Although I thought I would never have to write anything more of the subject it appears that some people just don't get it. The usual comments on the subject include "why save Russian oligarchs?" or "why is the country systemic?" or "they are have money laundering issues" or even "we should set a precedent". Again, I will direct any people who still believe any of the above comments to some of the previous posts on this blog, where you may find a long explanation of why these are not good excuses. (the reader may have a look here, here, and here).
In brief the answers to the above comments is that:
1. Why save Russian oligarchs?
Answer: Russian oligarchs are in no need to be saved by anyone. They can simply transfer the funds from one bank to another at the click of a mouse. And no oligarch has such an important amount of money in the country that it can really affect him even if he loses it. The bail-out is for the Cypriot banks which have suffered from the inane decision for a 70% PSI and for the government for is to take us this responsibility. In essence, it is for the Cypriot people and not for the rich. This is capitalism people; the rich are well-off both in recessions and booms.
2. Why is the country systemic?
Answer: Does it really matter? We are not talking about handing them with €100 billion but with €17. This does sound like much for us ordinary people but it isn't really that much for a government. And if the agencies do their mathematics well they will see that the whole situation can be reversed with about €4 (for details have a look at this article).
3. They are have money laundering issues
Answer: Not really... According to the non-profit Basel Institute on Governance Cyprus is on the 114th position for money laundering. (the lower a country is ranked are less possibility for money laundering exists). Compare that with Germany (68th), Netherlands (109), United States (97th) or Switzerland (71th) and Austria (74th). And I do remind you that this is an independent organization.
4. We should set a precedent
Answer: Set a precedent for what? When the EU screws up in its decisions (hint: 70% PSI involvement on the Greek haircut) why are going to let those affected by those, fail? So the rationale behind this is simply: "we didn't let Greece default, but we screwed up thus we have to let someone else take the fall for no apparent reason". And who is easier to take the fall but the little guy? Of all the excuses for not helping Cyprus this is by far the worst; it exemplifies the sort of money-focused, nationalistic, opportunistic behaviour which the EU was hoping to destroy. What do we care if a nation is destroyed based on our bad decisions?
There are two options actually: either they get the money or the fail. If it's the second then why not exit the Eurozone and print some new Cypriot pounds to compensate for their losses? And if this happens how about some new pesetas or drachmas? I repeat what I have said before: if one country exits the Eurozone or the EU then others will follow.
A look at the graph at the beginning of this article will tell you that the Cypriot state does not really have a problem with debt maturities before June and July. It is claimed that if Cyprus can last until the German elections in September it will be easier on them. But if they can last until September then why bother with a bail-out?
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