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
Getty
Show Hide image

Fears over Notting Hill Carnival reveal more about racism than reality

Statistically, the event is about as safe as Glastonbury.

Notting Hill carnival is terrifying. As soon as the sun sets, gangs emerge ready to prey on unsuspecting attendees with Red Stripe cans fashioned into knives. Children barter for drugs. Dancing is punctuated by ceremonial burials for those killed in between every dancehall tune. And that's just on the kids’ day.

Except, it's not true. Statistically, the event is about as safe as Glastonbury - if not safer, judging by the number of arrests. In 2015, Glasto was praised for its low arrest rate (75 arrests for a crowd of 135,000), but in the same year carnival had ten times the capacity and fewer than ten times the offences.

Despite these statistics, the police, MPs and newspapers seem desperate to paint carnival as a gang-run danger zone. The Met Police recently tweeted about a kilo of heroin seized in the run up to carnival, despite not even knowing whether the perpetrators were going to the event. MPs, such as former Kensington MP Victoria Borwick, are happy to fuel this fire, claiming to be concerned about the supposed “year on year increase in violence and physical harm to our police officers and members of the public”. Newspapers revel in publishing large spreads about the raids in the run up to the two days, despite lacking evidence they’re even connected. Break this down and it’s clear: this dislike towards carnival roots itself in racism - the presumption that a festival celebrating black, West Indian culture, frequented by a higher proportion of black British punters, must inevitably, be violent.

I have been attending carnival since the age of six, when my parents moved to the area (90s gentrification alert). I used to sell Ribena for a markup on my street, took part in the float my primary school ran and every year witnessed the incredible recontextualisation of the area. Gone is the whitewashing for a moment: the streets and houses become splattered in neon paint, jerk chicken boxes and Red Stripe cans. It is one of the best things to happen to the area, and its vast cultural value exceeds the bougie cafes and boutique clothing stalls that span the area.

And yet, every year, I have to dodge questions from relatives and friends about how dangerous it supposedly is. “Ooh, Notting Hill carnival. Bit scary, isn't it? Lots of angry youth who can get quite violent I hear. Didn't someone get stabbed last year?” Perhaps a viable question to ask anyone going to a crowded event. Except, why weren’t they asking me this when I flew to Amsterdam this year to go to a music festival?

There's another side of critiquing carnival that is equally infuriating, and that's that the fact that the event in some ways stands as a consolation prize to the original tenants of the area. In the middle of the 20th Century, Notting Hill was far from the Russian oligarch haven it is today. It was the Windrush Era, when black immigrants began arriving from the Caribbean. They came not out of some overwhelming desire to be freezing for 11 months, but because Britain was struggling after the Second World War, and desperately needed a labour force. Despite the demand, the West Indians were met with hostility and racism, forced to live in the worst areas of London. One of those places was Notting Hill.

Imagine, then, the audacity of shaming carnival. Imagine being forced by racism into a rundown neighbourhood, turning it into something fashionable, and then being priced out by middle-class white people. Imagine on top of that, having your legacy celebration degraded under the guise of safety concerns.

This year will feel different. It will be the first year ever under a Labour MP. It will also come two months and a half months after the Grenfell fire, where many of its residents and victims will have taken part in the event. Whilst there’s something defiant in these parades, it will be hard for the collective joy not to be marred by a knowledge that somewhere in this borough, bodies are being buried because of our council.

We need to see carnival for what it is: a celebration of a culture struggling to stay afloat in the area. Kensington continues to edge out those who may not be living in £2.5m homes - whether it’s with rising house prices, creating anxiety around an event or even putting lives at risk due to sheer disregard and greed. If you’re worried about going, I would avoid all large, crowded events in general, because there’s no use believing the vacuous and racist hype. Beyond getting splattered with paint and dancing too enthusiastically to Bashment, there’s nothing to fear.