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The Cyprus nuclear solution

March 19, 2013

“When you hear hoofbeats behind you, don’t expect to see a zebra”, “When you hear hoofbeats behind you, don’t expect to see a zebra”, which was coined in a slightly modified form in the late 1940s by Dr. Theodore Woodward, a former professor at the University of Maryland School of Medicine in Baltimore. [2] Since horses are the most commonly encountered hoofed animal for most people and zebras are comparatively rarely encountered, logically one could confidently guess that the animal making the hoofbeats is probably a horse. By 1960, the aphorism was widely known in medical circles. [3] As you can imagine, this is exactly how we felt hearing the Eurogroup decision to haircut all deposits in Cyprus . Our economy is at least 50% dependent on International services including banking, accounting and law. Anyone believing that this “one off “ haircut will not significantly diminish this business, and cause a major drop in our GDP, must be working in some scientific lab with no knowledge whatsoever of how the real business world really works.

Some say that if we accept this “one off “ haircut our debt to GDP ratio will become sustainable at about 100%. But if our GDP drops by 25% as a consequence of the haircut our debt to GDP ratio will be again at the same level that it is today. Only in addition to that, we would have sold at bargain prices our gold reserves, our telecommunications company, our electric authority, our port authority, our water reserves and anything else that as a country we can use to get any cash.

Nuclear solution Our bank subsidiaries in Greece have cost the Cyprus Government over €7 billion. If they were not subsidiaries but under the Greek Central bank, then these loses would have been absorbed by the Greek rescue plan. A lot of politicians have blamed Cyprus previous President for not demanding this.

So the solution is to follow the icesave model and move the remaining €10 billion the Cypriot Banks have in deposits in Greece to Cyprus . What happens to these banks afterwards,can be decided by the same people who ordered the PSI in Greece as well as others who are responsible for the systemic risks of Europe . It is not our problem, we are a small bankrupt island and trying to save our selves.

Cyprus is not willing to abandon the only political friend we have, so we can please countries, out to exhort us. Russia should get for free the natural gas plots that face directly to Turkey and in exchange deposit in our banks €5 billion.

The €10 billion we repatriate from Greek branches and the €5 billion from Russia is plenty to cover all our liquidity needs, but in the event that they are not enough, we can stop paying all the foreign Cyprus bond holders. If this money is not enough we can start printing and paying in our own currency. And Europe , if they can, maybe they should throw us out of the Euro. So what ? Ι rather be poor than having to deal with the Euro mafia that would enslave me anyway.

Christos Savva

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