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By Dr Olga Kandinskaia, CIIM Business School
It has been a truly sad experience for me to watch the dramatic series of events unfolding in the last ten days here in Cyprus. Being Russian and having lived through a number of crises in Russia before I moved to Cyprus eleven years ago, I thought I was well prepared to deal with the economic uncertainties of Europe. After all, I vividly remember the empty shelves of the grocery stores and the endless queues for bread at the end of 1991 – right before the extremely painful transformation of the planned Soviet economy into the equivalent of the wild market capitalism. I have lived through the 1998 default when the Russian government devalued the ruble, refused to pay domestic debt, and declared a moratorium on payment to foreign creditors. For simple Russians it meant losing almost all of our savings due to massive bank closures and severe devaluation. The historical reports may say that Russia bounced back very quickly from the 1998 crisis (largely due to the luck of the growing oil and gas prices), but believe me, the feelings of disappointment, anger, pessimism and negativity have prevailed for years. This (and NOT money laundering!) is the biggest reason why Russians try to get away from their motherland and prefer to keep their money in banks abroad.
Sadly, what I have seen in Cyprus in the last ten days felt painfully familiar. It is almost incredible how in a matter of a few days the whole Cypriot society has been submerged into the dangerous dark waters of gloom and uncertainty. The fear of the soviet-expropriation-style tax to be imposed even on small/insured depositors destroyed the trust of the locals, while foreign investors are cursing to stay away from our banking sector once (or more like IF) they manage to recover their large deposits. Local businesses – both small and large – are outraged by the suddenly imposed deterioration of the economic climate. People are extremely worried about their future. Nothing seems safe and secure anymore.
Last Friday, when the tension reached its peak, I witnessed desperate queues at ATMs and angry protests of bank employees. I never thought I’d see such things happening here in Cyprus. Neither could I imagine myself shopping for the double amount of food on Saturday and being approached by an American TV crew asking me why families are storing up on the food essentials and whether we are worried. The torturing uncertainty continued till the early hours of Monday. Finally the Eurogroup reached the agreement with the Cyprus authorities. Now we keep hearing that we should be happy that the immediate catastrophe has been averted, and that the EU will help us through the collapse of our economy. Somehow I don’t see any happy people around…
What I find incomprehensible is that this shock therapy is happening in an EU country and it is not a mistake or incompetence of local politicians but is a medicine prescribed by the EU, ECB and IMF who are supposed to provide positive advice and whose ultimate mission is to ensure economic stability of the Eurozone. One of my Cypriot students commented last week: “My disappointment is big… how people with MSc, PhDs, Nobel in Economics, made a mess with the Cyprus economy…” There is certainly fault on the Cyprus side. Our politicians ignored the problems for several years. It is obvious that the Cyprus economy has many faults and has been in need of a restructuring for a while, but the barbarian methods of economic destruction and political humiliation, which troika did not hesitate to test out in the case of Cyprus, are really questionable. In the end, these methods defy the whole purpose of what it is all about, and we could even say that they undermine the very basic foundations of the European Union.
Last year the EU received the Nobel Peace prize. To quote the Nobel Prize committee, it was awarded to the EU because "for over six decades it contributed to the advancement of peace and reconciliation, democracy and human rights in Europe". If there was a prize to the EU for the Cyprus case, it should read: “for the advancement of misery and confrontation, poverty and national humiliation”.
However, I do not want to end on a pessimistic note (even that I am allowed because I am Russian). Let us hope that all sides involved in this nasty episode have learned valuable lessons. I believe in the capacity of people in Cyprus (both Cypriots and foreigners like myself who consider this island as their home) to recover and bounce back. I also believe that the Cyprus case will serve as a wakeup call in Europe to signal the inappropriateness of the troika methods – no matter what “greater good” they advocate.
Olga Kandinskaia is Assistant Professor of Finance and Director of the MSc in Management Programme at the Cyprus International Institute of Management.
