European Central Bank President Mario Draghi surprised markets and analysts last week by saying the central bank is open to an unconventional stimulus tactic: pressuring banks to lend by charging them a fee for parking cash at the ECB.
The ink on the provisional bailout agreement for Cyprus was hardly dry last month before bond markets shifted their attention to Slovenia, another small euro- area country with a banking problem. The Slovenian government’s borrowing costs subsequently shot up.
The mood on the ground in Athens has shifted palpably over the past few months. Everyone has firsthand stories of sorrow and bitterness to tell, as austerity measures bite. They speak of retired parents on rapidly shrinking pensions struggling to meet higher taxes and prices, or of young siblings with multiple masters degrees forced to work in call centers or cafes.
The only thing worse than Cyprus accepting the rotten bailout program that European policy makers agreed on late last week was Cyprus rejecting it. Yesterday, the parliament voted decisively against the terms of the bailout, with 36 members opposing it, the ruling party abstaining and not a single vote in favor.