Thursday, 21 March 2013

As Osborne delivers a fantasy budget, the Cypriot minnow says no to the EC crocodile

Cypriots protest against the EU bailout, which would require a one-time tax on bank deposits.
Russia Today dismisses Brussels as ‘out of the picture’ in Cyprus
Sterling has weakened around 7% against the dollar this year. But while Osborne the diminutive deckchair attendant on the Titanic was admitting this lunchtime that his fiscal watchdog had cut its 2013 U.K. growth forecast in half to 0.6%, The Slog went off in search of people and TV channels that might have even the vaguest idea about WTF is going on in relation to the Cyprus bailout….or indeed, if there is going to be one. The alternative (just so we’re clear about this) is an EU Member default, Cyprus bank crashes, and without question some ancillary damage elsewhere. Especially to the plans of Draper George in Westminster.

What’s clear is that, in the last few hours, the EC has returned to a form of hardball, in that it has been made brutally clear to the Cypriot authorities that no further bailout monies will be made available. Russia Today contained a report around 3.30pm GMT quoting a British financial expert as saying that the EC “is now no longer in the picture”. RT is a thinly disguised propaganda vehicle for Moscow; however, the report then seemed to be confirmed by the Cypriot finance minister holding a press conference there to insist that “we will not leave until we have a deal”.
In Moscow, Nicosia is seeking a further €5 billion, on top of a five-year extension and lower interest on an existing €2.5 billion loan. But back on the island itself, Plan B began to look like a raid on the social and pension budgets which (let’s face it) is the only way Spain has managed to stay alive. Quite why anyone thinks the bashing of older and unemployed people is going to be any more popular than looting the bank accounts of farmers and blue-collar workers is beyond me; but then, I am an old-fashioned sort of chap.
And being that sort of cove, I cannot help but ask this simple question: if Russian lends the money to Cyprus, and then the island at some time in the future welches on it, how might this affect Russo-EU relations given that Cyprus went bankrupt in the first place by supporting Greek banks being ‘helped’ by Berlin-am-Brussels?
I don’t mean by this that Moscow will be genuinely upset. Rather, my point is that they will make much of it, in both propaganda and negotiating terms. But in the greater scheme of things, it is a piddling amount for grown nations to argue about.
Let’s not forget the endlessly pernicious EC spin machine in relation to all this. The banking sector in Cyprus is being portrayed in the mainstream European press as a safe haven for every which way kind of Russian mafioso gargoyle. In fact, banking assets held there are about 7.1 x GDP relative to the EU average of 3.5 x GDP  – that is, similar to Ireland and Malta.
By contrast, Jean-Paul Juncker’s beloved Luxembourg has banking assets of 21 x GDP. Would Wolfgang Schäuble now have us believe that JP-J’s homeland is also “an economy that has been unsustainable for decades”?
When a valued Greek source tells me that Cyprus is “Mediterranean spy central” for all the major powers, that person is only relaying what we have all known for years: the British stayed there and put up with the warring factions in the 1950s for strategic naval reasons, the Turks want the entire place transferred to their sovereignty, both the Americans and the Russians accept it as a pivotal  launch base, Islamists use the Turkish half as a regular refuelling port when they’re sending ‘peace’ flotillas to Israel, and the smarter minds in the EU regard the island as crucial to any future planned influence in the Med.
This is what makes any analysis of the thinking behind the current mess so problematic. This afternoon, the euro rose the most in five days after the European Central Bank’s pledge to provide short-term liquidity to Cyprus: but my world-weary mind says that’s probably exactly why they made an offer nobody would be around to refuse. Equally however, some analysts are saying that the very fact of Cyprus seeking alternatives to the European Union for bailout funds has strengthened the 17-nation currency.
But that’s just purely fiscal stuff: very few informed observers really believe that this crisis is about a tiny bailout estimated at 8% of that required to initially rescue Greece. Rather, it is an oil-and-water suspension of German domestic politics, Frankfurt-Berlin politics, EU-Russian-American geopolitics, Greco-Turkish politics, US-Russian-Chinese hydrocarbon politics and, perhaps above, military-industrial geostrategy.
Only one big departure is apparent here, and that is the astonishing élan with which Cyprus has rebuffed the EU’s Orwellian double-speak, and told its hauteurs where to stick it. Whatever the media make of any Cyprus outcome, the EU will never be the same again. For the minnow has dared to say no to the crocodile. And suddenly, he is revealed to be toothless. 

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