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‘Cyprus no longer part of Eurozone’

Published time: March 20, 2013 14:26
Cypriot and EU flags fly next to a building in the city center of Nicosia (AFP Photo / Patrick Baz)

Cyprus means so little to the Eurozone’s economy that it can't count on any bailouts from Brussels, believes Paris based economic expert Marcus Kerber.

Cypriot politicians are apparently aware and clearly show who is in charge economically speaking - it is Moscow, not Brussels.

RT: There appears to be a stand-off between the EU and Cyprus with neither side willing to make concessions. Do you expect either side to give in?

Marcus Kerber: For the time being Cyprus is having the upper hand and the blackmail policy made by the Cyprus government seems be working, although Cyprus is 100% dependent on the willingness of the European Union to bail out the island.

Let’s remember one thing: Cyprus represents 0.7% of the gross national product of the Eurozone. So it is not an essential part of the Eurozone. And bailouts are only allowed – according to the European Stability Mechanism – if country really represents an essential part of the Eurozone and its stability is vital for the stability and sustainability of the Eurozone.

We have to come up with a decision: Cyprus is no longer a part of the Eurozone. And the behavior of Cyprus politicians shows who is quite clearly in charge of the island economically speaking. It is Moscow, not Brussels, and we have to draw conclusions from that as quickly as possible.

RT: How is the Cyprus drama resonating in other vulnerable Eurozone countries - like Greece and Portugal? Could we see an investment exodus from these countries after what's happened?

MK: No. The situation is absurd. After years and years of a policy which is a part of regulation arbitrage, and offshore paradise offers made to non-residents, which has created a bubble economy and a bubble banking community, which is truly disproportional to the gross national product of the island.

Now the EU community has to bail the island out without too much solidarity from the other European tax payers.

The Greek case has always been qualified by the EU rescuers as a unique case. Apparently it is no longer.

The Greek banks, despite a horrible situation, seem to be making bets for the affiliates in Cyprus.

Two women make their way alongside Russian advertisements about a property development in Limassol, a coastal town in southern Cyprus (Reuters / Yorgos Karahalis)

It has always been said that those who have broken the rules of the European community – and Cyprus is a part of that – they have no real economic weight to dictate the policy of the European Community.

If the European Community gives in, then the authority of Brussels is gone or disappearing.

RT: The German Finance Minister has warned Cyprus that its banks may never be able to reopen if the country rejects the terms of the EU-IMF bailout. Is that a real possibility or an empty threat?

MK: This is a response to the blackmail position of the Cyprus Finance Minister and Prime Minister, who said the Cyprus population is against any fair part of recapitalization of the [national] banks, let the European taxpayers pay for Cyprus banks.

We have offered conditions for the accounts which are beyond anybody’s dreams, which offered low tax rates and have let in people from abroad, non-residents and not involved with the Cyprus population. Let’s take this into account as well.

In Germany we are going to have election in the autumn. And the German population, after the Greek bailout, the Irish bailout, the Portuguese bailout and the Spanish bailout now is confronted with another absurd case of bailing out a country which is not at all essentially a part of the Eurozone and which in the past has benefited enormously from the euro not in order to build an economy, but in order to build an off-shore zone. An off-shore zone, which is not a part of the European project or the euro project and not a part of a policy generally understood by the largest majority of the population.