As I tweeted over the weekend, the world seemed to be getting worked up about the Cyprus developments over the weekend but what many people were failing to consider on Sunday night when we saw pre-market futures trading significantly lower, was that the deal still had to be voted in parliament. Today the parliamentary vote took place and in an unanimous vote, members of parliament rejected the deal. The country has not gone broke and while there will certainly be be taking their money out of the banks when they open, I doubt that these parliamentarians want to put anything into place that will affect their ability to be re-elected and in politics, that is what it is all about.
Make no mistake about it. There will be a run on the banks when the bank holiday in Cyprus is over but to even suggest that a country whose economy is the size of the state of Nebraska and factors 0.25% into the entire GDP of the Euro Zone will bring down nations and cause financial chaos is ludicrous. This goes to show that what we lack in today’s world is the ability to step back, take a deep breath and analyze the entire scope of any situation we are presented with. We live in an internet world where we expect answers to our questions immediately, where we want immediate solutions to our problems and a world in which nobody seems to take things on a day to day basis with a well thought out approach. We need to learn to step back, analyze, think and then act.
There is no doubt that the issue in Cyprus would have set a dangerous precedent but only in a country with a population of a million people. Such a levy would never fly in any other larger nation. As has occurred since the start of the financial crisis in Europe, the ECB will come to the aid of Cyprus. Russia, who has many holdings in banks across that small European nation would probably help the nation from going bankrupt. At the end of the day, and in hindsight of course, perhaps everyone over-reacted. The fact that the US markets didn’t melt down on Monday goes to show that as people had time to digest the news and the reality that parliament was likely to vote against the levy should have been the clue that perhaps people over-reacted.
President Nicos Anastasiades, led the rebellion by abstaining his vote. This led to a further 19 abstentions and 36 votes against the levy. The President was the one who made the call to Germany to advise Merkel that the deal would not be approved in Parliament. In his words, “isn’t just and that it’s against the interest of Cyprus.”
According to The Telegraph, the Cypriot finance ministry said its boss had gone to Moscow. Government sources also said the Cypriot government was considering asking Midde East investors for help. Cypriot banks will be closed for the fourth day today. The Royal Air Force flew €1m in cash to Cyprus for army personnel.
