The former central banker warns that the current stability is nothing more than the calm before the storm. In his view, German politicians are doing their best to hide the cracks in the foundation of the European economy and are trying to lull the voters into a false sense of security. After the vote, there will be no reason and no resources to keep the illusion alive. A flare up of the crisis will certainly lead to new bailouts that will have to be financed by the European Central Bank and the economically stable member-states of the European Union. In the end, it is the German taxpayer who will pick up the tab for the economic errors of the European Commission and the ECB.
Orphanides’ assessment is echoed by the dire warning made by the German finance minister Wolfgang Schaueble who predicted that Greece will require a new bailout in 2014. So far, there is no information on a new bailout for Cyprus but it is clear that the islands’ economy and financial sector haven’t recovered. The capital controls imposed by the ECB on Cypriot banks are still in place and have become a semi-permanent measure, despite the fact that restrictions on capital flows were supposed to be temporary. The European Central Bank and the European Commission seem to be scared of a new run on the Cypriot banks, preferring to keep the country’s financial sector in a limbo between solvency and bankruptcy. If the collective efforts of the European countries are not enough to restructure the financial sector of a small island country, then it can be argued that revitalizing the whole European economy is an impossible task for the current European leaders. The mainstream media would be tempted to deride the forecast of the former Cypriot central banker but it is very likely that he is close to the truth. The German elections are very close. Soon, everyone will see whether the “European economic recovery” is real or just an illusion created for Angela Merkel's reelection.