Cyprus Highlight Cracks In European Unity
The rapidly developing story of Cyprus' bailout left much of Europe's media speculative and unsure as to how the crisis would play out. Questions are in abundance; questions of possible runs on the banks, Cyprus' future within the Eurozone, the viability of its economic structure and whether or not it will be allowed to maintain sovereignty over its financial dealings. They cannot, however, hope to be answered for some time to come.
Yet, no matter where the Cypriot crisis is going, the events of the past two weeks have already said much about where Europe is right now. With deals brokered and rejected, political figures throwing blame across the table, and major commentators across the continent agreeing on little more than the hardest of facts, the manner in which Europe's internal factions have reacted to the crisis have seemed less diverse than mutually hostile.
The narrative which has provided a substantial fuel for Europe's anti-Eurozone parties, that of Germany's overlording dominance and control of Europe's financial situation, has flared up once again. The BBC's correspondent in Nicosia, Chris Morris, has depicted Germany's actions in the Cypriot crisis as "essentially writing the rules of the eurozone," using phrases such as "Germany will no longer accept" and reporting that Germany sees Cyprus as a "huge irritation."
The ultimatum given to Cyprus by the "troika" of the EU, IMF and European Central Bank, has been challenged by prominent Cypriots as being less in the interest of European stability and more a tactic in German domestic politics. The troika gave Cyprus short notice to raise EUR5.8billion before it would give the Mediterranean island a further EUR10billion to deal with its financial crisis.
Anthanasios Orphanides, the former governor of the Cyprus Central Bank, said that this ultimatum would deliberately damage Cypriot banks so that Germany would not have to arrange a full bailout that would anger German voters during an election year Angela Merkel is already expected to struggle in.
Meanwhile, The Spiegel in Germany is emphasising the fact that the EU has made proposals to Cyprus that Cypriots are refusing to compromise on. Angela Merkel has reportedly criticised the social principles behind the Cypriot's government handling of the crisis. In order to raise the EUR5.8billion demanded by the troika, Cyprus is planning to use government assets which include pension funds of its citizens. Merkel has decried this as deviating from European social values, and believes that the Cypriot banking sector should pay for its own mistakes.
One of the most telling events of the crisis was Cyprus' rejection of the initial EU bailout proposal. The proposal included a levy on all deposits in Cypriot banks, including small-scale deposits. The Cypriot government unanimously rejected this proposal, an unprecedented move in European bailout negotiations. Not only did this indicate the degree of separation between Cypriot and EU economic policies, it fired up the passions of anti-austerity and anti-Eurozone groups across the continent.
Greece in particular saw renewed anti-Eurozone protests in the wake of Cyprus' rejection of the troika's terms. A rally was held in Athens at which attendees praised the move by Cyprus and asked why the same negotiative ability was not displayed by Greek politicians during the Greek bailout crisis. Supporters of the extreme-right wing party Golden Dawn showed up to the German embassy in considerable numbers to add their voice to the protest.
The Cypriot crisis has also reignited the debate over individual Eurozone nations' right to set taxes at rates that greatly deviate from Eurozone norms. The issue was hotly disputed during Ireland's bailout negotiations, when then French President Nikolas Sarkozy demanded that Ireland raise its relatively low corporate tax rate, in order to allow Europe to compete. Now, Cyprus' ability to hold the status as a tax haven for large-scale depositors is being brought into question.
How the situation in Cyrpus will pan out is now a matter of time and speculation. Yet, if anything is clear, it is that Europe has shown itself as having come through five years of financial hardship no more united than it was before.