Germany’s Gambit in Cyprus-Don’t judge too fast, nothing is what it seems!


The recent EU’s decision on Cyprus for a bailout with the precondition that this will take place through the citizens’ savings in banks has sparked venomous reactions both from the citizens of Cyprus and the “gurus” of the laissez-faire economy such as “The Economist” magazine for example.

Let’s look at the facts first, though. Eurozone countries and international creditors imposed the levy of up to 9.9 percent on all deposits. Reportedly the sums that are below 100,000 Euros will only be subject to this “haircut” at a 6.75%. The conservative recently elected President of Cyprus Nicos Anastasiades has a rather negative history in terms of his patriotic “inclinations” when he supported the infamous “Annan Plan”, which mediated a bargain between Greek-Cypriots and Turkish Cypriots to acknowledge two different states on the island, even though the Turkish part of the island is considered as a “diplomatic anomaly”, formed after the ruthless invasion in Cyprus by the Turks in 1974. The “Annan plan” was subject to a referendum and it was ultimately turned down by the Cypriots, but Anastasiades, even though he did get elected, still carried “this stain on his shirt”.

In regard to the still pending levy (it has yet to be ratified by the Cypriot Parliament and the government asked for a one day postponement) things are much more complicated than they seem. If the Germans used Greece as a “Guinea Pig”, as it is stated and to some extent it is true, that was in order to promote a political union. In Cyprus we see the initiative of promoting a banking union. Germany has not been “in the best terms” with banks since 2008. Even with the Country’s ones and that is paradoxical, because Germany is often promoted for the way it views the Economy as a whole, which could be actually characterized as neo-liberal. Nevertheless Chancellor Merkel herself did not hesitate to condemn with the strongest of words the Anglosaxon financial system when the crisis in 2008 was manifested. This can mean two things. First, Germany is playing the card of conservatism or neo-liberalism accordingly and when it is necessary. The second reason is more thorough and fits more to Germany’s profile. Germany does indeed see the economy through the “neo-liberals’ eyes” although the mentality is different, as Germany has “the next step” in mind, which is the formation of a confederation.

That said and with the upcoming elections one should wonder why Merkel would shoot everyone and Germany “in the leg” by setting a precedent of an “obscure bailout”? Why would she risk the dissolution of the European Union? True, events have shown that she has been risky in the last three years, but those same events seem to have placed Germany in the center of the EU’s potential future reform. Let’s do note that the Greek crisis started after the Lisbon treaty in 2009 was signed, which called…for more European Integration and less sticking to elements such as national identity. In other words, Lisbon was a perfect substrate for future “cohesion maneuvers” within the EU.

Still, though, the question is not answered, why would she do that? The answer is in front of everyone’s eyes. Germany wants to pursue a banking union in its own terms and while banks possess the enormous power they keep on possessing, this will obscure Germany’s plans, which have always regarded the banks as merely “the means” rather than “the end” itself. With the trust completely shaken it won’t be long before all the banks experience even more severe capitalization problems, almost everywhere. Moreover, the citizens of Cyprus have turned against the banks, not against the EU, which actually took the decision. They DEMAND that the banks pay for their mess and they can rest assured that they will.

There is one last thing and that is Russia. Russian businesses are going to bleed after the implementation of such a measure, since Cyprus has always been a crossroads of Russian money. According to an expert who spoke on Al-Jazeera, the second best clients come from the Cayman islands, you know, one of those places where amounts that equal the Global GDP are deposited and never get taxed? That one! So, how is Russia benefited from this process? We all know that Cyprus Banks have been very good “Laundrettes” for Black money, be it Russian, Middle Eastern, Chinese and so on and so forth.

First thing, Russia is on the way to building a “different kind of economy”, one which tax evasion and black money have no place therein. In Russia there is a huge purge going on regarding officials who were bribed or have assets abroad. In fact, no Duma MP is allowed to have assets abroad. Second and most important, is the cash outflow, which is killing the country! The estimated outflow in 2008 was $135 bn, while for 2011 it was estimated to be around $40 bn. After such kind of a “blow” against Cyprus and the subsequent statements by the President of the Association of Regional Banks of Russia, Anatoly Aksakov, things start to get a little more “obvious”. 

We do not wish to take position regarding Eurogroup’s decision, we are just analyzing it and we can see that indeed it is serving both European and Russian interests, in spite of the Russian “nagging” that numerous businesses will be destroyed, yes maybe they will, but what matters is the repatriation of the capital and the purge of those who evaded taxes. Not to mention the strike against the “Cayman Oligarchs” who are now start sweating, as they do realize that there is no such thing as “Tax Paradise”, at least not anymore!

Alexandros Boufesis reporting for and Focus Dynamics Research Center

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