The future of Cyprus is uncertain, and most probably would be filled with depression,
The island have been living way way above it’s standards for years, by joining the EU and the financial help that comes with it, and by being a haven for Russian oligarch money and being a money laundering center, the island have experienced growth and a high quality of living.
But the time for a reality check came, the banking system and the schemes collapsed and the naked truth was out in the open, Cyprus Production and services are negligible, the country GDP of $24 billion is mainly due to it’s banking/services sector.
With the latest crisis, and Money fleeing Cyprus, it would not be an exaggeration to predict the GDP sliced by half.
Cyprus plans to impose capital control that means you can not move your money out of Cyprus, Restricting capital transfers – movements of money or securities – to other countries but not payments out of Cyprus. But Cyprus currency is Euro … so will it be feasible? is Cyprus exiting the Euro as-well?
“What you’ve got is a monetary and banking system which is not supposed to impose capital controls. What they are doing is creating a sub-set of rules to create a new economic area, which is unprecedented,” said David Brown at New View Economics.
One could be to buy goods in another eurozone country, shifting funds out of the island to pay for them.
To counter it, the Cypriot government could introduce limits on such payments > that will impede business and slow turnover.
“The longer this lasts the more it will hurt the economy, the more likely it is that businesses run out of liquidity and have to default. Then we really get into trouble,” said Berenberg bank economist Christian Schulz.
So basically not only the skeleton of the Cypriot economy crumbled, but it seams the Cypriot politicians will put the mercy bullet in the head of Cyprus economy, killing the businesses and destabilizing the currency.
let’s call things as they are,
Earlier there was a proposal to take 6-10% of bank deposits in Cyprus, it was refused by the parliament,
then Cyprus went running to Russia to ask for help at the same time cutting communications with the EU representative and the IMF.
Russia didn’t want to get into this mess, so refused to help ….
As a result Cyprus went back to negotiating with the EU and IMF aiming to secure a bailout, but now Cyprus is considering a 25% levy on deposits of more than 100,000 euros.
in simple words most big money is Russian, and Cyprus don’t give a F* about it.
What a nice way for a country to behave, turning it’s back on the foreign investors!
what should have been done in my opinion is liquidating the scam banking system they have,
sell everything they have and nationalize these dishonest -gambling banks!
eventually make everyone pay, force the 6-9% levy that was decided before, after-all it’s Cyprus mess and Cypriots should pay for it not Russians!
My friend wanted to invest his money, and he had no idea what to do!
the Euro crisis have rendered the euro weak and fluctuating,
the sub prime crisis have rendered Real estates a not so attractive investment!
so what to invest in and what is really happening?
The main problem is the dollar, since the 70’s the dollar is no longer backed by gold, and thus the dollar paper became an i owe you paper from the the U.S. federal government! as long as the government financials are healthy, there are no reason to worry, but with the trillions of dollars in debts the situation started to become challenging!
If i write an owe you paper, and you can use this paper to buy whatever you want then you have no problems taking this i owe paper, but the moment this paper is no longer accepted in this or that shop, then you no longer would wish to use it!
It is the situation with the dollar, as long as countries were able to buy oil and other commodities with the dollar it was fine, but once some players in the commodities market started to try to price in euro and other currencies a problem was raised! this problem was also caused by the arrival of the Euro, a strong currency backed by gold!
This meant the US dollar had 2 options either to be backed by a commodity, or make sure others will remain accepting it, and this would be translated by disrupting trust in the Euro currency and making sure that the oil producing nations be afraid of shifting to another payment method!
The actual state of things is that, it is in no one interest to have the dollar fall, China have trillions of dollars in reserve and all other countries also have huge reserves and investments in dollar, if the dollar falls, this i owe you paper will become worthless and they will lose a lot of money! so it is better for everybody to pretend that everything is fine and just see how it goes, meanwhile they are all trying to get rid of their stockpile of i owe you paper!
so on the long term the Euro must stabilize, the best investment in Europe is probably the Real Estate ,
the U.S. economy will probably suffer more and more, till there is a political decision to bring it back to reality!