Insight: Desperate for bailout, Cyprus plays risky geopolitical game

Wed Mar 20, 2013 4:13pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Peter Apps and Henning Gloystein

LONDON (Reuters) - As it tries to play Russia off against Europe to salvage its economy, Cyprus has embarked on a high-stakes poker game that could see almost everyone lose.

Its banks shattered by exposure to Greek debt, the island state urgently needs a way of bailing out its financial system.

Cypriot policymakers hope they can begin to monetise as yet undeveloped offshore gas fields and position themselves as a vital source of energy for Europe.

However, such income is still years away and delusions of becoming the Qatar of the eastern Mediterranean in the 2020s may prompt Cyprus to overplay its hand now.

In the coming days, Nicosia may have to choose between a European bailout that punishes savers - including both ordinary Cypriots and much richer Russian investors - and a deal with Moscow with as yet unknown strings attached.

At worst, it could emerge with its financial system - by far the biggest contributor to the economy - in ruins along with relations with its closest allies.

"Cyprus has always been complicated," said James Ker-Lindsay, a senior fellow at the London School of Economics and expert on the 50-year-old conflict between Greek and Turkish Cypriots. "But this is by far the most complex it has been.

"They are in trouble. They may not want to make these decisions, they know they have to."   Continued...

 
Anti-bailout protesters raise their open palms showing the word "No" after Cyprus's parliament rejected a proposed levy on bank deposits in Nicosia March 19, 2013. REUTERS/Yorgos Karahalis