It’s very tough to live in Cyprus at the moment, virtually all sectors are suffering from the austerity measures. You might think it’s fairer that people with money are also being affected by the financial problems, but many of the people with high balances in Cyprus banks are people who have put their lifetime savings there. The deal that is being put towards the stricken Cypriot government is bailout cash in exchange for austerity and a tax on peoples deposits.
Cyprus might not be the biggest country in Europe, and of course the sums are much smaller than Spain, Italy, Greece and Portugal. However what happens in this smal island is important for Europe and the future of the Eurozone. Their latest vote on accepting a new deal was won by only two votes in the Cyprus Parliament. A loss would have probably involved an exit from the Euro and the establishment of the Cyprus pound as a currency again.
No-one denies that this would have been very painful to the economy, even the opposition parties. However the idea of exiting the Euro is becoming more and more realistic for many countries. Just think of the situation on a human level. You go to live in a country with a reputation as a strong financial centre, you place your hard earned life savings in a Cyprus bank. Suddenly it all goes wrong and a huge portion of your savings are eradicated overnight – basically just removed without your consent from the bank. The banking sector in that country is suddenly completely without value – would you put any money in a Cyprus bank?
Confidence is shattered in the banking sector, the financial community and in essence the whole economy overnight. Which business can operate without a bank account? Two votes have saved the Government from Euro exit, but it’s critics say that the effects will be far, far worse. Small members like Cyprus will often suffer because they are forced to trade on the same terms as bigger and more efficient economies like Germany. Different currencies gave countries some flexibility but the Euro means that a Cyprus factory has to compete with one from Hamburg directly.
There are many of us who believe that countries like Cyprus would be better out of at least the Eurozone. Being able to control their own currency would mean at least Cypriots could compete by modifying their exchange rate. If I sound emotional it’s because I spend a lot of my time in Cyprus, and worse I’ve found out about this decision via the BBC website – although I had to fiddle with an Ipad and a UK VPN – http://www.uktv-online.com/bbc-iplayer-on-the-ipad-abroad/ to view it!