Straightening Out Cyprus • Gay Marriage And the Wisdom of Crowds

What the EU must do

The March 25 Cyprus bailout deal is a big improvement over the first botched attempt. It doesn’t repeat the error of breaching the guarantee on bank deposits up to €100,000 ($127,830). Instead, it restructures the two biggest banks and forces their creditors, including large depositors, to take huge losses.

Yet the euro area’s leaders must do a lot more to convince Europeans and the markets that they’ve drawn the right lessons from this debacle. They need to say why Cyprus is an exception and commit to integrating the euro area further so it’s less vulnerable to such crises. They’re failing on both points.

The head of the euro area group of finance ministers, Jeroen Dijsselbloem, appeared to draw all the wrong conclusions in an interview after the new deal was struck. He suggested that the Cyprus pact offered a template for resolving the debt crisis. Under this model, the burden of repairing banks would shift from taxpayers to private creditors. Specifically, Dijsselbloem said he hoped the approach meant that the €500 billion European Stability Mechanism would never be used to directly recapitalize banks.

Leaders from the wealthier northerntier countries, including Germany, Finland, and the Netherlands (Dijsselbloem is Dutch), advocate such a tack because it would avoid further transfers from north to south. This would be fine if it were possible. It isn’t — not if the euro area is to remain intact. Upon hearing Dijsselbloem’s remarks, any bondholder or depositor in a weak Spanish or Italian bank would be inclined to run, leading banks in those countries to collapse. Thankfully, he recanted in a short statement, which said Cyprus is not a model.

National leaders and the International Monetary Fund should state clearly why Cyprus is different. Unlike Spain, Portugal, or Ireland, Cypriot banks are in trouble because they’d attracted hot money from abroad, in particular Russia. Cypriot banks have assets eight times bigger than the nation’s gross domestic product. It’s wrong to ask taxpayers, whether in Cyprus or Germany, to guarantee such investments. The banks’ owners should take the losses, and the banks should be reduced to a more sustainable size.

Nine justices, millions of opinions

What Do You Care What Other People Think? is a book by the late physicist Richard Feynman, who cared at least a little. If one of the most independent minds of the 20th century was swayed by others’ impressions, it’s no surprise the nine justices of the U.S. Supreme Court are, too.

After oral arguments on the constitutionality of same-sex marriage, it’s clear the court can’t ignore what other people think — and can’t afford to. Support for same-sex marriage has come from politicians, elected officials, professional athletes, and the thousands gathered outside its doors on March 26. Opposition, though declining, is also passionate.

The March 26 case concerns California’s Proposition 8, which bans same-sex marriage. Voters approved it in 2008; federal courts later ruled it unconstitutional. The state has declined to defend Prop 8, leaving the task to the law’s proponents. Several justices questioned whether that’s appropriate: The proponents haven’t suffered the particular harm that the law requires of such petitioners. “Have we ever granted standing to proponents of ballot initiatives?” Justice Ruth Bader Ginsburg asked. No, was the answer.

As usual, the most important justice was Anthony Kennedy, who has written ringing defenses of both states’ rights and gay rights. What does the most unpredictable member of the nation’s most important court do when two of his most cherished principles collide?

Kennedy’s answer, insofar as it can be gleaned from the arguments: punt. “I just wonder if the case was properly granted,” he said. It’s too soon to know how same-sex marriage will affect society, he said, and rather than require all states to recognize it — or, conversely, outlaw it, or some in-between option — he seemed inclined to dismiss the case.

That would be anticlimactic. Would it also be timid? The courts have an honorable tradition of dodging sticky questions, and in this case the consequences wouldn’t be catastrophic. Dismissing the case — or ruling that the challengers lack standing — would leave same-sex marriage legal in California, as it would be in nine other states and the District of Columbia. By letting the lower court decision stand, the court could signal support of same-sex marriage while still allowing time for public opinion to settle the matter.

Which brings us back to Richard Feynman’s question. The cavalcade of opinion in support of same-sex marriage has surely affected the court. About half the public is in favor, with the figure rising to 70 percent among Americans younger than 30, indicating the way forward. Few justices can doubt that the freedom to marry will expand nationwide — and soon.

How much deference do the justices owe the public? Getting too far ahead of popular opinion can undermine the court’s legitimacy. So can trailing too far behind it. The reason proceedings like these are public is that the court is as interested in forging consensus as following it. It’s also why, even more so than other public institutions, its reasoning matters. It’s all well and good for a politician to change his mind on same-sex marriage because he has a gay son. That’s not reason enough for a Supreme Court justice.

With each passing day, an increasing number of Americans views the right to marry, for gays and straights alike, as among “the most intimate and personal choices a person may make in a lifetime, choices central to personal dignity and autonomy.” That’s not wording from the latest poll. It comes, only slightly out of context, from a 10-year-old Supreme Court decision on gay rights.

To read Stephen L. Carter on postage-stamp advertising and Pankaj Mishra on V.S. Naipaul, go to: Bloomberg.com/view

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