Wednesday, 20 March 2013

Cyprus turns down EU deal, and looks to Russia

Well, as we all know by now the Cyprus parliament categorically rejected the Eurogroup/Troika deal put to it that would have involved haircuts to bank deposits in return for the securing of a €10bn loan. Obviously, I’ve been following this story very closely and below is my tweeting activity over the last couple of days, which agrees with the NO vote and draws attention to the broader issues for Cyprus and the dilemmas it still faces.

What is clear is that the EU’s intention was to decimate Cyprus as a financial centre. Cyprus accepted the need for a contraction of its banking sector, but it could not accept that this would be done in a chaotic and rushed fashion that would propel the country into economic turmoil and years and years of recession. Nor could Cyprus accept the spurious premise on which this would have been done, i.e. Cyprus was a haven for Russian mafia money. The German-inspired emphasis on dirty Russian money made Cypriots suspicious that they were being caught in a wider geopolitical game between the EU and Russia, in which Cyprus was being sacrificed to lessen the influence of Russia in the Eastern Mediterranean. But while it might suit the EU, the US and others that Russia is excluded from the Eastern Mediterranean, it does not suit Cyprus, which has an overriding political problem with Turkey that is not taken seriously by the EU but has garnered Cyprus, over a long period, support from Russia.

1. Currently reading Claire Palley’s book on Annan plan. Her description of UN shenanigans & bullying of Cyprus very similar to EU browbeating


2. Having said Cyprus can’t afford to alienate EU because of Turkish occupation, for same reason it needs to keep Russia on board. Dilemma.

3. @EnetEnglish. Story isn’t serious. It just wants to discredit & defame Cyprus & make out the occupation regime is legitimate & responsible.

4. @EnetEnglish. Why are you reporting such a bullshit propaganda story as if it had any credibility or worth? Get your act together. (

5. Worth stressing that Cyprus membership of EU was a strategic not economic choice, designed to reverse Turkish occupation of 40% of island.

6. @Hugodixon Cyprus bailout piece is v. good. Appreciates Turkish occupation context & why Cyprus can’t alienate EU. 


7. Please @cybc2012, fix your web stream. I’m having to watch TV stream from Greece for latest news on Cyprus, and it’s doing my head in.


8. Putin invites Cypriot president Anastasiades to Moscow. ‘Come any time you like’, he tells him:

9. Georgie Markides: ‏
Cyprus NO is a strong message not to its public but to the investor community that it fights to remain a financial hub
. Retweeted by john akritas 

10. Panikos Hadjipanayis: 
Russia tries to ease concerns over Cyprus levy: Retweeted by john akritas 

11. Message to Greece from Cyprus: you don’t have to burn down country and hold general strike after general strike to get your message across


12. Cyprus NO is correct decision. Only when Andros Kyprianou was speaking did I think we might be making a mistake.


13. Cypriots are very, very stubborn. That’s my explanation. When they think they’re right, they think they’re right.

14.  Danae Marga: ‏
Είναι Ρωσσία εναντίον Γερμανία απλά η Κύπρος είναι το μέσο δυστυχώς. Retweeted by john akritas 

15. One of the worst consequences of Cyprus haircut plan is that it’s put a spring back in the step of communist AKEL.

16.  Στράτος Μωραΐτης 
RT @EfiEfthimiou: Cyprus DIKO leader: It is clear now, the problem isn’t economic, it’s political, it's geopolitical. Retweeted by john akritas 

17. Nul points to bailout plan. Not one Cyprus MP will vote for haircut deal. Up to 36 set to vote against, while remaining 20 will abstain.

18. ‘Just a month into his new presidency, Nicos Anastasiades has been comprehensively discredited’. 


19. Must be stressed: Cyprus can’t afford to alienate Russian money as Russia’s support against Turkish occupation is matter of life and death.

 20. @achrisafis Can you stop referring to the ‘Turkish north’ in your pieces on Cyprus. This is a politically loaded term, which Turkey prefers.

  21. ‘The Cypriot govt was keener to protect its banking model, which turned out to be a disastrous political mistake.’ 

22. MRT @pdacosta @YanniKouts Correct. Anastasiades not Schaeuble hit small savers to keep Cyprus as financial centre. 

23. Russians can’t complain too much about losing Cyprus as offshore haven. Christofias begged them for money to avoid precisely this scenario.

24. What Cyprus is trying to do is preserve itself as financial centre, but the game is up, regardless of vote tomorrow. Russians are off.

25. On revising deposit tax, wealthy Russians & Britons will take their money out of Cyprus anyway, so right to hit them harder before they go.

26. MRT @TheCyprusWeekly: Pissarides accepts outcome of Cyprus bank levy deal will be mass exodus of foreign depositors.  

27. Should be stressed. There has been NO panic in Cyprus over bank deal and demonstration outside presidential palace was tiny – 150 people.

28. Even if Cyprus parliament votes against haircut and there is some renegotiation with troika, country's financial system faces devastation.


Hermes said...

Interesting developments over the last few days. It seems the blonde race is not interested in altruistically saving Hellas. The pound of flesh was too much to bear. As I have said before, there are many guilty parties here. The Russians should have known that their deposits were never completely secure in Cyprus. The Germans never pulled the Cypriots to the side years ago and told them to reign in their banking system. The Greeks in Cyprus should also have asked for some recompense when the Greek PSI was agreed to and the idiot Christofias should have cut expenditure immediately to reduce the pain but the unions would not allow him. The attack on small deposits was just plain stupid.

The Greeks in Cyprus ran a weird tax haven model within the EU. They should have realised that if that system collapsed, creditor countries would not wholly support them. You cannot take all the benefits and ignore your obligations. The Elladites have been learning this over the last few years the hard way.

There has encouraging signs in re-orientating the Greek economy towards production and away from consumption (debt, imports, fiscal deficits etc). Towards a more muscular country confident in its ability to weather storms rather than being dependent on begging foreigners and then crying foul. Greek exports grew the strongest in the EU over the last 12 months. However, they are coming off a very low base. Even with the growth, their exports as a % of GDP are only 14% as at 2012. Portugal is 25%, Bulgaria 52%, Slovenia is 70%.

Hermes said...

A good article from one of my favourite pro-Putin sites:

John Akritas said...

I’m a little surprised that the Russians didn’t take the opportunity to assert themselves in Cyprus. This is worth reflecting on.

It’s not quite true that Christofias didn’t cut expenditure, raise taxes, cut salaries, etc. This has happened, but what he couldn’t bring himself to do was reform the financial system, which was strange for a communist and for someone who banged on about evil banks and bankers. And, again, I don’t think the Cypriots were expecting that the financial system could just go on as before, but were asking for time to make this massive adjustment to the economy; whereas the Germans and French seem to want to dismantle it overnight and wreck it completely.

Still, as we’ve said from the start, trying to save the financial system once the haircut on depositors was decided on, was futile and what had to be done was accept the Russians, etc, were off and to take their money before they left. As you say, they did rather well the last 20 years in Cyprus with the high interest and low taxes – they knew their money was not insured – so it’s too bad for them.

The russophile article is largely correct. Cyprus suffers from delusions when it comes to institutions like the EU and UN, believing in the nonsense they spout about justice, solidarity, etc. They learned the facts of life regarding the UN in 2004, and now we’ve learned about the true nature of the EU.