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http://marketsandbeyond.blogspot.com/ http://www.pcgwm.com/ To lose its independence, Cyprus had a better course of action: quickly negotiating joining a ruble zone and offering Russia a naval base in Cyprus plus offshore gas rights. Cyprus would have lost its independence but Cypriots would have been better of. Geopolitically this would have been a coup for Russia: it will loose its naval base in Syria and would have replaced it with an even more strategically positioned one. Russia would also have enjoyed privileged access to Cyprus gas, further surrounding the EU. This also would have open the way for other disappointed countries with the EU to join the fray like Serbia; and eventually why not Greece. The Orthodox church is a powerful cultural and historical link between all these countries. Cyprus cannot be kicked off the EU (well, European politicians and eurocrats are used to twist and carve treaties and laws to their own advantage), and therefore it would have allowed Russia to have a foothold in the house. In any case, this would have been a trump card in the hands of Cyprus in its negotiating positions with the troika. 3. The future of small countries The crisis has demonstrated that all countries in the EU are not equal in rights despite what is claimed (not surprising, it has always been the case: big boys bullying feeble ones). Rules do not apply the same way depending on size: France has hardly ever abided by Maastricht criteria, and always got away unarmed (we are nearing the end of it, since eventually facts are always right over rhetoric). Greece was slammed (they lied, so they got what they deserved), Cyprus walked over and Luxembourg is bullied. Cyprus and Luxembourg are criticized for over relying on the financial sector. I do not know what makes Germany, France or the US to impose a business model to small countries whose size limits their ability to enjoy a well diversified economy. If they do not like money fleeing, they should offer a fiscal environment where money is happy at home: there is no tax haven if there is not tax hell. With Frances banks over 3 x GDP (more or less Cyprus post bail-in), the financial sector is much too leveraged. In the case of France, the media are increasingly reporting that young educated French national are going abroad to find a job (40-50,000 in 2012 when one calculates the heavy cost of education and no return from those leaving the country, it will become unbearable at some point). These larges countries should first put their home in order before lecturing others. A few examples: Delaware money laundering machine where the beneficiary owner of a company does not need to be disclosed or the specific local laws that make it very difficult to get rid off an incompetent board or special protections against takeovers; France with
http://marketsandbeyond.blogspot.com/ http://www.pcgwm.com/ its free zones, special tax treatment of Corsica or no income tax in French Polynesia to name a few; and what about the UK with the Channel Islands, The Netherlands with its holding tax efficient regime, etc. Small to medium size countries where the financial sector allowed them to prosper are increasingly subject to bullying from large ones, the latter specializing in finding scapegoats for their own economic sins. We are entering a world where democracy is much talked about as never before, but where reality contradicts the words. Small European countries beware, you have been warned. Source: European Commission: Assessment of the public debt sustainability of Cyprus http://blogs.r.ftdata.co.uk/brusselsblog/files/2013/04/DSA-9-April2013.pdf European Commission: Assessment of the actual or potential financing needs of Cyprus http://blogs.r.ftdata.co.uk/brusselsblog/files/2013/04/Estimate-of-financing-needsESMT-art-13-v09042013-1.pdf Reuters: Cyprus to sell around 400 million euros worth of gold http://uk.reuters.com/article/2013/04/10/uk-cyprus-bailout-goldidUKBRE9390NW20130410