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Cyprus Edging Closer to Moscow

The crisis in Cyprus still has not focused the world's attention as it should. Russia is poised to make a huge political/economic gain, almost unprecedented in a country that never before was under its sway.

Openeurope.org reports from varied sources,

"The Cypriot government announced yesterday that banks and the Cypriot stock market will remain closed until next Tuesday, as it rushed to find a new deal to raise the €5.8bn needed to unlock a €10bn loan from the EU/IMF. Cyprus reportedly submitted a plan which involved creating a fund made up of: revenue from a solidarity tax (not a deposit levy), nationalised pension assets, revenue from restructuring and selling off the two largest Cypriot banks and property of the Church of Cyprus. This was rejected by the EU/IMF/ECB Troika since it would increase Cypriot debt to unsustainable levels. Cypriot political leaders are meeting this morning to adjust the plan with the hope that they can get it approved and then vote on it in the Cypriot parliament this evening.

At the same time, Cypriot Finance Minister Michalis Sarris was in Moscow looking to secure further aid from Russia. Sarris reportedly offered Russia the chance to purchase the largest Cypriot banks in exchange for incentives linked to Cypriot gas reserves, although Russia remained cool on the prospect. In an interview with the FT, Russian Prime Minister

Dmitry Medvedev suggested that the eurozone had acted like a "bull in a china shop" by imposing the deposit tax. He added that Russia was willing to help Cyprus but will wait for the eurozone to come up with some concrete plans first."

This is a case where the European Central Bank (ECB) and the International Monetary Fund, and EU, should be treading very cautiously. Imagine a country so desperate that it is putting its people pensions on the block, along with the property of the state Church! Meanwhile, there is Russian tea and sympathy inside the patient walls of the Kremlin.

Faced with catastrophe, the people of Cyprus seem ready to accept the new dispensation. Openeurope.og notes that the Athens Daily newspaper (Kathimerini)

"(R)eports that a survey by Prime Consulting found that 91% of Cypriots backed their Parliament's decision to reject the deposit tax. The poll also found that 67% of Cypriots favoured their country's exit from the eurozone and a strengthening of relations with Russia."

If Washington is not very exercised over the Cyprus crisis, perhaps it is partly because the Europeans are not much exercised themselves.

You can email brucechapman@discovery.org

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