"When a bank needs
capital injections, the first thing that happens is that the national
government provides the capital needed to raise the bank’s minimum capital
ratio (T1) to 4.5% of its assets. After that, a sequence of haircuts must
follow. First to be haircut are the shareholders and bondholders and then come
the uninsured depositors (i.e. the Cyprus model is enacted). Beyond that, the
ESM and the national government pout more money in the bank, with the latter
participating at a rate of 20%, which can later be reduced to 10%. (...)
Mr Olli Rehn, the EU’s
economic overlord, has said it himself, in describing this scheme as an attempt
not to decouple the two crises but, rather, to “dilute the link” between them.
It is like telling a hanging man that you will not cut the rope choking him but
that you will remove a couple of layers of string from it."
