Known as the “crown jewel of East Mediterranean Sea”, -while located on northeast part – is also very popular, last year, being the target of Europe’s Debt Crisis along with Greece and other European Countries.
It is a place, whose history and civilization spans for eons in an ideal natural environment and a special climate. The island’s strategic place at the crossroad of three continents and its beauty has also been a cause of many battles during the last 6000 years, turning this place into the object of desire for many “conquerors”. Nowadays, the battle differs…..It is Financial and become far away much harder than ever before!
It has been almost 40 years since Turkish troops invaded and divided the island in two pieces and forcibly expelled about 1,80,000 Greek Cypriots from their homes and other 20,000 seeking safety in the government controlled areas of the South. Despite calls by the UN Security Council [Resolution 353 (1974)] and the quick restoration of constitutional order on the island, Turkey occupied till now the 37% of the island in the North. Since then there have not been any improvement in Cyprus occupation, although a number of UN calls have been filed. Additionally and despite the UN calls upon all parties to cooperate fully with the United Nations Peace-Keeping Force in Cyprus, to enable it to carry out its mandate, is not any change in Cyprus occupation’s status.
FINANCIAL GROWTH and FALL
Despite the well-known tragedy, the South of Cyprus had a significant financial development during this period of 40 years after the invasion, and became one of the most visited tourist destination worldwide. Against all odds Cyprus became also a full member of the EU and entered the Eurozone, adopting the currency of Euro, along with the other powerful EU partners.
For many years the Cypriot banks “gathered” lot of the savings of the Europeans – giving great performances – making the financial sector the 60% of whole economy. The German and Europeans depositors, Russian tycoons and many Greeks along with Cypriots worldwide placed billions of euros in Cypriot banks and dealing in huge sums through thousands of off-shore companies and made Cyprus the ideal tax-haven. The Euro through Eurozone was the main factor to push Cyprus in the frantic race that made the financial sector, along with tourism, the cornerstone of the Cypriot economy.
But the dream soon ended. The Cypriot Government was forced to pursuit extreme emergency actions either because did not want or manage to act in time to tackle the upcoming crisis. As a result the economy was destroyed overnight!. The European leaders imposed “salvation solutions” in Cyprus, which essentially wiped out its banking sector. Some desperate attempts from parliament members to oppose to the above impose policies, soon fade out. The European leaders imposed measures through “haircuts” (for amounts over 1,00,000 €), resulting loss of lifetime savings of ordinary civilians, not to mention financial losses for businesses.
According to my experience in Regional issues there are some theories explaining what happened not only in Cyprus but also in Greece and other Mediterranean countries. According to my perspective, Cyprus was the “escape goat”. And for what purpose? Along with the above, several years ago, the German Chancellor Angela Merkel, and her predecessors, conceived the idea to transform the European economy into a specific model (as a revival of Mercantilist type or better – with some irony – “Merkelntilist” type of economy!). With its actions Angela Merkel wished to resemble the EU economies being modeled somehow as the hard Chinese “state capitalism”. With this strict economic model in Europe, social policies must be abandoned inside countries. Everything earned over many years as a “social protection», about to be lost due to the rigorous policy imposed by Germany within a few years. The philosophy is simple: It must be prohibited to buy and consume and the workforce should focus on to produce and export of his goods, rather than consume them. It is simple, but …somebody must have the ability to buy in Europe. The “model” is not working well such as China!
According to this model and believing on this philosophy, the German and North- European governments, the last decade, understood that all the “funds” were outside of “Northern Europe” and the North European “thirsty” banking system. For many reasons – mainly tax reasons –, Cyprus was the Europe’s tax-haven inside Eurozone! (In the case of Greece it was the excessive debt while in Spain the real estate). More than 1.3 billion € in deposits outside Germany and the most of them in the European South. The dispersion was not equal, but inside Europe, Cyprus with the huge returns and sometimes the banking system’s deposit rates exceeding 7%, presented the “Island” as the most favored financial destination. For the German government and Angela Merkel this was unacceptable! The German economy with yearly development index on 6%, needed a lot of funds! The money from the European South should be return immediately. The only way to “convince” the depositors to bring the money back was “fear”. The plan was so simple yet so disturbingly cruel and inhuman. Fear should spread like a virus to savers with only one goal: bring the money to the banks of the Northern Europe and especially Germany. Despite the fact that in Germany the bank deposit rates were no more than 0.5% or even negative, the depositors should be convinced that other financial institutions in the “periphery” were unsafe or unreliable. It should never be considered from now on safe there, or anywhere else. The trick was successful and “fear” now has a name: “Haircut”. With only one victim “dead” (Cyprus) and other four badly wounded (Greece, Spain, Portugal and Italy), Germany with the help of Merkel’s administration, grabbed back all the “peripheral” funds. The plan was completed when some of the top European officials (under Merkel’s sphere), “accidentally” releases media, that the Cyprus tactic of Salvation with any type of “haircut”, will be a common solution and has been a “pilot program” to other weak economies…..
THE STRICT REALITY
Considering the above, it is easy to understand that the ongoing game is endless while an important element is missing in Merkel’s plans. Cyprus has been totally destroyed and recovery will take many years and probably will never be the same. Furthermore the western economies, obey in the simple rule where someone to sell there must be someone else willing to buy. It means that the Cyprus imposed program – with its solution as a model for the other weak economies – will become alienated for Germany and her orbital governments. For German industry, where for years made products for the rest of Europe, the devastated Cyprus and winded European south, is a market that will not be able to buy the expensive German products that Germany expects to sell. The scope for Germany is always been to avoid a negative trade balance. If Germany has difficulties to sell products, it is a matter of time to face such negatives and of course is something that Merkel and her Finance ministers neither want it at all. A Europe where nobody buys since nobody can, because of “fiscal consolidation” which forcibly imposed is something that Arrogant Germany did not calculate well! Cyprus may have been a tragic example for the repatriation of the German “parked” funds “from the European periphery”, but it was also an opportunity of disillusionment of the German miracle; having the collateral damages – beyond the humanitarian dimension – of the “infallible model” of German Chancellor. What did they believe?? If Europe cannot be their customer in the future, who will take it’s place? China or USA? Who can answer on these? Probably is something that Germany or any other country following her orbital track must answer…
THE ENERGY SECTOR
Cyprus was somehow lucky because of an unexpected fact with geopolitical and geostrategic meaning. The search of Natural Gas deposits and the cooperation with Israel in the EEZ of Cyprus is a developing key-factor for the Island’s weak economy. If the findings are so much larger than expected, then the situation will be improved more rapidly and the remnants of “salutary solution of Troika” will disappear in front of the energy benefits. The expectations seem to be positive and everyone in the region will come out winner. Along with the energy plans for Iraqi’s oil crossing via Syria, the “thirsty for resources” Europe is ready to pay. Cyprus expects to gain from this, the same as Greece, possibly Turkey, which energy ambitions are great! (Through the leadership role, where Turkey wants to impose on its neighbors, strongly backed by its military superiority)
The Russian hegemony of providing natural gas is the energy foe of Europe. Seven days without heating in Europe, few years ago, was something that Europe never forgot. Cyprus has the perfect opportunity to win this round. Israel and also Greece realize also that everything should be done to sustain their leading role position. Even Lebanon was interested for his part in the sharing of profits.
Before I started writing this article, I had in mind to split it in parts because of the size but also for my belief in historical importance to be written more detailed. Now I understand that it’s not so easy to cut in parts something so intricate such as a financial and geopolitical analysis. Even if the size of the article prove tedious, it is not possible for the reader to have the whole view if this was cut into two or more parts. Accordingly, I strongly believe that the division of the island into two parts is an issue that will find me always opposite. I believe that now – more than ever – it is imperative to talk about the reunification of the island, because only in this way can be developed again. Cyprus was a bad “avoiding example” for other countries and became the experimental subject of a dirty “game theory” not worth it; at least not the people. The Turkish Cypriots are experiencing an ongoing obsolescence, misery and isolationism after 1974, while Greek Cypriots are beginning to experience it from the more recent past. It’s time now to review the case of Cyprus, on a new fair basis, for the good and prosperity of its people. As we say in Greece… It is never too late…
Themistocles Konstantinou was born in Athens on 6th February of 1965. He finished his basic studies in the same town, before its mandatory service as a reservist sergeant in the Greek Air Force with the specialty of mechanic in A-7H Corsair aircrafts. After his term was appointed with the same specialty in various types of aircrafts such as F-16 C/D, F-5 A/B, F-4E etc. till his graduation from the Hellenic Open University of Patras (2008). He took his Bachelor degree in Humanitarian studies as Europologist and the next year (2009) followed post-graduating seminars in Mental Health Promotion, a branch of Psychiatry. Since then serving on the Hellenic National Defense General Staff (civil personnel) in Military Intelligence Service as a Military data Analyst.