By Fiona Mullen
Director, Sapienta Economics
If we fall out of the euro, the Argentina crisis suggests that the new currency will fall by 75%. That means that our personal and state debts will quadruple overnight, the value of our savings will fall to a quarter of what they were, and the price of imports will rocket.
It is still the worst of all scenarios. Cyprus depends for over 90% of its electricity on imported fuel oil. We don’t want another summer with electricity cuts. And they would be longer this time.
But if the European Central Bank (ECB) and our “friends” in the Union have already decided to kick us out (see other article), we have to throw all rules out of the window and concentrate on survival.
Here is my ten-point plan. It will annoy a Hell of a lot of people so I hope it never comes to this.
1. Since the ECB will have hung us out to try, tell the ECB we will pay the Emergency Liquidity Assistance (ELA) money back at our own pace and on our own terms.
2. They won’t like it. It will be the first “Official Sector Involvement (OSI) in the eurozone. They will sue big time. So step 2 is to hire some big shot US lawyers. It is important that they come from the US. They have no political skin in the game and they can meet the beast with the Rottweiler.
3. Hire the Icelandic tweeter who knows how this went down in Iceland and has lots of practical advice.
4. Hold a bondholder meeting for a private-sector debt restructuring deal that involves the assets of the banks, the sovereign debt and some clever US/UK private-sector brains.
5. Very important: keep the Europeans and the IMF out of its. If this scenario unfolds they are history (in more ways than one). These are private-sector solutions. No politicians or officials required.
6. Call on Cypriots to exercise restraint with cash withdrawals, buying up food stocks. We will have a much smaller pie to share so we cannot be greedy.
7. Return to the old Cyprus pound (CYP) model: capital controls for locals (residents); capital liberalisation under an offshore model for the rest.
8. Hire the bright young Cypriots, of whom there are plenty, to map out the new growth model that does not depend on money whizzing in and out of Cyprus.
9. Introduce incentives for Israelis to invest in venture capital, high-tech and solar power.
10. Real solar power production in every home. The current system gives no reason to take part.