The Cyprus economy was relatively speaking in a good state but the Bank of Cyprus bought a large amount of bonds from the Greek government in an effort to help. The EU cut about 40% of the Greek debt last year leaving Small countries like Cyprus exposed to heavy loses. So the reality is the current crisis is a result of the knock on affect.
Now we have the EU going to the Cypriot government saying that despite having created the problem they expect the ordinary citizen on the island to pay for the mistake so up to 10% of savings will have to be paid in tax to bail out the bankers huge mistake. The difficulty with this formula is that it has never been done before and of course the real fear is that Spain, Portugal and Greece will follow.
The government was right to reject the so called proposal but I think the best thing (if you can use such a term under the circumstances) to have come out of this situation is that the opinion polls show that more than 67% of the population want to exit the Euro. It is now a fact that the Euro experiment has failed.
In addition to all the background issues we also have the huge problem of the Germans and other EU countries not being happy with the increasing influence that the Russians have on the island. More than one third of all deposits in the banks there are from Russian investors. Russia is also looking for an opportunity to have a base in the Mediterranean and I personally see no reason as to why they should not be given one, at the end of the day if the British have a base why shouldn't the Russians be given one also? The western allies better sort their ideas out, either they want Cyprus to be close to them, in which case they treat them as equals, or their influence should be removed. Bring the Russians in I say!
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