What is common between the Cyprus epopee and Ukraine’s energy question?

In the past 24 hours the situation concerning Cyprus’s confiscation tax has become more acute. Cypriot parliament has rejected bank deposit tax bill, although namely this bill was the main condition for getting financial aid from the EU and IMF: with it help it was supposed to write off 6.75 percent of sum from 20 to 100 thousand euros’ deposits, and 9 percent – from larger deposits.

Reportedly by dpa agency, Germany’s Minister of Finance Wolfgang Shaeuble was disappointed by the parliament’s decision. In particular, late that day, when it became known that Cyprus would not raise the deposit tax rates, he stated: “German government regrets that Nicosia has refused to adopt the program, developed jointly with the Eurogroup and aimed at saving the island from bankruptcy.”

In particular, in the past three days numerous reports with estimations of the RF’s losses if Cyprus suddenly goes bankrupt have appeared in the media. According to the open data, approximately 68 billion euros of all money deposited in Cyprian banking system approximately 25-30 billion belong to Russians. If the local authorities fail to stabilize the situation, these deposits will get frozen, at least for a while. Besides, Russian corporations have already reported extreme losses caused by the two-day outage of Cyprian banks.

However, as it turned out, Moscow is not in a hurry to save Cyprus. After parliament’s rejection of the bank deposit tax bill, ministers of finance of Russia and Cyprus have not yet agreed any conditions of helping the country. “The negotiations will continue on another platform,” Cyprian Minister of Finance Michalis Sarris stated after a 1.5-hour meeting with his Russian counterpart Anton Siluanov. Russian agencies reported without mentioning their sources that Michalis Sarris went to negotiate with RF First Vice Prime Minister Igor Shuvalov.

According to Wall Street Journal, a delegation from Cyprus went to Moscow for negotiations, in order to ask for a several-billion loan in exchange for a share in their banks and energy assets. Cyprus also asks for putting off payments of the 2.5-billion loan issued in 2011 (nearly 3.3 billion US dollars) and reduce the interest rates. Russia has made it clear that the question of restructuring of Cyprus’s loan can be resolved positively only if EU countries’ actions on Cyprus’s rescue are coordinated with Moscow.

By Alla DUBROVYK, The Day

Arkady MOSHES, expert of the Finnish Institute of International Affairs:

“Eurozone will not collapse. And I think that Cyprus will not be leaving the eurozone because such move won’t solve the problem of devaluation or any other problems. You can make estimates in whatever currency you want, but if your bank liabilities are several times higher than the GDP, it is clear that the problem is not in the units. This is a very serious structural problem of the economy, which can be solved only by means of implementing very serious structural reforms. That is why neither Cyprus nor eurozone will benefit from its exit from the eurozone.”

Cypriots are very offended by the fact that the EU imposes such scheme of solving their debt. How, in your opinion, should Cyprus’ problem be solved?

“I think that the problem of having a habit of living in debt and, at the same time, as if retaining the elements of not transparent or not fully transparent economy should be solved by all means. I certainly understand the feelings of the people, especially those who have small deposits. That is why, I believe that we shall continue searching for a more fair formula for treating private depositors with small deposits. However, the position of the European Union in the form I see it now seems absolutely justified. If there was more time we could, of course, think more about the formula and the math of the process. But the basic approach that it’s time to start living within their financial resources and start implementing structural reforms, and if this is not done voluntarily, it should be done at the instigation of the creditors, seems to be an absolutely justified approach. All European countries that have been subjected to some impact of their creditors had to sacrifice something and got something in return. This is a compromise. As a result of such compromises it is impossible to make everyone happy. But we can see that, in fact, there are countries where the improvement of financial discipline leads to significant positive changes, and there are countries, where the problem was more advanced and solving of this problem will require more time.”

What do you think about the fact that after rejecting the suggestion of the EU, the Cypriots went to Russia and Gazprom to ask them for money? And this happened at the time when German Chancellor Angela Merkel said that Cyprus had to negotiate financial assistance only with the trio of international lenders – the European Union, the European Central Bank, and the International Monetary Fund, without attracting any third party.

“In my opinion, receiving financial assistance from Moscow won’t solve any problem today. It would only transform it. The received money will be used for recovering the assets of some specific customers by increasing the total debt of the state. As a result, after some customers, individuals, and companies will rescue their investments this problem will become even more acute. Looking at this situation we can think back to the Russian experience in 1998. As long as new loans were received the game of refinancing continued. And the longer it lasted, the more painful was the end.

“It is understandable why Cypriots are trying to find a solution in Moscow. It’s all quite obvious. They already received loans there and are now trying to buy some time. However, since the problem is not in this particular debt, but rather in the structural state of the economy of this island, it won’t be solved in this way. They can try to do so, but it won’t solve the main problem.

“If Moscow agrees to that, the outcome will be as follows: again the group of people, whose interests could’ve been affected in the event of introducing the tax on bank deposits, will be rescued from financial problems, but as a result the Russian budget will have another problem of public debt that is not being paid off and default, which it has faced many times in different regions of the world over the past 20 years and every time nothing good in terms of refunding the debt to the Russian treasury came out of it.”

By Mykola SIRUK, The Day