All eyes are on Cyprus right now, a tiny island in the Mediterranean, that is destined to become the modern-day version of the 1930s Great Depression.
On Tuesday, the Cypriot Parliament rejected a controversial €10 billion bailout package, devised by the Eurozone, that would also force depositors to pay part of the bill. This would happen through a tax of 6.75 per cent on accounts with less than €100,000 and a 9.9 per cent tax on accounts of more than €100,000.
A new plan must now be drawn, or Cyprus’ banks face total collapse.
The image of Cyprus played out in the American media has one been one of chaos — a mix of residents and wealthy foreign investors rushing to ATMs to withdraw cash and thousands of outraged locals protesting in the streets.
Nicolas Phillippou is more of passive observer, watching all of this (slightly exaggerated) mess play out from the comfort of his home in Cyprus. That doesn’t mean he isn’t deeply concerned about the future of his country.
Nicolas is the owner of trading consultancy company and is the Vice President of the American Chamber of Commerce in Cyprus.
He doesn’t plan to protest. And he hasn’t been to the ATM machines. But he does seem himself hopelessly stuck in a game of wait-and-see.
“What will the Europeans say?”
“Will they give the bailout money or not?”
These are the questions that will keep Nicolas, and his fellow Cypriots, up at night over the two next days, if and when the banks do open.
“I worry about what will happen if one of the two major banks goes bankrupt,” Nicolas said over the phone. “But it’s hard to accept the legal robbery by the government.”
Cyprus’ economy represents less than 0.2 per cent of the Eurozone — a very insignificant amount.
So why such a big fuss?
“The Germans want to get rid of Cyprus as a financial centre. They want to destroy the Cyprus economy,” he said.
Some experts, and Nicolas, believe that giant reserves of natural gas will be discovered in Cyprus within the next two years. Although this hasn’t been proved yet, Nicolas believes Germany would want Cyprus under their influence in that fortunate circumstance.
“The same way that [Germany] bombed London in the second World War, they destroyed the Cyprus economy by taking this action,” Nicolas said.
He is not alone in his sentiments.
Photographs of German Chancellor Angela Merkel painted to make her look like Adolf Hitler have been circling at anti-bailout rallies.
What’s unfortunate is that in any outcome, regardless of when the banks open, Cyprus has already taken the hit. Foreign investors will want to withdraw their holdings and locals will try to take out money and place it under their pillows, said Nicolas.
“I’m not optimistic. The damage has been done.”
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