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South Cyprus: surveying the wreckage

26 March 2013

President Anastasiades is now back in Cyprus having secured a deal of 10 billion euro funding from the EU.

However while this bailout, plus funding for the Bank of Cyprus will allow the country to limp along; many painful years lie ahead.

Greek Cypriot confidence in the EU has now been shattered. They used to see the EU as their partner who would help them put pressure on Turkey at the negotiating table when the Cyprus issue was discussed. Now they are full of bitterness and disappointment with their EU partners.

Separately, Anastasiades has vowed that there will be a “criminal investigation into how Cyprus was led into crisis.” This is in clear reference to ex-President Christofias, who avoided signing any EU agreement before he left office, leaving Anastasiades to pick up the pieces. Christofias’s AKEL party abstained through all the passage of bills required to gain the bailout. It is ironic that Christofias refused far more lenient bailout terms some eight months ago.

Capital controls have now been implemented and the two largest banks will be closed at least until Thursday. Following on from this, will be the collapse of the offshore finance market; it is hard to see international investors flocking to banks where uninsured depositors stand to lose up to 40% of their money.

Unemployment will mount, primarily in banking where thousands of jobs will be lost with the closure of Cyprus Popular Bank (Laiki). Support services will also suffer heavily with job losses in legal and accountancy firms.

South Cyprus is on the road to deep recession.

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