Cyprus Scrambles To Change Terms Of Its €10Bn Bailout

As the Cyprus government it's contemplating to renegotiate the €10Bn bailout pressures are rising because of the unstable state of the Cyprus government and the pressure that the Russian government it's putting to hear a final decision. First of all, the beginning of the Cyprus debt problems started when the the Cyprus governement kept accumulating up expenses to international Markets and the fact that it was impossible to pay them back. Therefore, they are at the point now were the reserve its thinking about of giving the government €10Bn as a bailout. In order to do that they have to close the second largest bank which is the Cypres Popular Bank formerly known as Marfin Popular Bank.

Second of all, Cyprus is facing the terms of the bailout that are under the deal of struck with international lenders over the weekend, a 6.75 per cent levy would be imposed on all deposits in the island’s banks under €100,000, while accounts over that threshold would face a 9.9 per cent levy. Hope, Kerin. "Cyprus Scrambles to Change terms of its €10Bn Bailout ." Financial Times 19 03 2013, n. pag. Web. 3 Apr. 2013. Taking in consideration the big issue with this bailout will be the Russian government because the Russian governemet and the Cyprus government are codependent on each other. Although, the Russian governement gave €2,5Bn loan to Cyprus, and that loan has kept Cyprus government afloat. Also, the Russian governmet is afraid and feel threatened from loosing money from the escalating levy. In addition, Cyprus has not finalized the desicion or the terms of the bailout. For that reason, Cyprus as a tax haven can possibly be profitable to Russia. On the other hand, if the bailout is renegotiate to higher levies Russia will suffer signiffically.

To conclude, cyprus economy started to get hit like all others from the big 2007-2008 crisis. They were strongly affected by the Greek crisis because of the proximity between the 2 countries

and they took in €5Bn of Greek debt which is a lot for a small economy. It can be said to be irresponsible for the EU to accept cyprus knowing about the offshore banking industry and then frown upon it like they didnt know. The result is the long term downturn for the cyprus economy, the withdrawal of foreign, mainly russian investment and most importantly the attitude of the EU and Eurogroupe which in my oppinion is always fanatic "dont let anyone out" so they are determined to keep all euro countries in whatever the cost for those countries and for taxpayers in Germany and others. The new thing here is that they are now ready to rob people of their savings setting a most dangerous precedent.

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