborate ‘mechanism’ of levers and pulleys to hit Jerry; Tom can operate this mechanism remotely. The happenings in Eurozone remind me of exactly that. Well, everywhere it is the same. Solution to one problem leads to another problem, and the chain goes on.
In a series of secretive emergency sessions at the dead of night in late October 2011, European leaders and the International Monetary Fund engineered a 50 percent write-down of Greek government bonds. This meant that those holding the bonds would get back only half the money they had lent; eventual losses came close to 75% of the face value of the bonds.
Among the holders of these bonds were the then-cash-rich banks of the Greek-speaking Republic of Cyprus. Altogether, they lost more than four billion euros, a huge amount in a country with a GDP of just 18 billion euros.Of these, Cyprus Popular Bank or the Laiki Bank, alone took a hit of 2.3 billion euros. And that is the bank that is at the centre of the current storm.
This is just one example of how there can be no easy way out of the Eurozone problem; or for that matter the US crisis. They have their roots deeper down into the structural changes in consumption and production that took place over the last half a century and more post the WWII. All along we called it development and prosperity; development and prosperity they did bring; but they also involved a fundamental shift in values – social, economic and political.