Sunday, January 20, 2013

The German Non-Solution to Cyprus

There have been several business stories out of Germany this week that connected onto the Cyprus bail-out problem.  Germany has been at the front of the line throughout Europe....walking in and putting cash on the bail out a number of nations (Greece and Ireland for example).  So most folks from Cyprus thought that they'd be offered the same deal when they were admitting financial failure. Germans aren't tempted to budge on helping the island of Cyprus.

So this brings up this interesting topic of how Cyprus functions in the European business world, and why the Germans aren't tempted to help them.

Over the years....Cyprus has been this odd player in Europe.  For decades, Greeks and Turks on the island tended to get along.  The British were actually a major part of the atmosphere, after World War II.

In 1974, after almost a decade of violence activities between the local Turks and Greeks....a little war started up on the island, and a DMZ was established.  The Turks took control of roughly forty percent of the island, and the local Cypriot group took control of the rest.

The Cypriot group had various influences on its operation, and since the Soviet empire kinda came to a closure....Cyprus has become a place where Russian business men often meet...discuss deals....swap money (perhaps laundering money as well), and there are various parts of the government that likely function only with corrupted leadership.

The Germans aren't idiots at this comical state of affairs in Cyprus.  They know how money is flown in, distributed and shifted around.  So to say that the government is under threat of failure....well, if the Russians cared enough...they'd pump up the economy themselves.

It's an odd deal when you examine how much money resides in Cyprus banks (figure roughly eight times the amount that the island itself generates).  This simply begs more questions....which can't be truthfully answered.

My humble guess is that some wealthy Russians will eventually realize that Cyprus will likely fail without some type of help.  So a deal will be worked out.  Somewhere in this mix....Russian mafia guys will be introduced, and expectations of pay-back will be inferred.  The Cypriot government guys might be stupid enough to accept the Russian money, but they will be shocked how their generally corrupted past will crumble when the mafia guys ask for their money payments.

Maybe in the long-run....this does clean up Cypriot politics and makes the government more accountable.  Maybe.  If will make for a fairly interesting movie in ten a bunch of mafia guys screwed up and had to take out half of the Cypriot leadership to fix their problems.  And the Germans?  They will be mostly amazed how this worked itself out...bullet by bullet.

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