A Diary of the Euro Crisis in Cyprus (eBook)

Panicos Demetriades served as Governor of the Central Bank of Cyprus and was a member of the Governing Council of the European Central Bank from May 2012 until stepping down from the governorship in Cyprus in April 2014, a move that The Economist described as ‘a blow to central bank independence’. He returned to his academic position in the UK as Professor of Financial Economics at the University of Leicester shortly after.  Professor Demetriades continues to speak regularly around the world on his experience as Governor of the Central Bank of Cyprus during one of Europe’s worst financial crises. He holds a PhD in Economics from the University of Cambridge, UK, and BA and MA degrees, also in Economics, from the University of Essex, UK. His academic career spans a period of 25 years, the last 15 of which have been with the University of Leicester. He has published extensively in academic journals and books, primarily in the area of financial development. According to RePec (Research Papers in Economics) he is among the most widely read economics authors in the world. He has also published in ‘popular’ and specialist media, such as VOX-EU and The Financial Times. He is frequently a guest on TV and radio programmes worldwide in relation to the euro crisis, Brexit and other economic issues.  Professor Demetriades is a Fellow of the Academy of Social Sciences of the United Kingdom.

Foreword 6
Acknowledgements 8
Contents 9
List of Figures 11
Prologue 12
1 Baptism of Fire 16
Alarm Bells 16
Central Banks, ELA and Some Financial History 19
The Trigger 23
Bibiliography 25
2 Entering a War Zone 26
EU Membership 26
Turbulent History: From Ancient Times to British Rule 28
Troubled History: From EOKA to Christofias 31
Back to the Present 39
Bibliography 43
3 A German Question 45
Bibliography 52
4 Buying Time 54
Appendix: Irish Letters 60
5 “Two” Big to Fail 63
A Greek Tsunami 63
In the Footsteps of Alexander 64
Capture 66
Gambling for Resurrection 67
The Business Model 69
Appendix: A Commentary in Kathimerini Cyprus 72
Bibliography 73
6 Too Big to Save? 74
The Diagnosis 74
Another Conspiracy Theory 77
Bibliography 78
7 A Russian Playground 79
8 A Bank Run and a Tearful Agreement 85
Appendix 89
9 The Euro at Breaking Point 90
Incomplete Architecture 90
Grexit 91
Cyprus: The Next Weak Link 93
Hostage to Politics 94
Elections 95
Bibliography 96
10 Illusions 97
The Russian Deus-Ex-Machina (that Never Was) 97
An Angry President 99
11 Taxing the Poor (to Protect the Rich) 102
Appendix 1 109
Appendix 2 109
Appendix 3 111
Bibliography 112
12 Heading Towards the Abyss 113
Waiting for Deus-ex-Machina 115
Wake-up Call 119
13 “Take It or Leave It” 126
Working Towards Agreement 128
The Final Hours 131
14 Resolution and Capital Controls 133
Capital Controls 138
International Reaction 142
Banks Reopen 145
Appendix: Eurogroup Statement on Cyprus 146
Annex 148
15 Toxic Fallout 151
Legal Challenges 151
Scapegoat 154
Dragoman of the Troika 159
Death Knell of the CBC’s Independence 161
Appendix 163
Bibliography 168
16 The Final Act 169
Colourful Language 169
Official Declaration of War 174
Coup D’ Etat 175
Under Siege 177
Enemy of the State? 179
17 The Key Ingredients of the Crisis 182
The Banking Sector Before the Crisis 184
Deteriorating Balance Sheets 191
The Gamble with Greek Government Bonds (GGBs) 194
Capital Shortfalls 195
Bibliography 197
18 Lessons for Europe and Beyond 198
Lesson 1: Prevention is Better than Cure (TBTF and TBTS) 200
Lesson 2: Beware of Capture (TBTR) 201
Lesson 3: Educate the General Public About Bail-in and Deposit Insurance 204
Lesson 4: Clear the Muddled Waters for Smaller Banks and Mutuals 205
Lesson 5: Don’t Force Central Banks to do the Dirty Work Without Appropriate Safeguards 206
Lesson 6 (for Europe): Step up the Protection of Central Bank Independence 207
Bibliography 209
Bibliography 210
Index 211