Eco+Nomics

Over the past few days, the Cyexite scenario has been communicated several times, either via journalists or bloggers and some other times as a leverage for negotiations... I shall  examine some implications of this undesired though improbable- if you ask me- scenario First of all, Cypriot firms, both financial and non-financial, and households have issued debt denominated in Euro, such as loans, bonds, commercial credit, cheques etc. Then, in case Cypriot pound (CP) substitutes for euro a practical question arises: the just mentioned debt will be repaid in what currency? If some of you see an obvious answer, please take some time to reconsider your thoughts. First of all, the debt holder will have to agree to be paid back in an other that the agreed currency and then he will have to negotiate the exchange rate this will happen (for now let us ignore the exchange rate related problems). On the other hand, the debt issuers, will have to find adequate funds to pay back its borrower...

After the ultimatum issued by the ECB  one might wonder about the independence of the ECB and its subsequent credibility. Is the orchestrator of the Eurosystem really independent, conditionally independent or totally dependent to the political agenda of any given moment? Its dependence or independence extends to which degree? First of all, the direct funding of public sector, i.e. public debt, is prohibited in the name of the credibility and independence of a central bank (here, the ECB). I must admit that I do not rigorously disagree with the necessity of independence, at least under certain circumstances. What about when a central bank is used as a leverage to political negotiation? What about when the central bank (any given one) turn a blind eye to imminent systemic risks of extended destabilization? What are the motives of this attitude? Why all of the ECB controversial measures have been proven to be cripple so far? When the monetary authority does not seem annoyed at al...