Cyprus deal: takes and double takes

The next Cyprus will be Malta.

If there is one thing today's Eurogroup statement is keen to get across, it's that deposits below €100,000 are now safe. They'll be no tax or haircuts for anyone but uninsured depositors at Cyprus' two biggest banks. That's the good news. The bad news is that the economic pain has been transferred to the financial sector, from whence it will trickle down to everyone else. There probably won't be a bank run, but there will be bank shrinkage which won't be good for Cypriots in the long term. Political contagion throughout the Eurozone will also be a big problem. And as I wrote last week, the damage to depositor trust was done the minute the 6.75 per cent tax was announced.

As Citi's Steven Englander says (my emphasis):

It makes the euro zone more susceptible to bank deposit runs in the event that banks come under question. This may make any future bank-related crisis more intense. The fact that deposit insurance was called into question so casually will make other depositors wary of policymaker assurances that they would not behave similarly. It told depositors that policymakers could act that way if they wanted to. The German FM’s comments that deposit insurance does not apply to levies and is only as good as the sovereign backing the insurance will be remembered at the next crisis. So now we have a deal that does not involve repudiating deposit insurance or imposing a levy on deposits  -- yet is has managed to raise fears of deposit insurance repudiation and deposit levies down the road.

Here's UBS’s Reinhard Cluse on what Eurozone policy-makers might do to try and restore it this trust (my emphasis):

A good aspect of today’s decision, compared with the rejected decision from 16 March, is that deposits below €100,000 will not be bailed in. In our view, European policymakers clearly realized that they had made a mistake by originally signing off the 6.75% haircut, as this arguably increased the risk of future bank runs in other periphery countries with troubled banking sectors. European policymakers where therefore keen to reverse this decision, and this was also stressed in subsequent Eurogoup statements. Nevertheless, the ‘credibility’ of the EU’s €100,000 deposit guarantee benchmark has been damaged. We therefore expect Eurozone policymakers to come out with a strong statement in due course, stressing that the €100,000 limit will be secure in the EU in the future and that this will also be written into the EU’s future bank resolution framework in the context of the European banking union project. 2.They will hope that this sends a strong signal to depositors in other troubled Eurozone countries (above all Greece, Spain) where depositors might react a lot more nervously in the future.

Marc Ostwald at Monument Securities on where to look for the next Cyprus - which will be Malta, he thinks:

Returning to Cyprus, outside of the colossal damage to the Cyrpiot economy, the other issues to consider are the precedents that this set: in the first instance, it keeps alive Mario Draghi’s promise to do “whatever it is possible” to save the Euro very much alive, though the price that the citizens of whatever country requires assistance will always need to be prepared for the principles of law and democracy to be bulldozed, and per se to be treated with the utmost disdain and contempt. To be sure, the Cypriot economic model, or rather banking model was always doomed to failure, as had already witnessed in Iceland and Ireland, and one has to ask why there was not more effort expended in addressing this, given the Icelandic collapse was now 6 years ago – this is not to say that it would have been successful, but to highlight that policymakers have been dilettante voyeurs at this particular car crash. Eminently one needs to look at other economies which are vulnerable to such a collapse, Malta to some extent, and one has to wonder a) where Russian offshore deposits will now be re-directed to – Hong Kong and Singapore look to be the most obvious beneficiaries, especially given the much closer ties that are being forged between Beijing and Moscow, for which Germany, traditionally a very close confidante of the Moscow political elite (of whatever type), may suffer, and b) the fall-out in terms of deposit outflows in the Eurozone at any point where a crisis appears to be emerging.

 

Photograph: Getty Images
Photo: Getty
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Hyper-partisan Corbynite websites show how the left can beat the tabloids online

If I were a young Tory looking forward to a long career, I’d be worried.

Despite their best efforts during the election campaign, the Sun, Daily Mail, Telegraph and Express failed to convince voters to give Theresa May a majority, let alone the landslide she craved. Instead, Labour made inroads thanks partly to increased turnout among younger voters who prefer to get their news online and from social networks.

The centre of power in the media has been shifting to the web for years, but during the election we saw just how well a crop of hyper-partisan left-wing news sites are using social media to gain the kind of influence once restricted to the tabloid press.

Writers for sites such as the Canary or Evolve Politics see themselves as activists as much as journalists. That frees them to spin news stories in a way that is highly attuned to the dynamics of social media, provoking strong emotions and allowing them to address their audience like a friend down the pub “telling it how it really is”.

People on Facebook or Twitter use news to tell their friends and the wider world who they are and what they believe in. Sharing the Canary story “Theresa May is trying to override parliamentary democracy to cling to power. But no one’s fooled” is a far more effective signal that you don’t like the Tory government than posting a dry headline about the cancellation of the 2018 Queen’s Speech.

This has long-term implications for the right’s ability to get its message out. Research by BuzzFeed has found that pro-Conservative stories were barely shared during the election campaign. It appears the “shy Tory” factor that skewed opinion polling in previous elections lives on, influencing what people are prepared to post online. If I were a young Tory looking forward to a long career, I’d be worried.

Distorted reality

Television was once the press’s greatest enemy. But its “newspaper reviews” now offer print titles a safe space in which they are treated with a level of respect out of all proportion to their shrinking readership. Surely this must change soon? After all, the Independent sometimes gets a slot (despite having ceased print publication last year) for its digital front page. How is it fair to exclude BuzzFeed News – an organisation that invests in reporting and investigations – and include the Daily Express, with its less-than-prescient weather predictions?

Another problem became apparent during the election. Because the press is so dominated by the right, coverage from the supposedly impartial broadcasters was skewed, as presenters and guests parroted headlines and front-page stories from partisan newspapers. Already, some political programmes, such as BBC1’s The Andrew Marr Show, have experimented with including news from outside Fleet Street. One of the newspaper industry’s most reliable allies is looking for new friends.

Alternative facts

The rise of sites spreading the left-wing gospel across Facebook may be good for Labour but that doesn’t mean it’s good for the public. This was illustrated on 16 June in a post by a relatively new entrant called the Skwawkbox, which claimed that a government “D-notice” – now called a DSMA-notice – might be in place restricting news organisations from reporting on the number of casualties from the Grenfell Tower fire.

The claim was untrue and eventually an update was added to the post, but not before it was widely shared. The man behind the blog (who gives his name in interviews only as “Steve”) insisted that because he had included a couple of caveats, including the word “if” in the text of his article, he was justified in spreading an unsubstantiated rumour. Replacing an irresponsible right-wing tabloid culture in print with equally negligent left-wing news sites online doesn’t feel much like progress.

Blood and bias

Narratives about the corrupt, lying mainstream media (the “MSM” for short) have become more prevalent during the election, and it’s clear they often hit a nerve.

On 17 June, a protest over Theresa May’s deal with the DUP and the Grenfell Tower fire made its way past BBC Broadcasting House, where a small group stopped to chant: “Blood, blood, blood on your hands!” Hours later, in the shadow of the burned-out tower, I heard a young woman complain loudly to her friends about money being used to fly BBC news helicopters when it could have gone to displaced victims.

The BBC cites the accusations of bias it receives from both ends of the political spectrum as evidence that it is resolutely centrist. But while many of its greatest critics would miss the BBC if it goes, the corporation could do a better job of convincing people why it’s worth keeping around.

Grenfell grievances

Early reports of the attack on a Muslim crowd in Finsbury Park on 19 June exhibited a predictably depressing double standard. The perpetrator was a “lone wolf”, and the Mail identified him as “clean-shaven”: phrases it is hard to imagine being used about an Islamist. Yet the media don’t just demonise Muslims in its reporting; they also marginalise them. Coverage of Grenfell contained plenty of references to the churches in this part of west London and its historic black community. Yet Muslims and the relief work carried out by local mosques received comparatively little coverage. Community issues such as Islam’s requirement that the dead are buried swiftly were largely ignored, even though a large number of those killed or made homeless by the fire were Muslim.

I suspect this may have something to do with outdated ideas of what north Kensington is like. But it also must reflect the reality that just 0.4 per cent of UK journalists are Muslim, according to a study by City University in London. The lack of diversity in the media isn’t just a moral issue; it’s one that affects our ability to tell the full story.

This article first appeared in the 22 June 2017 issue of the New Statesman, The zombie PM

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