Cypus: an example of the cost of (Eurozone) bailouts

Cyprus was the subject of an expensive bailout by the European Union, IMF, European Commission, and European Central Bank.

As part of that bailout, large account holders took a haircut. My memory was it was 40% of all deposits over 200,000 euros. You can google and check me on this. Most of the affected account holders were Russians (possibly hiding funds from taxation at home.)

As with all such bailouts, austerity was enforced. In addition, Russia provided an extra loan with generous provisions.

Cyprus’ embarrassment over this included changing the rules for granting citizenship: from ten million euros’ investment, to three million. In addition, losers of three million or more in the ‘restructuring’ were also able to request Cypriot citizenship.

All of the above, and more, can be found in this Wikipedia page.

It turns out, Cyprus is still fundamentally in trouble. To keep its airline flying, Cyprus provided state aid. It is now hiding its planes. You can read about this here.

My point here is to show that the bailout is, crudely, a failure. Some quotes from the above page:

Under EU rules a company can only receive state assistance once every 10 years, and the airline had already been bailed out in 2007.

Cyprus Airways is 93 per cent owned by the state and employs 550 people. It has a 10 per cent share of flights to the island, down from 30 per cent two years ago. 

EU Competition Commissioner Margrethe Vestager said Cyprus Airways had no chance of becoming viable without continued state subsidies, which means money paid out in 2012 and 2013 as part of a restructuring package would have to be recovered.

Cyprus Airways has reportedly flown its fleet of planes to a remote Welsh airfield in a bid to prevent them being seized over a row about paying back 65 million euros (£51million) in illegal state funding.

As usual, you are allowed to ask, what’s my point?

The European Union overrides sovereign rights. If you screw up, we’ll force your banks to haircut your depositors. We’ll force you into austerity. We’ll make you desperate to keep getting rich immigrants. And, we’ll tell you when you can, and cannot, put money into an airline which you pretty much own outright. You’ll find yourself hiding assets so we can’t seize them.

Perhaps the EU are only friends of themselves.

As usual, I will end with dumb questions.

Given the above, and that Cyprus is a small nation, we can expect them to grovel and toady to the Europeans. Right?

If Russia had the ability to fully bail out Cyprus, would it be putting up with this dreck?

If another EU country, say France or Spain or even Italy, decides it’s had enough, will the EU be able to keep control?

and finally,

is Greece the thin edge of the wedge here?

Coherent answers or comments, that include real (kept secret) eMail addresses, will be accepted here.

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