Not so long ago Cyprus joined the EU and later the Euro hoping to enjoy the benefits of joining the European monetary club and reaping all he rewards that this would befall the island.
As history has taught us it is not long before those who enter any kind of union with more than two parties discover that there shall always be inequities between the members. In this case the European power broker Germany along with partners has forced tiny Cyprus into a horrific situation where they had to decide between angering the EU or it's own citizens and a nation one should never defraud out of it's belongings, Russia.
On one hand, I understand that Cypriot politicians feel that they have no choice, the Troika (how appropriate it is a Russian word) has the ready funds and is able to transfer the necessary to solve the immediate crisis. However, this is short term thinking and is only is about today and tomorrow. What about next week, next month and next year. Russia's wealthy elite who have driven development and economic demand on the island significant for decades will never trust the islands decision makers again. They have already started looking for an alternative 'holiday home’ for their cash elsewhere. Will this be in the EU, I doubt it! With 40% less cash in their Cyprus accounts I would suggest that the risk of reinvesting in an increasingly regulated, taxed and now occasionally levied financial system is too great for many.
Let's not forget that as part of the EU and Euro Cyprus has become a popular place for many other Europeans, including thousands of Britons, to retire. There is something quite appalling about having your savings 'stolen' by a Troika having been through a difficult last 5 years. These people will only find out tomorrow when the banks open once again if they have lost 0%, 30% or 40% of their life savings. I’d imagine that many European tax payers in their 50s and 60s are discussing alternative plans for their retirement. Like most family holidays, suddenly the short budget flight to Europe is looking less attractive when one considers the extras one may have to pay staying in the Euro zone.
Cyprus is now facing a recession of it's own and the damage to the islands reputation shall no doubt last at least a decade. Would if it had been worse if the island's politicians had opted to leave the Euro and risk all? The clock is ticking on the European fiscal machine and a cog will eventually have to fall off. Cyprus would have been a good opportunity to see how well oiled the machine actually is. After all, the Euro's survival will only be secured once it has been fully tested - and we'll see a member leave because of a situation like Cyprus sooner or later.
We live in interesting times and within a decade or sooner I think many shall turn round and quote the ‘Cyprus Scandal’ as where it all went ‘Pete Tong’. Taxing people is generally fair, taking money from what they have left after tax is reminiscent of a feudal system. Federal? Feudal? Fraud?
The banks in Cyprus may be opening again tomorrow but they shall not be opening any new accounts for a very long time.