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Tuesday, 19 March 2013

Germany Anschluß Cyprus

In a bizarre twist of events, Germany forbid Cyprus to enter any talks with Russia, discussing the debt issue and potential credit. The move by Merkel ominously reminds of Germany conduct before WWII, but substitute the territorial gain by economic despotism, and picture becomes painfully familiar.

No question Germany stands to lose the most if Euro collapse, but it also a major beneficiary of the single currency. Germany is the only parcel of growth and stability in EU, with sizable growth of GDP and low unemployment. All this can be changed in a snap of the fingers, when Euro will be pushed down the hill, by one "insignificant" EU members.

Russia on the other hand, stands to "donate' to EU cause about 3 billion Euro, and this may be a "dirty" money, or could be "tax planning" for large Russian corporations, but truth is this is the money of Russian beneficiaries, and at this point it doesn't matter how those money got to Cyprus.

The truth is the none of large corporations pay taxes at home, they leave it to middle income families, and Russia is no exception.

From semiofficial release: "German Chancellor Angela Merkel stressed in a phone call with the president of Cyprus that his country hold talks only with international creditors on its bailout deal and not third parties like Russia, a government spokeswoman said on Tuesday."

"A telephone call between Mrs Merkel and the Cypriot president took place yesterday evening," the spokeswoman told news agency AFP.

"The chancellor once again emphasized that the negotiations are to be conducted only with the Troika," she added, referring to the term used for the European Union, the European Central Bank and the International Monetary Fund- so much for democracy.

The truth is that Cyrus has what to offer to Russia, to underpin a new loan. Cyprus territorial waters are rich in oil and gas, and they are certainly of interest to Russian companies. Such a development particularly irritant to Germany, who quietly sabotage Russian effort to gain foot in European Energy markets.

The comment was made as the Cypriot finance minister headed to Moscow after an explosion of anger in Russia at the EU bailout deal for the island that could see Russian investors lose billions of euros.

In exchange for a €10 billion ($13 billion) bailout for debt-laden Cyprus agreed by EU leaders on Saturday, a controversial levy will be slapped on bank savings. The move has raised widespread anger in Cyprus, but also in Russia, where investors have placed vast amounts of cash in the island's banks.

The German spokeswoman also declined to say whether the phone conversation took place before or after Merkel met French President Francois Hollande and European Commission president Jose Manuel Barroso in Berlin late Monday.

Cyprus Tuesday was reviewing its bailout package ahead of a scheduled parliamentary vote on the deal after the eurozone urged a rethink on the controversial levy on bank deposits.

But German Finance Minister Wolfgang Schäuble said on Tuesday that investors who placed their money in Cyprus in order to pay less tax should shoulder the risks when it comes to a bailout.

"Whoever invests their money in a country where they pay less tax, and perhaps where there is less supervision, shoulders the risk when that country's banks are no longer solvent. That's a fact," Schäuble said in an interview on German public radio Deutschlandfunk.

If investors from Russia and elsewhere were not to foot the bill for the bailout, then it would fall to European taxpayers to pay for the billions of foreign investment in Cyprus, Schäuble said. "That would be irresponsible," he said.

The minister also said that the Cyprus economic model, which used low tax rates to attract foreign money, was "bankrupt".

The eurozone has told debt-hit Cyprus to revise the controversial levy on bank deposits to allow small savers to escape the tax amid a public outcry and fears of a bank run.

The statement from eurozone finance ministers came Monday after Cyprus bulked at putting the bailout plans to a parliamentary vote, as the growing uncertainty forced a prolonged closure of the island's banks.

Cyprus shut its banks until at least Thursday and delayed a parliamentary vote on the package until Tuesday after large queues formed at ATMs on the island.


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