World View: Germany, Russia Blamed for Cyprus Crisis

This morning's key headlines from

  • Cyprus president pleads for nation to accept bailout terms
  • Germany and Russia get blamed for the Cyprus crisis
  • Israel's government turns hardline pro-settlement on eve of Obama's visit

Cyprus president pleads for nation to accept bailout terms

 Cyprus President Nicos Anastasiades
Cyprus President Nicos Anastasiades

It's now become clear that European financial negotiators vastly underestimated the widespread furious public reaction to the terms of the bailout of Cyprus's banks that we reported yesterday.

Cyprus President Nicos Anastasiades went on nationwide television on Sunday and called it the greatest crisis since the 1974 war with Turkey. It was just a month ago that Anastasiades won the election to the presidency, and one of his promises was that bank deposits would be completely safe. Now he has to explain that he has no choice but to renege on that promise or face collapse of the banking system and the economy:

"The first option would have led to a disorderly default as a result of the decision by the European Central Bank for the immediate stop of the emergency liquidity assistance to the two major Cypriot banks.

The second is the option of a very difficult but controlled and manageable situation that will eventually lead to the stabilization of the economy and to a rebound."

Perhaps the biggest shock of all to the public is that small savings accounts were reduced by 6.7%. Accounts with totals up to 100,000 euros are supposed to fully insured in many countries in the euro zone, including Cyprus, just accounts in American banks are supposed to be insured up to $250,000, but now the safety deposit insurance throughout Europe has been thrown into question, as it's clear that a government can revoke the insurance on a moment's notice.

Monday is a long-scheduled bank holiday in Cyprus, and the Parliament will debate on Monday whether to even accept the bailout on those terms. If not, then Cyprus' banking system will collapse, unless some other solution can be found.

Banks will be closed on Monday, and are scheduled to reopen on Tuesday. It's expected that when the banks reopen, there will bank runs that will deplete all the banks of cash. For that reason, Cyprus is considering keeping the banks closed on Tuesday as well. Cyprus Mail and Kathimerini and Cyprus Central Bank

Germany and Russia get blamed for the Cyprus crisis

Opposition political parties are blaming the European Union, especially Germany, for "vindictive and neo-colonial" practices that led to the current crisis. According to the leader of the communist AKEL party: "They are attempting to impose their political options on Cyprus, leading out country and people to conditions that are similar to those in other countries of the European south."

Russians are unhappy at being made scapegoats for the Cyprus crisis. A lot of what happened can be attributed to German animosity towards Russia, particularly the fact that German officials refused to bail out Russian oligarchs who had "dirty money" in Cyprus banks. However, not all Russian money is "dirty," as there are plenty of legitimate businesses, especially in the energy industry, that have put money into Cyprus.

Some Russian businessmen are in a panic. Russian businesses and individuals have deposited tens of billions of dollars in Cyprus banks, and they are going to lose 10% of those deposits when the banks reopen. For that reason, some Europeans are hoping that Cyprus will reject the bailout, and get another bailout from Russia. Cyprus Mail and AFP

Israel's government turns hardline pro-settlement on eve of Obama's visit

After six weeks of tough negotiations, following the election where he didn't do as well as he had hoped, Israel's prime minister Benjamin Netanyahu has assembled a new governing coalition, just two days before President Barack Obama is scheduled to visit. However, much to Obama's likely chagrin, most of the key positions in the government will be filled by pro-settlement hardliners. In particular, the housing ministry has been given to Uri Ariel, an ultra-nationalist settler in the Jewish Home party, which completely opposes a Palestinian state. Even the new Defense Minister, Moshe “Boogie” Yaalon, is a military veteran and staunch rightwinger known for his support of the Jewish settler movement. Israel's aggressive settlement policy has been a major source of world criticism for Israel, and has substantially heightened tensions with the Palestinians. President Obama has urged Israel to halt West Bank settlement building. Arab News / AFP and Jerusalem Post

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