Cyprus – Is the European Union opening Pandora's Box?

Pytheas
Market
Focus
®
March 2013
Cyprus – Is the European Union
opening Pandora’s Box?
By Harris A. Samaras
www.pytheas.net

Pytheas
Market
Focus
®
About the Author – Harris A. Samaras
An Economist and presently the Chairman & Group CEO of Pytheas, an international investment banking
organization, Harris has also worked with the Bank of America Group, Thomson Financial BankWatch, and
Moody’s Investors Service. His expertise lies primarily in the areas of investment and corporate banking,
private equity and finance, risk management, corporate restructuring and business development. His research
and extensive publications in these areas range across practice rather than theory, economic and business
thought, entrepreneurship and geopolitics.
He has been an adviser to various governments, central banks, financial institutions, and other corporates and
has been a member of the board of directors of multinational organizations.
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Are we witnessing the slow death of the European Union? Have the repeatedly failing EU
policymakers finally opened Pandora’s Box with their recent proposal for Cyprus?
Why are some European member states taking actions that are catastrophic for the European
sentiment?
Aren’t all citizens of the EU equal under the European law?
What a blunder! What a gaffe! Because it is a serious blunder and a gaffe when the EU is
blackmailing the government of one of its member states, Cyprus – to confiscate the deposits
that rightfully belong to EU ordinary citizens and others alike! Depositors that trusted the
written and unwritten laws that the European Union inspired or used to inspire...
Could such action ever affect the European Financial Crisis positively?
Cyprus never had a problem with earlier “blunders” caused by EU policy... The Cyprus
banking sector is indeed quite large but it was in solid state up until the one-sided decisions of
some European governments caused many billions of losses to banks through the haircut
imposed on Greek sovereign debt and elsewhere within the EU...
All EU member states must in concert find a solution for the EU as a whole instead of shifting
the damage to one member state or another... The crisis of the Euro area is systemic!
Decisions taken by the strongest countries in the EU have spread misery sequentially to
citizens in Ireland, Greece, Portugal, Spain, Italy and now Cyprus. This is not going to end if
they, the strongest countries, keep on handling the crisis in such manner. The EU has to
enforce a decision making process where the European governments are asked to care for all
their citizens. The inability of the EU to take care of its citizens wholly led to the failure of the
EU... clearly seen these days by the way the EU has handled the Cyprus financial issue...
Is a Cyprus-like incursion on people’s savings unlikely to happen anywhere else in the EU?
This inconceivable way of blackmailing the government of Cyprus to confiscate the deposits is
sending a clear message: Nobody with deposits in smaller countries, such is Luxembourg for
instance, should feel safe with her or his deposits; nobody with deposits in a weaker
financially country, such is Spain, should feel safe about her or his deposits either...
Whatever happens, the Cyprus story teaches important lessons for every European and not
only economy: Austerity has failed!
A most valid question which if we answer yes to transforms into an oxymoron: Are the people
that led Europe into this mess the right ones to lead Europe out of it?
Praying that there will be no bank runs across Europe...
It just does not make any sense...
You would expect that finance Ministers across Europe to have known better...
How could countries like, Cyprus, Greece, Portugal, Spain, Italy and Slovenia ever boost
growth with no money? With lending rates continuously dropping how can any country even
have growth?
One thing is for sure: Decisions like this one about Cyprus or about the haircut of the Greek
debt benefit in essence some countries... it can be very easily observed from the markets that
such decisions reduce the financing cost of the German government... the German
government can now borrow at negative rates... while it inflicts pain and misery on other
countries... not everyone is equal under the European law!
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Moreover, Germany is quick to scold the citizens of other countries for the actions of its own
government officials and bankers; actions which Germany tolerated and even encouraged for
years... enjoying a large market for its manufacturing products, while exerting enormous
financial leverage over other EU member states... its economic missteps have gone unnoticed
and so has its profit-taking from its EU partners...
Only an ignorant should not worry that the total failure of the European Union is around the
corner...
The European Central Bank has also been quite unclear on its position... and it was the
vehicle to blackmailing the Cyprus government... thus contributing to say the least to the
mess that the EU is now into...
In order for the EU to “work”, the EU needs to form a banking union (as per the European
Council’s decision of June 2012) which primarily means that all member states should have a
common credible deposit insurance guarantee; a guarantee that shall apply to everybody in
the Euro Area! Now the EU or better the strongest states, members of the EU, made a
mockery of it, sending clearly the message that that they do not want to be part of such a
decision, a decision that they so much preached about and advocated for less than a year
ago...
Those in the EU that use blackmail as a mean to their own benefit should think again... Is it
the right way towards a better EU to demand confiscation of somebody’s deposits? It is not!
And notions of recalibrating the amounts to be seized or better stolen from depositors are not
a solution either! The EU as a whole should take responsibility! And remember this is more
about Europe than about Cyprus!
Think!
Is it just about the Russian money deposited in Cyprus? Funny, the EU did not feel that way
two decades ago, even a few years ago...
Is it just a Germany-led propaganda which argues that the Cyprus depositor is aimed at
Russian oligarchs who evade taxes? But it targets ordinary Cypriots nearly as much as it
targets high depositors and somehow it doesn’t matter if it’s the life savings of a middle-class
family...
Is it just about the deposits of non-residents? Only very recently the IMF and the EU stated in
their reports about Cyprus that supervision of international and local commercial banks in
Cyprus are more than competent, progressed over the years to the highest of standards...
Is it just about the recently confirmed and scientifically estimated huge hydrocarbon reserves
of Cyprus? A fact by the way that has so strangely been ignored or diminished by the EU and
international media...
Could it be that the EU in its effort to save a mere €5.8 billion (the Cyprus “bail-out”
money)... is upsetting European confidence and trust... facing possible bank runs... and in
essence risking trillions?
Frightening! Scary!
One is for sure: Mattresses are looking a lot more attractive than European banks nowadays...
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See also other related publications by Pytheas (Chronologically)
► The failure of the Greek State engendered a disillusioned society (May 2012)
► Southeastern Mediterranean Hydrocarbons – A new energy corridor for the EU? (April 2012)
► Cretan Gas Fields – A new perspective for Greece’s hydrocarbon resources (March 2012)
►
The Economic and Geopolitical importance of Eastern Mediterranean gas fields for Greece and the EU
(January 2012)
► Cyprus Hydrocarbons – A Presentation (January 2012)
► Cyprus – A country “ruled” by benighted labor union leaders? (December 2011)
► Cyprus – A country in denial and a scandalous political leadership (December 2011)
► Cyprus – Finally, energy security for the EU in the pipeline? (November 2011)
► Turkey unveiled and the dawn of a new energy opportunity for the EU (October 2011)
► The U.S. debt crisis, the U.S. and EU leaders and their power games (August 2011)
► Could the Greek Financial Crisis lead to the end of the EU as we know it? (June 2011)
► Cyprus – Why the C.O.L.A. must be abolished immediately! (March 2011)
► Cyprus must change or suffer! (February 2011)
► Investing in Cyprus, an EU bridge to the world of business (February 2011)
► Cyprus – The economy calls for immediate action! (December 2010)
► Cyprus – Real estate and construction industries optimistic despite the slowdown (October 2010)
► The long overdue emergency loan for Greece is announced. Is it enough? (April 2010)
► Greece must change or sink! (December 2009)
► Twenty years after the collapse of “communism”, the global financial crisis pushes emerging European
markets to the brink of collapse! (November 2009)
► The Cyprus real property market contracted… (October 2009)
► What about the Sterling? Is it in crisis? Is Britain bankrupt? (October 2009)
► Laissez-faire, the “Freer Market Global Economy”, the investment banks and the policymakers... (August
2009)
► Greece unlikely to escape its worst financial crisis of modern times! (July 2009)
► The US economy is in trouble! (February 2008)
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