Treating Cyprus as the Eurozone’s lab rat (1)
Arvamus 28 Mar 2013  EWR
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The Euro elites have bullied Cyprus into becoming an economic experiment, and to hell with what Cypriots want.

Bruno Waterfield, spiked Wednesday 27 March 2013
Every negative European political trend has deepened in the latest round of the Eurozone crisis, as Cyprus has been treated by the EU with a disdain for self-determination worthy of the high age of imperialism. It is this which is really troubling, not the haircuts for depositors or the bank closures. In effect, an entire island nation has been made a laboratory rat for a new Eurozone experiment in rebalancing economies in the EU single currency – whether the Cypriots like it or not.

Cyprus is the perfect fall guy for the EU and IMF experts who, despite the mess in Greece and elsewhere in southern Europe, still believe they know best how to run a nation’s affairs. That’s because, as well as being too small to count, especially for the markets, Cyprus is easily painted as a bad guy, a swarthy, even Levantine crook which launders dirty Russian money (nearly a third of Cypriot bank deposits) for ‘dodgy’ oligarchs. This whiff of corruption (nothing new to Cyprus, or other European banks for that matter) provides the perfect pretext for treating Cyprus as a case apart. This is meant to soothe the fears of senior northern European debt holders - it is corrupt Cyprus, and not failed private risk in general, that has been targeted.

So, because it is small, and in the eyes of the Eurozone social engineers, easily contained, Cyprus has been selected to be an experiment, potentially a model for Portugal or Spain. And if it all goes horribly wrong… well, Cyprus is small and a dodgy special case, so who cares? The EU doesn’t.

As a result, Cyprus is to become the test dummy for a new Eurozone rule that no country’s financial sector should be bigger than the EU’s average of 3.5 times the size of annual GDP. As with other Eurozone axioms, the new target is entirely arbitrary (it’s based on an average of 27 countries with economies as different as apples and pears) with a bias towards the larger and wealthier nations of the EU.

It ought to be obvious that uniformly distributing the financial sector over the geographic area of the Eurozone is absurd. Financial specialisation and concentration is part of geography and the division of labour in capitalism, especially for an island in Cyprus’s part of the world. Just look at Luxembourg, Switzerland, or the City of London.

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