The FT’s Wolfgang Münchau is famous for his gloomy prognostications about the Eurozone, and he’s made predictions in the past that the currency bloc would break apart.
In a new piece he freely admits to having been wrong, but says he’s doubling down, having been inspired in part by the events of this week in Cyprus.
First the small picture. He thinks the Cypriot President made three big blunders this week in the wake of his parliament rejecting a one-off deposit levy that would have saved the banks.
The Cypriot parliament was right to reject this mad deal. But the Cypriot government then committed three subsequent blunders. The first was the decision by President Nicos Anastasiades to seek help from Russia. Instead of working with the eurozone, he worked against it. The Germans, in particular, saw this as an openly hostile move. It was also ill-judged because the Russians rejected the offer. The second was the decision not to communicate with the European finance ministers and the euro working group for three critical days last week. The third was the Cypriot government’s proposal on Thursday to create a sovereign wealth fund backed by a raid on the pension fund and other state assets. On Friday Angela Merkel swiftly dismissed it.
Ultimately he sees Cyprus as a symptom of an inability to seriously address issues, in part because there are so many actors all working at cross-purposes, and because the economies of Greece/Cyprus/Portugal are just radically different than the economies of Germany/Finland/Netherlands.
This time he’s not giving a timeframe on a Euro breakup (In November 2011 he predicted that Europe had 10 days, and of course he was wrong about that.), but he’s confident it’s going to happen at some point.
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