Does Europe have its own Tim Geithner?
In January I asked rhetorically whether Jeroen Dijsselbloem was up to the task of leading the Euro Stability Group during these tumultuous times. It turns out we may have an answer, and it isn’t good.
To deal with its banking crisis, the President of Cyprus proposed taxing all deposits—even small deposits. Over Dijsselbloem’s objections, this plan was aired last week. After being voted down, it was back to the drawing table—this time directly with Europe’s “troika,” cutting Dijsselbloem out of the process.
Then, when the group came up with an approach that kept small deposits whole but could wipe out some large depositors, he called it a “template” for the future. Not good. If you want to maintain faith in the rest of Europe’s banks, telling large depositors that they might get nicked isn’t wise. He was immediately slapped down other leaders, who said flatly that his comments were wrong.
For years Tim Geithner was the whipping boy for the Obama Administration, taking flack when its policies failed to revive the US economy. With his clumsy comments and awkward negotiation style, Dijsselbloem may play the same role over there.
Douglas R. Tengdin, CFA
Chief Investment Officer