King Pyrrhus is one of my favorite historic figures. An orphan of sorts who lost his father and uncle to failed wars, Pyrrhus was raised outside the Greek city-state of Epirus where he was supposed to inherit rule. He became an amazing warrior and was eventually put back into power by Ptolemy with whom he became friends after being sent to his service in Egypt. His ambitions knew no bounds, and soon he was conquering other city-states on his way to briefly become king of Macedon.
His adventures and work on behalf of Greek city-states took him to Italy where he was to stop the ambitions of the fledging Roman Empire. This resulted in three wars known as the Pyrrhic Wars in which he saw amazing victories and dazzling defeats. In his first encounter, his use of skilled warriors and trained elephants caught his opponents off guard so badly that Romans lost 15,000 of their 50,000 men. King Pyrrhus marched to within four miles of Rome but decided to turn back in the face of an oncoming winter and several Roman armies.
Having rested and trained more soldiers King Pyrrhus once again headed to meet the Romans. Once again he won after several tactical maneuvers allowed him to exploit the skill set of his forces. This victory, however, wasn't without major consequences. Immediately after the conclusion, in response to a sycophant lavishing praise, King Pyrrhus replied:
"One more such victory will undo me!"
Licking his wounds in victory, Pyrrhus was summoned to Sicily where Carthage fighters had made major inroads toward conquest. Lured by the promise of being king, Pyrrhus ran the North African invaders out of most of the island, but his rule was short-lived. The Greek inhabitants of the island grew tired of his tough rule and soon he was on his way-to fight the Romans, again. By now his force was only a shell of its former self, yet he picked up recruits along the way and seemed confident at the task at hand, mainly because he still had fifteen elephants at his command.
By now the Romans came up with a way to defend against the pigs. After earlier efforts, including a would-be anti-elephant chariot drawn by oxen with wooden shields and iron-tipped rams which were quickly dismantled or subdued, the answer was ... pigs! Yes, the Romans met the 15 drunk and angry elephants with more than 20 pigs. The pigs were greased up in tar, set on fire, and pushed in the direction of the elephants. The blood-curdling squeals and grunts frightened the elephants into disarray, rendering them useless in this battle.
King Pyrrhus lost his last battle ... and limped home with his remaining army to Epirus while Rome went on to rule the world.
Today's European Battles
Fast forward from that Battle of Benevetum (275 BC) to current day Europe, which is in amazing disarray fighting for economic survival after succumbing to a socialist doctrine that breeds complacency, entitlements, and false promises of lavish retirements and cozy everyday lives. A series of bailouts have barely kept several countries from insolvency, although many reach that low point in reality. These bailouts all came with conditions that often offended the borrowing country where indigence seems to go hand in hand with delusion. For the last couple of years we've witnessed ungrateful nations tell their would-be saviors to jump in a lake.
The latest to do this is the tiny island nation of Cyprus. But, this time the situation and the request are different.
Cyprus was humming along okay, although the same time bomb that lurked beneath larger Mediterranean countries also ticked away beneath the surface while tourists frolicked on the surface. But the economic crisis upset the slow route to disaster as Cypriot banks lost 4.5 billion Euros on Greek debt and bad loans. GDP slipped 25% and the nation when into a death spiral. Russia stepped up with 2.5 billion Euros in a low-rate loan but that wasn't enough. The three largest companies, all state-owned, provided loans from monies raided from their own pension funds:
> Telecommunication Authority 100.0 million Euros
> Ports Authority 38.0 million Euros
> Electric Authority 100.0 million Euros
By now the citizens were restless and the nation needed a bailout. There was no doubt that conditions for a bailout would include drastic changes to ...
> State payroll
> Social benefits
> Tax Evasion
Those were a given but not enough for the Troika (ECB, EU and IMF), which needed Cyprus to have some skin in the game. The thing is the only skin on the island is the hefty deposits sitting in banks. Estimates say there are 70.0 billion Euros to 160.0 billion Euros socked away, hence the deal that rocked the world. Tax savings accounts were to raise about six billion Euros. While some politicians felt it would be politically fine to hit these banks because of large Russian accounts the fact is even the smallest Cypriot would have seen part of his savings snatched.
Over the weekend it seemed to be a done deal but an uproar and maybe a secret offer from Russia changed everything for now. Parliament in Cyprus voted overwhelmingly yesterday to reject the offer. Leaders there actually decided against throwing their own citizens under a bus in order to save the banks.
What we've watched this week in Cyprus is how the last days of empires come crumbling down. The Roman Empire crumbled after a period of peace (Pax Romana) led to a soft underbelly, complacency, corruption and sense of entitlement that morphed from being the treasure of conquerors to the unearned claims of heirs. Make no mistake; all these efforts to save Europe may inevitably fail as the main problems aren't being addressed, including their soft underbellies.
The leaders of Cyprus were facing an army much like that of King Pyrrhus. The troika was poised to pounce and there seemed only a single solution. The leaders of Cyprus greased their citizens with tar and lit torches. They were only minutes away from setting them on fire in hopes of scaring and appeasing their would-be saviors. Although our market rebounded there was a moment when the action ebbed and flowed with news from the Cypriot parliament.
High taxes, lavish social programs, expensive social benefit promises, state-owned or influenced industries and businesses are just some of the shared similarities of Cyprus and America. It's hard to imagine any country or group of countries could ever bail out America, but if it came to such a moment I could see leaders following the same mindset that balanced budgets don't matter and success should be punished rather than applauded, doing the unthinkable. Our bank accounts could be confiscated as we are lined up like tarred pigs to be slaughtered in order to save banks and a government that couldn't stop spending.
That so-called stress test was a joke and failing banks would get bailed out which is why there has been such an effort to portray the bailouts as successful - so they're an easier sale next time.