23 march 2013, what in the world is going on ?

The markets remain calm, and a million cypriots seem half a world away, but what's going on there is an absolute breakdown, with a root cause of an oversized banking sector, like iceland, ireland and, yes, the uk. Though a year in the making, and with many deadlines past, the crystalisation of the crisis this week seemed a surprise, not least to the cypriot body politic, which rejected the deal its leaders made to secure the bail-out they asked for. Russia spurned their advances, thrusting them back to their european reality, and the ecb, rather precipitously, if legally, brought about a final climax by threatening to turn the taps off on monday. They can't now back down, hence cyprus passing extraordinary laws on friday night, with a final component, of the banking levy, needed saturday. This should be enough to persuade the eurogroup on sunday to send ten billion euros down the tubes to save the island. Though an astounding shock to the system, the levy on bank accounts is just a tax, designed as everyone knows to raise some of the necessary cash from russians parking large amounts of money offshore. It was the cypriots who tried to make it all encompassing in order to not be seen to be singling out the russians and so try and keep some of those deposits that are now the anchor of their main (tax haven) industry. The cost of that has been a wider erosion, across europe, of the basic idea that banks are not just any company we lend our money ("savings") to, but are tightly-regulated so even if they go bust our money will somehow flow back to us intact. For the euro, it is yet another major hurdle suddenly to be overcome, and although it will endure, its reputation and dynamics will take yet longer to recover. In "german" voters again facing down "southern" spendthrifts, and living to tell the tale, it is another dose of reality that makes the euro less a dream and more the sort of bitter battle and roller coaster that any currency must go through as a rights of passage, and all the stronger for it on the other side. For the broader eu, those effects are trickier, as the union was always built more on the dream element than hard core everyday governance, and that is looking ever more altered, especially for the "new" member states of 2004 like cyprus, and especially for the broader group of smaller states as the bigs, albeit reluctantly, take more steely control. Europe is ever less now about dreamy ideas and statements and ever more the real business of economy and finance that needs proper management and is inevitably less flexible in a crisis to sensitivities. Whatever doesn't kill you though, makes you stronger.