Cyprus in danger By Kononova Aleksandra
Causes of financial crisis § The absence of economic diversification – Cypriot specialization on offshore sector (tax privileges) § Unsuccessful investments in of the Cypriot banks into the Greek debt obligations § Rise in non-performing loans § The burst of the so-called economic bubble on the speculative real estate market § Government inability to refund its state expenses from the international markets § The downgrading of the Cypriot economy to junk status by international rating agencies § The weakening of the European Union and euro-zone economics, in particular countries, which fell under the economic crisis of 2008.
In result § Cyprus has agreed to a 10 billion euro ($13 billion) European Union bailout § The aid plan will protect all deposits of less than € 100, 000, but is likely to impose a levy or "haircut" for account holders with more than € 100, 000 at the two biggest banks -- the Bank of Cyprus and Popular Bank of Cyprus They could lose up to 60% of their savings. § Popular Bank will be broken up immediately, and its viable assets will be integrated into the Bank of Cyprus § Eurogroup predicts that Cyprus' public debt will reach 100% of GDP in 2020 § Cypriot parliament rejected the bailout offer due to public outrage over the levy, prompting fears of a run on the country's banks
expropriation of 10% of money held in bank accounts investors, companies or private individuals disagree to maintain a deposit with a Cypriot bank
What’s the Russian connection? § Cyprus is a ‘tax haven’ for Russia since the early 1990 s § Nearly a third of the money in Cyprus' banks is Russian, and the country's 10% corporate tax - half that of Russia's § Cypriot attempt to secure Russian help was unsuccessful
The forthcoming aftermath of the crisis § Cyprus’s withdrawal from the euro-zone § Liquidation of the banking sector in fact as one of the two fundamentals of Cyprus’s economy (together with tourism) § Negative effect on the direct investment flow in Russian economy § Development of natural gas reserves, which has recently been located
Behind the scenes § Fall 2012 that natural gas reserves on Cypriot shelf may make up 1. 2 trillion cubic meters and amount to 2 trillion euro § The located minerals acted as a security of the bailout offered by international creditors
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