Saturday, March 23, 2013

S.O.S Cyprus

"the real economy of Cyprus, is and has always been -Tourism." 

Cyprus is undergoing a financial Tsunami. The Cypriot business model may well have been proved unsustainable but, it is one that is followed by several small E.U countries such as Andorra, Liechtenstein, Luxembourg, Monaco, etc. The big difference being these nations are not at the centre of the most important economic and energetic cross-roads of the Western, Eastern, and Arab world.

Homer in his time described Cyprus as being ‘the whore of the Mediterranean’,  today our ‘services’ ,with the discovery of sufficient natural gas reserves capable of supplying the every single EU country for the next few decades, are more than ever in demand from powerful outside interests. This has sparked off the current crisis emanating from Germany.

The eternal rivalry between German friendly countries and Russia has found in us a new battle ground. When asked what kind of weapons would be used in a Third World War, Einstein remarked he did not know then the weapons that would be used in a Third World War, but that he was pretty sure that the Fourth World War would be fought with stones.  The Third World War we are living now. It broke out in Lisbon in 2008 with the so called Lisbon Convention when the Franco – German alliance thought that the heart of Europe was beating in Berlin and Paris.  Some months later the French realized the Germans had a hidden ace and that German strategic commercial positions were much superior. In only three years Germany managed to become the “EU steam engine”.

For us, the simple people of Cyprus, Cypriot nationals, the UK Nationals, Russians, Germans, Swedish, Dutch along with other foreign passport holders who live and work in Cyprus  all that is but political chess playing with a good dose of poker thrown in. At the end of the day all this political gamesmanship does is to confuse, disrupt, and distress.

Today, our less than appealing Cypriot politicians, are calling for us to ‘Save Cyprus’, a bit of a cheek on their part considering they are utterly incapable of saving or solving anything, other than their own backsides with all having the requisite masters degree plus PHD in self survival techniques. Over the past week there has been a wall to wall Muppet show episode on Cypriot TV (without the clever humor or remotely interesting characters)  the supposed star of the show being our Ex – President Demetris Christofias performing a vanishing act, his communist party spending air time only criticizing the new government. Then we had our newly elected conservative president Nikos Anastasiades failing spectacularly to prove he had the essential guts ( for the last 2 years he was metaphorically exhibiting these as a vote catcher) when he did not get up and exit the Euro-group last Saturday.

With our avaricious Cypriot banking system teetering on the edge, we now know how easy it is to pass from the donkey to the Mercedes and back to the donkey in less than twenty four hours.

 The fear the Euro group implanted in our brains by “suggesting” cutting of bank deposits went way beyond Cypriot borders. Every sector of the European middle classes felt the icy hand of Mrs. Merkel and her followers hovering above their wallets. It is utterly immoral to expect European citizens to pay for the gross mismanagement of the banking sector. Of course, scaring people has always been an effective weapon, but, when scared, people often react in an illogical and spasmodic manner.  Panic is the worst enemy and that is exactly what the Euro-group succeeded in provoking.

Now, we need to figure out what path we should follow. It is clear that Cyprus is capable of creating a domino effect in the euro zone, making it the perfect excuse for Frau Merkel to step in and raid everyone’s bank accounts. We do need to have a breathing space, we need to lose the panic mode, and we need to start asking all the EU countries what kind of Europe we really do want.

When the Cypriot banks open most foreign deposits will go, flying off to Malta or Luxemburg, the Cypriot banking system will shrink, 6-8000 thousand people will be unemployed and some hundreds of Bank branches will become empty shells. However, banking is not the real economy of Cyprus, the real economy of Cyprus, is and has always been -Tourism.

If you are a middle class European citizen do not ask Cypriots to give you part of their savings but help them save your savings. Help us save your money by spending it here in Cyprus. Go on your computer and book a low cost flight to Larnaca or Pafos, find your accommodation and if possible book it directly skipping any middle men to enjoy a week long holiday (or more) in any beach or mountain resort in Cyprus. In doing so you will be pumping into the real economy the equivalent of high quality oxygen and in return you will experience value for your money both in the  hospitality and sheer beauty of the island.
Don’t ever underestimate us please, we are determined NOT to be Europe’s ‘experiment’ and tourists can set us free from being wired up lab rats.

To those planning to come to Cyprus in 2013 I personally invite to come down to the seafront where at the municipal baths you will find me every morning taking a morning dip in the company of a bunch of friends so please Contact me on twitter @petrosmavros –then I can look forward to meeting you and over a complimentary coffee say thank you for being such a welcome visitor to our lovely island.

Thursday, March 21, 2013

Russia can protect Cyprus

A proper solution must involve all interested parties, writes Dimitry Afanasiev

This Article was written By Dimitry Afanasiev and published in the Financial Times 

At the weekend, Angela Merkel said those “responsible” for the Cyprus banking crisis would have to pay, not just European taxpayers. Russian depositors in Cyprus were to take a hit under an EU plan – rejected on Tuesday by the Cypriot parliament – because it was politically expedient for the German chancellor.

Why are Russian depositors being held responsible? Cypriot banks are in trouble not because Russians deposited funds. It is because the terms on which EU officials (including in Berlin) opted to restructure Greek debt to protect European investments harmed Cypriot banks, which held it in significant amounts. On the contrary, thanks to Russian investment, Cyprus has developed into a modern European country.

On what basis do German officials classify Russian depositors as money launderers? And what about the stripping of the accounts of the 60,000 British bank depositors, mostly retired, and average Cypriot citizens?

The answers are clear. The Germans are pushing a blatantly irresponsible “tax” on deposit holders in Cyprus because neither the average British or Cypriot pensioner nor Russian bank depositors have any meaningful voice with EU finance ministers. And neither does Cyprus, evidently – because, although it is an EU member, it is in a dire situation.

German officials’ implication that the actions are justified because Russian funds are “laundered” adds insult to injury. It is an absurd and irrelevant argument – many Russian depositors are small and medium-sized businesses that lawfully placed their money in Cyprus. In the eyes of Berlin, any Russian or Ukrainian with a bank account is suspect.

Cyprus is stuck between an old friend (Russia) and new EU partners (not so friendly now) willing to give Nicosia money if it forgets the old friend. The European Central Bank goes as far to say it is willing to sustain the stability of Cypriot banks and lend as much as needed to maintain liquidity after the confiscation. Common sense suggests the cost of such emergency loans will likely be much higher than the €6bn that the ECB is not willing to give now because tens of billions will flow out of Cyprus if this tax stands. Clearly, there is a better solution.

First, the EU has to stop this nonsense of expropriating deposits through confiscatory taxation. The EU cannot hold itself together if, at times of crisis, decisions are made from a national (German) rather than all-European point of view and small nations are allowed to be bullied.

Second, Russia and the UK have to stand up to Germany and fight back. International law provides a good basis for holding governments and individual officials liable for inducing expropriation.

Third, Russia should respond to Nicosia’s request for help, expressed most recently on Tuesday when the Cypriot finance minister flew to Moscow. Cyprus needs €16bn. Europe is willing to give €10bn. Russia should loan the other €6bn.

A proper solution for Cyprus must involve all interested parties. This should promote further development of the country so it can pay back its debts rather than stifle business and kill the banking system. The loan made to Cyprus should be secured by its mineral resources – including rights to recently discovered offshore gas reserves – land, property and banking stocks. These interests should then be securitised and privatised. Private interests will drive further economic development, making the creditors happy and restoring Cyprus’s fortunes.

The writer is chairman of the Russia-based law firm Egorov Puginsky Afanasiev and Partners