Cyprus severe problems could be the sparkle to set the euro zone on fire and break the European Union. This break up started with an economic crisis that evidenced the ditch between the North and the South. In spite of Brussels and Berlin, the South does exist. Spain, Portugal, Greece and Cyprus are a dangerous stain that could spread to northern countries in a domino effect. That has been Ireland’s case, for example.
There are already warning signs: Cyprus asking Russia for help with the bailout and the conditions set by the European troika. Russia did give Cyprus a €2,5bn credit in 2011. It is true that Putin’s country has a notable financial presence in Cyprus (deposits, banks and investments). Russian President is quite angry because the EU hasn’t count on him in the plan to avoid Cyprus bankruptcy. He has called it “a lack of respect”. Brussels plans will damage Moscow interests in the island, which has been sort of a Russian financial haven for years.
Economics School analyst Dimitri Miroshnichencko says that “Russians used to have Cyprus for their dirty business, but now they have more respectable places like Gibraltar, the Virgin Islands, Luxembourg and some Swiss cantons”. That is a clear warning for the EU and an obvious wink to the poorest countries in the euro zone: Russia is here if you need it. We’ll soon see the impact of those winks.
As for Spain, renowned Economy minister Luis de Guindos has tried to ease the tensions saying that “Cyprus’ situation is quite unique” and that “Spanish deposits are sacred”. They had said the same about Spanish pensions. President Mariano Rajoy has stated that he is not in favor of Spanish citizens losing their deposits money. Of course he isn’t. This is not Nicosia, Mr President. Or is it, a little bit? Mr Rajoy refused to answer the questions about Cyprus crisis in front of the Congress. Why?
The truth is that the Spanish public administration debt was of €896,3bn in January, around 12bn more than last year. That is to say, 85,3% of GDP. Mr Rajoy has announced something that we already knew: “2013 will be worse than expected”. Spanish families’ income is in 2011 levels, three million Spaniards live in extreme poverty and 6,4% of the population is on the brink of social exclusion. In the same time, the law is not always enforced. Too many corruption scandals are strangling us.
A Southern European countries coalition is necessary to counterbalance the troika’s power. It would be bad if more countries asked Russia for help, like Cyprus did. Or even worse if they asked China for it, which would allow Beijing to boost its influence in the West. This could lead to enormous and uncertain consequences that we should not dismiss.