Saturday, March 23, 2013

Merkel Promotes EU Member State Discord, Needs to Back Off


Since the Cypriot Government (lead by former President Christofias, left party) requested a bailout from the European Financial Stability Mechanism last June, we have heard a constant stream of statements from Cypriots like “Europe is out to get Cyprus,”  “Europe wants to destroy Cyprus,” “Protect our sovereignty,” “Merkel get out.” Clearly, Cyprus gave up a certain amount of sovereignty when it requested a financial bailout, but is there a grain of truth in these comments?

Reuters stated “Chancellor Angela Merkel stuck to the hard line Berlin has been pushing for weeks, telling lawmakers that while she wanted to keep Cyprus in the euro zone, the country must first recognise it had no future as an offshore financial centre for wealthy Russians and Britons.” (1) It is comments like these that offend and infuriate Cypriots.

Most Cypriots understand that Cyprus has made mistakes, particularly with its over-confident, yet high risk investment in Greek bonds and arguably inept previous administration. Cyprus is a small economy, an island nation with few natural resources or industry.  The economy consists of family-owned businesses, a tourist industry, and the financial and corporate services sector based on low corporate taxes. Because it’s a small economy Cyprus is vulnerable and less-able to recover from investment mistakes.

Cyprus developed its financial and corporate services sector in an attempt to create an industry based on people, its main resource, rather than natural resources or products, of which it has little. Cyprus developed its financial and corporate services sector legally and within in full view of all of Europe and the world. Therefore Merkel has absolutely no right to inform Cyprus that it must “recognise it had no future as an offshore financial centre for wealthy Russians and Britons.”

 Cyprus understands that its main industry has taken a huge hit and is beyond repair in the near future. Thousands of people will be without jobs and no other industry to turn to. This is a source of high stress and concern for those employed in the industry, and their families, facing the choice of leaving the island for another country. For a nation with strong families, this is particularly sad; and where to? Merkel’s statement pours salt on fresh wounds.

Merkel’s statement also promotes discord among EU member states by creating a small state verses big state polarization, particularly dangerous in a time of systemic financial instability. Her statement also betrays ulterior motives. Germany wants Luxembourg to absorb the investments in Cyprus.

Cyprus has a right, within the terms of its bailout, to attempt to preserve its financial and corporate services sector as much as possible, and work towards building it back up.

Cyprus made mistakes, but is Germany a country without mistakes in its history?

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