Following the dramatic showdown between Cyprus and the Troika (IMF, ECB, EU), during which both my tiny homeland and the Eurozone behemoth were at stake, and which resulted in a dubious outcome, I decided to mark the occasion with a dramatic but appropriate tune, which I played all day on my PC.
The reason? To remind myself of what the next steps are, other than a plunge into Tartarus.
Let me put things in context. Why was the outcome dubious to begin with? Or, as they say in Germany…
Warum, Warum Ist Die Banane Krumm?
The reasons are five.
First, Cyprus had to accept a destructive rescue plan that will most definitely cripple its entire banking sector, and, thus, its economy.
Much of the decision-making was conducted under pressure. The negotiation process was attritional.
Second, this was done under the worst possible circumstances. Much of the decision-making was conducted under pressure. The negotiation process was attritional, shredding the ties of goodwill between the EU and Cyprus, while sending unnerving signals to other member states.
Third, a bail-in of approximately 30% was agreed on all Bank of Cyprus accounts over and above 100,000 Euros, a taboo never before broken in modern Europe. Though the Euro Group emphasized that Cyprus was a special, one-off case, it spooked people round the continent.
Fourth, Russia is currently aggravated by the fact that roughly 20 billion Euros held by Russian offshore companies in Cyprus will be trimmed. Retaliatory action will surely be taken in due course, which Europe may well afford (or may even be expecting under the auspices of an ongoing economic war, which Germany is currently waging on both friendly and rival countries) but which Cyprus will have a very hard time dealing with.
Last but not least, the rescue plan isn’t targeting the problem at its root. The Cyprus economy will not become more sustainable.
Last but not least, the rescue plan isn’t targeting the problem at its root. The Cyprus economy will not become more sustainable, as was the ostensible aim of this foul memorandum, despite the noble and bold intentions of the government, who negotiated it. Even though the island had it coming for a while, having failed to act accordingly when the first signs of trouble became evident months ago – some say years ago – this was ‘overkill without return.’ The overgrown and overexposed Cyprus banking sector has been shrunk overnight, crippling GDP growth and shocking the island into trauma, while the bloated and unsustainable public sector that has been eating away at the country’s viability for years has not been dealt with at all. It has not even been mentioned.
Thus, a second memorandum is bound to follow in order to address not only an imminent GDP shortfall, but also the clogging of the economy’s arteries from chronically-bloated state expenses, abused state pensions, belligerent union initiatives, and inefficiently state-run organizations.
It is an inevitable development. What doesn’t work must be either fixed or replaced. There’s no way around it.
If only it could take place without throwing everything to the dogs. There are parts of the island that work admirably well, from select public sector departments to numerous private enterprises.
Unfortunately the healthy parts of the island are inextricably entwined with toxic appendages and faltering organs. They will have a hard time escaping the scalpel, if not the cleaver.
So How Now Dear Cow?
Sadly, Cyprus will have to suffer extensive deconstruction and catharsis in order to get out of its plight. The old and catastrophic mentality that has lead the island to its doom will have to be discarded in favor of something viable.
The demise of the old and faltering will bring about the birth of something fresh, functional and exciting
Some individuals would call this a promising prospect and not a sad one – a blessing in disguise, if you will, or necessary pain, whereby the demise of the old and faltering will bring about the birth of something fresh, functional and exciting. It will help the island move not round the same spot, like a goldfish in a drain, as it has been doing over the past years, but forward, like a ship on open waters, heading for a sustainable future.
Let it be done. It is time for the young and able of my small but promising homeland to rise and take control of the helm. Let the able among us displace the unable, so that life may be conducted in ways that withstand both the tests of time as well as the challenges of a competitive world.
To mark this painful but potentially momentous transition, I have chosen the following song: Death Is The Road To Awe, which, like I said, I was playing all day yesterday on my PC. A little over-dramatic to the casual eye, I admit, and slightly depressing at first sound, but a most appropriate tune all the same, especially if one listens to it from start to end.
Clearly, what is happening right now in Cyprus is the unquestionable demise of something unworthy. And what awaits those who will walk through the coming trials and tribulations without fear, emerging stronger on the other side, free from the burdens that were dragging them down and eager to carry on, is nothing short of awesome.
Own your misfortunes before they hit you and they never really hit you. Own the uncertainty that envelops you and you will most certainly transcend it.
For those among us who feel I am being too rational in my assessment of the situation, let me refer them to what a wise friend of mine told me once, during a time of terrible uncertainty: “Own your misfortunes before they hit you and they never really hit you. Own the uncertainty that envelops you and you will most certainly transcend it.”
What better way to own this misfortune and the uncertainty it has brought forth than to use them as platforms for a new beginning?
N.B. – In practical terms, the way forward can be achieved with the issuance of promissory notes and other certificates of investment to all persons, physical or legal, whose accounts have been trimmed. These notes and certificates are to be backed against revenues from future natural gas reserve sales and other profitable enterprises at a rate that matches, or beats, the haircut, thereby staving off all damages incurred on depositors.
The idea is viable and the resources are available. It can be done. All Cyprus needs are good planning, sound coordination and solid commitment to a mid-term goal on a national scale.
It is a truly awesome opportunity for a people to excel and a nation to reinvent itself.