web analytics
January 31, 2015 / 11 Shevat, 5775
 
At a Glance
InDepth
Sponsored Post


Cyprus: When the Law Prescribes Theft

Now is a good time for the EU to take stock and recognize that the entire Cyprus problem, like the Greece problem, was created by the actions of government.
President of Cyprus Dimitris Christofias

President of Cyprus Dimitris Christofias
Photo Credit: Miriam Alster / FLASH90

Who will shoulder the pain from the Cyprus bailout deal?

The first-order sufferers will be small businessmen (mostly Russian) and upper-middle Cypriots and foreign residents with their money in Cypriot banks.  But the whole region will take a longer-term blow from the loss of Cyprus as a place for upstart businesses to park capital.  Capital that can’t be parked cheaply in the E.U. won’t be invested in the E.U. – at least not by the smaller, less financially “connected” entrepreneurs who drive economic dynamism and growth.

The big Russian firms that bank with the Russian Commercial Bank in Cyprus have protection in the deal, although they will have more trouble moving capital around under the “capital controls” to be implemented, which hwill keep depositors from draining their accounts.  Russia has been relatively quiet and mild on the terms of the Cyprus deal, largely because the biggest Russian depositors in Cyprus bank with the Russian Commercial Bank and won’t be hit with the 40% “amputation” tax on their accounts.  For the average traditionally-autocratic government, smaller entrepreneurs are always easier to accept as roadkill.  They may create jobs and revenue, but they aren’t in a position to line politicians’ pockets and they’re not easy to marshal as a means of geopolitical leverage – unlike, say, Gazprom.

It will hurt the E.U. for Russians to flee Cyprus; it will hurt equally for only the biggest, most state-connected Russians to remain in Cyprus.  All the Russians won’t necessarily flee,  but if nothing else changes, and the bank deal defines the future, the dynamism of the Russian economic presence in Cyprus will be bled off.  The economy of Cyprus will become more of an elephants’ dance than a coyote squabble, even with the gas eventually coming up from the ocean floor.  Cyprus will go further down the road taken by too much of the E.U., discouraging entrepreneurship and overserving itself on the future obligations.

Italy and Spain are obvious others to bring up, of course, and everyone is doing that.  Besides serious debt and bank-solvency problems, they have already gone further down the controlled-economy road than Cyprus has (which is the main reason for their debt and solvency problems).  Their big-name companies, the international giants, are incapable of growing the economy, because it doesn’t work that way.  The big firms aren’t the future.  Small entrepreneurship is always and everywhere the future, and in Italy and Spain, engaging in it openly is discouraged by regulation and the tax code.

There is a regional aspect to this, of course; a difference among points of the compass, inside both countries, and between city and hinterland.  Such differences are creating fault lines throughout the E.U.  Those gaps aren’t going to narrow any time soon.  Now is a good time for the E.U. to take stock and recognize that the entire Cyprus problem, like the Greece problem, was created by the actions of government.

Left to their own devices, people coming together for economic activity don’t do this to themselves.  Failure is liquidated; it is not enshrined in policy.  But governments do the opposite, propping up and enabling failure for as long as they can, because they insist for political reasons on the policies that make it inevitable.  Government’s perspective is always political, and therefore inimical to economic efficiency.  The more government is chartered to control, the richer a society has to be to afford it.  And unfortunately, there’s a kind of “peak government” rule to this: a society in which government controls too much cannot stay rich.

The U.S. is headed down this path too, but most of the E.U. is already further down it.  The E.U. and its individual nations created this problem through policy.  There’s a political relief-valve aspect to making “the Russians” pay for it (although the FT article linked to above points out that at-risk Russians expect to find ways to get their money away from the amputator’s saw).  But the Cyprus crisis illustrates nicely that the cost of over-regulatory government will lead to outright theft from the people.  Policy as cosmically comprehensive as that in the E.U. model will indebt everyone, until theft seems to be the only option left.

This isn’t a condition for stability.  Moscow hasn’t given up on Cyprus, which still sits enticingly athwart Turkey and Europe.  The Cyprus deal won’t last very long – not while Cyprus and the E.U. remain in the vise of the E.U.’s negative, defensive policies.  (If the Russians sneak enough of their money out, the Cyprus deal won’t last long enough to auction off the office supplies with the Laiki logo).

About the Author:


If you don't see your comment after publishing it, refresh the page.

Our comments section is intended for meaningful responses and debates in a civilized manner. We ask that you respect the fact that we are a religious Jewish website and avoid inappropriate language at all cost.

If you promote any foreign religions, gods or messiahs, lies about Israel, anti-Semitism, or advocate violence (except against terrorists), your permission to comment may be revoked.

2 Responses to “Cyprus: When the Law Prescribes Theft”

  1. Charlie Hall says:

    "But the whole region will take a longer-term blow from the loss of Cyprus as a place for upstart businesses to park capital. "

    They can park it in any ordinary bank! Cyprus banks were paying interest rates far higher than the market. If something seems too good to be true, it probably is. Insured depositors are getting their money, but everyone else is losing. That is exactly what happens when a bank is closed by the FDIC in the US.

  2. Charlie Hall says:

    "But the whole region will take a longer-term blow from the loss of Cyprus as a place for upstart businesses to park capital. "

    They can park it in any ordinary bank! Cyprus banks were paying interest rates far higher than the market. If something seems too good to be true, it probably is. Insured depositors are getting their money, but everyone else is losing. That is exactly what happens when a bank is closed by the FDIC in the US.

Comments are closed.

SocialTwist Tell-a-Friend

Current Top Story
Jeremy Bird, working for Israeli campaign outfit V15, shown at Ted Talk, May 20, 2014.
V15 US Political Operative Marinated in Hate-Israel Activism
Latest Indepth Stories
Eli Weiss

Shepherding in the Shomron isn’t your usual kind of shepherding – despite his business-minded beginnings, Eli has discovered that a strong ideological impetus powers the job.

Resnick-013015-Pilot

I said to myself, “This story has got to be told. We’re losing this generation of World War II and if we don’t listen to them now, we’ve lost it.”

Eller-013015

His entire existence was about spreading simcha and glorifying G-d’s name on a daily basis.

IRAN-US-POLITICS-MILITARY

An Israeli strike could theoretically damage Iran’s nuclear program; only US can terminate program

At some point we need to stop simply defending and promoting Israel and start living in Israel

“We Jews are the only people who when we drop a book on the floor pick it up and kiss it.”

Though Zaide was the publisher of The Jewish Press, a big newspaper,I always remember him learning

Speaker Silver has been an extraordinary public servant since his election to the Assembly in 1975 and has been an exemplary leader of that body since 1994.

He spent the first leg of his daylong visit to the French capital at Hyper Cacher.

Drawing Congress into the Iran nuclear debate is the last thing the White House wants.

Great leaders like Miriam and like Sarah Schenirer possess the capacity to challenge the status quo that confronts them.

Obama’s foreign policy is viewed by both liberals and conservatives as deeply flawed

Many journalists are covertly blaming the Charlie Hebdo writers themselves through self-censorship.

Why does the Times relay different motivations and narratives for jihadists in Europe and Israel?

More Articles from J. E. Dyer
Steven Joel Sotloff as a hostage of ISIS, before his beheading.

In his travels as a journalist in the Islamic world, Sotloff never referred to his Jewishness.

ZIM Piraeus in happier days. (Image: ShipSpotting.com user b47b56)

ZIM Piraeus isn’t Israeli-owned or flagged, incidentally, it is Greek operated.

Obama is transparent, if you read his oracular signs with the right key.

ISIS has no intention of “marching on” Baghdad. The Sunni affiliates of ISIS are going to disrupt life there.

Oslo’s moment of unchallenged American supremacy and the illusion of unforced global stasis, passed.

Could the Obamas be any more “let ‘em eat cake”?

The Obama administration wants to take over the short-term financial services industry.

The topics are “The Reagan Strategy,” and the “Iran Time Bomb.”

Printed from: http://www.jewishpress.com/indepth/analysis/j-e-dyer/cyprus-when-the-law-prescribes-theft/2013/03/31/

Scan this QR code to visit this page online: