How Schäuble and Barroso lied about Cypriot sustainability, and Draghi lied about eurozone wage differentials

I’m indebted to an Irish Slogger for pointing out to me this piece from 2011 providing strong statistical evidence of Brussels-am-Berlin mendacity on the subject of Cypriot bank viability. Talking of the (then) latest Athens bailout and bond uncertainties, the report states very clearly:

‘The global loan-to-deposit ratios of Bank of Cyprus and Hellenic are largely satisfactory….[but]…The major factor affecting bank stability and operations in 2011 has been the impairment and write-down of Greek Government Bonds. Laiki has the largest nominal value of GGB on its books, at EUR 3.084 bln, followed by the Bank of Cyprus with EUR 2.088 bln.’

So here we see vindication of The Slog’s assertion that the only reason a ‘largely satisfactory’ banking system got into trouble was because of B-am-B’s insane policies towards Greece. What’s more, like good compliant little boys, the Nicosian banks listened closely to the results of the mid-2011 European Banking Association (EBA) second stress test results: as a result of this stress test, the two banks BoC and Laika agreed to recapitalise with the objective of reaching core tier 1 capital of 9% by 2012.

In due course, the Bank of Cyprus implemented a recapitalisation in 2011, bringing core tier 1 capital to EUR 2.9 billion (after a Greek bonds write-down) and thus achieving a ratio of 9.6%. Laiki had a core tier 1 rate of 8.2%, but then its 50% Greek bonds write-down screwed up the valiant attempt….another consequence of dick-brained B-am-B obsessions. More detail on that one:

‘On October 26th 2011, the Eurozone partners, the International Monetary Fund (IMF) and the European Central Bank  (ECB) agreed to a second bail-out package for Greece worth EUR 130 billion. This includes EUR 30 bln to facilitate the 50% PSI deal.’

As a direct result of this, the report concludes under Evident Risks and Risk Analysis:

‘Cyprus finds itself in the eye of a short-term financial shock….In the short term, the government needs to undertake further austerity measures, and has also implemented revenue-generation measures which will negatively impact Cyprus’ status as an international business centre.’

As we Romans say, quod erat demonstrandum.

In turn, a highly valued Greek source of inestimable courage alerts me to an excellent critique of Signor Mario Dracula’s late-night presentation to the europillocks, revealed here some days ago. It runs like this:

‘Draghi’s presentation contains a simple but fatal error – or should that be misrepresentation? The productivity measure is expressed in real terms. In other words it shows how much more output an average worker produced in 2012 compared with 2000. So far so good. However, the wage measure that he uses, compensation per employee, is expressed in nominal terms.

‘In other words the productivity measure includes inflation, the wage measure does not. But this is absurd. Real productivity growth sets the benchmark for real wage growth. In a country where real wages increase in line with productivity, the shares of wages and profits in national income will remain constant. By contrast, when nominal wage growth tracks real productivity growth, which is apparently the role model suggested by the ECB President, the share of wage income in national income will permanently decrease. Moreover, real wages will decline continuously, if price inflation is higher than nominal wage growth.’

I have threaded at the site to say, “Isn’t this what Mario wants anyway?” Beyond that, no further comment is necessary: what we have here is the standard leger de main we have come to expect from europols and technocrats.

Earlier at The Slog: The inescapable reality that Cyprus was set up