Athens – Cyprus is a good example for the European Union and more specifically for the European Commission as a showcase of success, especially towards Greece, where the good record of the European Commission is not so obvious.
The treatment of Cyprus at the moment of the crisis was harsh and unique, since it was applied at her expense, for the first time, the so called bail- in , that means the haircut of the depositions in the banks over the protected level of 100.000 euros. In this way, Cyprus, which, because of the small size of its economy (18 billion GNP), did not represent a systemic danger for Europe, became an experiment field for the bail-in.
The Cyprus government followed closely the prescriptions of the Troica and managed to get some good results, although the austerity policy created many problems and social uncertainty. Nevertheless, the relatively good results open the road for a stage by stage return of Cyprus to normality. The economic problem of Cyprus was never an acute one as that, for example, of Greece. Cyprus was in the forefront of the all European countries, along with Luxembourg and Finland.
The beginning of the problem came out from the PSI in Greece, which costed to the Cypriot banks a huge amount of 4,5 billion euros. There was, no , unfortunately, a recapitalization of the Cypriot banks by the European Union as it happened in Greece. It was mainly the fault of the ex- President of Cyprus Dimitris Christophias. Himself is also the main responsible for the catastrophic economic policy, applied during his Presidency, that transformed the state of the Cypriot economy from a surplus to a deficit status.
The weakening state of the Cypriot economy from a surplus to a deficit status. The weakening of the Cyprus economy presented an opportunity to those who had their own specific reasons to attack the Cyprus banking system and to use the economic crisis as a tool for exercising pressures on Cyprus in order to make concessions for a solution of the problem of Cyprus, on the basis of the rejected, in the referendum of 2004, plan Kofi Annan.
Cyprus has negotiated before entering the E.U. , a low tax system of 10%, at the example of Ireland. This low tax system, as well as the position of Cyprus, its climate and its good administration, helped its banking system to develop rapidly beyond the frontiers of its small economy. Many Russian and other foreign funds, chose Cyprus for their depositions. One reason for that was the high rate of profit in comparison with other European countries and banks. This was enough reason for the beginning of a smearing campaign that Cyprus serves a a laundry for black funds, which came out mainly from Germany. The presence of many Russians in Cyprus was another reason for dealing a blow on Cyprus, on geopolitical grounds, involving the Americans. The bail- in in the Cypriot banks brought a terrible blow on them and on the economy of Cyprus. It has to be noted that around 40% of the Cyprus national income came out from the international banking. The restoration of the Cyprus economy is not easy. Its banking system is already under foreign control. Nevertheless, Cyprus is making steady steps towards recovery and return to development. It is good news also for the European Commission, who has the experience of the dramatic failure and the deadlock in Greece.