Cyprus: ‘It was not a bailout. It was a collective punishment’

Cypriots and those who have their savings in the country’s banks are already feeling the consequences of the €10 billion bank bailout from the Eurozone and the IMF. Anger is mounting in the country due to what they are calling a theft of their assets.

Professor of Political Economy at the University of Nicosia, Andreas Theophanous, is sure that Cyprus is not only in a financial crisis, but also ‘is already having a major political crisis”, as the credibility of the system – “both economic and political is at very low level at this point.”

RT:There are allegations that the Cypriot President's inner circle is linked to a multi-million euro outflow of money… Are these claims being investigated - or is it mud-slinging?

Andreas Theophanous: It’s true that we’ve seen reports about capital outflows. There will be a full investigation, but obviously the point that I would like to make is that in addition to the economic crisis, Cyprus is already having a major political crisis as well. There will be report, there will be investigations, but in any case the credibility of the system – both economic and political is at very low level at this point.

RT:Are these claims being investigated? 

AT: Of course, economics and politics are related. There will be full investigation and again I am pointing out that the fundamental points – the respective of weather some political parties are trying to take advantage. At the same time it’s true that there have been acts that made people very suspicious. The issue is that credibility is at a very low level today.

RT:Is it actually possible for 'special' high-ranking depositors to escape the 'haircut' while everyone else loses up to 60 per cent of their savings?

AT: The other element in relation to this that I would like to stress to these issues, that the most important point is to see how we address the crisis, how we get out of the recession. But the architecture of the Eurozone and the philosophy of the Troika and these policies certainly will make the recession into a depression. It’s worth pointing out that the restrictions on capital flows are much harsher than they were in 1974 when Turkey invaded. In 1974 the capital restrictions they were around foreign transactions. Today we also have internal restrictions and this makes it extremely difficult.

RT:From your perspective – was this bailout package a good deal for the Cypriots?

AT: It was not a bailout. It was a collective punishment. The amount of money that Cyprus required could have allowed a more gradual approach to addressing the economic structure problems. With these policies – not only the Cypriot financial system has suffered a serious blow, but the economy as well. And I have no doubt, that this will have also a fallout effect on the Eurozone on the whole. People outside Cyprus are indicating that confidence in the Euro in the Eurozone has declined. And I don’t think that this will be the end of it. In relations to Cyprus I think in order to move forward it will be important to go back to the Pound at least temporarily, so that the country has the necessary tools – the fiscal tool and the monetary tool to address the crisis.

RT:Europe, and Germany in particular, are now the main targets of Cypriot anger - but is it justified given they're the ones coughing up money to help Cyprus recover? I mean, the Cypriots may be angry. Should they be angry with the very people who are trying to help them?

AT: We may go and try to find out the roots of the crisis and also the issue of abiding by the rules. I think that Cyprus was trying to enforce all regulations and laws in relation to what Cyprus is accused, money laundering I mean, Cyprus is doing much better than countries like Germany. And I think this issue about money laundering, it was an excuse. I take this opportunity to also note that when these measures were announced, it was reported that agents from German banks were coming to attract funds from Cyprus. Let me also say that what has happened to Cyprus is also related with a perverted image that they have created about Cyprus in the last few years. For example, it’s a place with money laundering, especially from Russia. And also that Cyprus is a headache to the rest of Europe. And that’s not true.