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Greece reacts childishly to the developments in Cyprus

20 March 2013 / 18:03:58  GRReporter
5255 reads

Anastasia Balezdrova

The critical vote in the Parliament of Cyprus was followed with no less interest in Greece than in the island itself. Official Athens has preferred to remain silent but different moods filled the social networks some minutes after the refusal of the Cypriot deputies to accept the terms of the agreement with the European partners.

There were images of the "brave" Cyprus, which has "resisted Germany".  "We need a Cypriot politician to govern us. We have 300 cowards in our parliament".

The attempts of the Cypriot government to find support in the face of Russia have also inspired a large majority of Greeks. Some users went so far as to welcome the "big brother in faith that will save Cyprus from the bad Europeans".

What is expected to happen in Cyprus? How are the developments there affecting Greece? What will be the result of the possible involvement of Russia in solving the economic problems of Cyprus? GRReporter has sought the answers to these questions from economic journalist for the online edition capital.gr Kostas Stoupas and political analyst and professor of history and international relations at the University of Maryland Eleftherios Drakopoulos.

Economic analyst Kostas Stoupas’ position

The developments in Cyprus do affect Greece because many Greek companies are operating in Cyprus and the Greek economy in general is connected with Cyprus in many ways. At the same time, the connection of the Greek economy with the economies of the euro zone is greater than with the economy of Cyprus and at least for now, it is an "anchor" of peace and stability. The decline in the turnover of the Athens Stock Exchange yesterday was much higher than in other European markets because of this connection between the economies of Greece and Cyprus.

The solution to Cyprus’ problem

I do not think the problem can be solved smoothly. To start with, Eurogroup’s decision to cut the deposits was totally inexplicable because it has affected the confidence in banks in practice. The effect could have spread and could have broken the confidence in the banks in Greece, Southern Europe and the euro zone as a whole.

But even if Eurogroup’s decision was somewhat hasty and it should have been put through in a different way, the reaction of Cyprus was even more hasty and disastrous.

What I mean is that Cyprus is a "treasure island." Pirates go there to hide their loot, i.e., the island is a tax haven. But the confidence in it and its security were due to the fact that the banking system of the island was under the "umbrella" of the European Central Bank - the bank of the euro. At some point, Cyprus had to decide whether it would continue to be a pirate island or a member state of the euro zone, which would respect its rights and obligations.

Yesterday’s decision of the Parliament of Cyprus is negative as regards the confidence in the banking system, because even if Cyprus leaves the euro zone, it will be very difficult for the country to restore depositors' confidence. The logic for Cyprus to be a "money laundry", thus providing revenue to the economy, will wane dramatically regardless of whether the country remains in the euro zone or leaves it.

"A significant part of the foreign capital in Cyprus belongs to Russian citizens who have exported their money there to avoid taxation in Russia. If an agreement is reached and Russia ensures the stability of the Cypriot banking system, these Russian citizens again - from the richest ones to those in the middle income bracket - will be the first to try to export their capital elsewhere to avoid control by the Russian government. I think that this will become clear very soon, when it becomes apparent how serious things are for Cypriot banks."

Potential help from Russia has been presented as a solution in recent hours, in exchange for which Cyprus will most likely propose the deposits of natural gas found or any political support. This view is completely ungrounded. A significant part of the foreign capital in Cyprus belongs to Russian citizens who have exported their money there to avoid taxation in Russia. If an agreement is reached and Russia ensures the stability of the Cypriot banking system, these Russian citizens again - from the richest ones to those in the middle income bracket - will be the first to try to export their capital elsewhere to avoid control by the Russian government. I think that this will become clear very soon, when it becomes apparent how serious things are for Cypriot banks.

The reaction in Greece is childish and emotional

On the other hand, the reactions in Greece can be described as childish and emotional. They are temporary and reflect an emotional satisfaction. Society needs to look a little further to see the results of this decision of the Parliament of Cyprus to understand the choice Greece is facing and choose those of them that will ensure long-term positive results.

Tags: PoliticsCyprusBanking systemRussiaEuro zoneCuts of deposits
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