Thursday 21 September 2017

'Eurogeddon' – welcome to the country that is closed for business

Cyprus's empty streets and shops show starkly what a nation looks like when the cash runs out, writes Richard Spencer

EVER since the credit crunch turned into a Europe-wide currency crisis, the question asked has been: what would things look like when the cash dried up?

Now we know the answer: Cyprus. Eurogeddon is sweeping the island, with the country's leaders frantically scrambling to avert catastrophe.

Unlike a Hollywood film, there is no stampede out of town. No one can afford to waste the petrol. The motorway that traverses Cyprus – connecting Paphos in the west to Limassol and Larnaca in the east and the capital Nicosia in the north – is nearly deserted. No more than a few dozen cars lit up its entire 140km length.

To say there was no Friday afternoon bustle would be an understatement. Every shop on Archbishop Makarios Avenue in central Nicosia reported not a single customer all day. "People just don't have the money," said Georgia, a lingerie saleswoman.

She is a living example of the spectre of financial disaster shadowing the continent. She trained as a kindergarten teacher in her home city in Greece, but kindergartens have shut in its austerity drive and she lost her job, before moving to Cyprus. Now, like most of Nicosia's residents, she has no idea what will happen next. "They say the banks will open on Tuesday, and this problem is only because of the banks," she said, a rather more hopeful analysis than that of economists. "But who really knows? They have to take a decision right now, in minutes, not days."

There were signs on Friday that Cyprus's political leaders and the Troika of eurozone representatives were moving towards that decision, perhaps saving the core of the banking industry and the euro itself, but far too late to prevent the fallout for the wider economy. That appears to be what the EU's leaders wanted. Germany, in particular, wanted to force Cyprus to accept that, as chancellor Angela Merkel put it, its business model was "broken", and it had to start again without all its Russian cash.

Russian investors will lose heavily in the plan, which sees a tax on all deposits over €100,000. Those who have invested more than that in the most troubled bank, the Laiki or Popular Bank, will lose up to 40 per cent.

So will the bank's employees, who took to the streets around parliament yesterday to protest. "I never expected this would happen," said Despo Pambaka, a customer services manager. "They are trying to take our lives, our money. This is not the Europe that we went into. Germany showed her real face."

Miss Pambaka shows the intractability of Cyprus's crisis and why Germany is so reluctant to come to its rescue. She said she had an outstanding mortgage of €200,000. She is just 28, and her annual salary is €18,000. That mismatch of income and debt is Cyprus's problem. Her boss, Nitsa Sarka, a senior manager, who has worked for the bank for 39 years, said she had a mortgage of €230,000 despite a gross salary of just €4,000 a month. Significantly, her "provident fund" – the pension and social security fund – was held as security against the mortgage. It is hardly surprising that Cypriots are battening down the hatches.

They are preparing for worse: even more stringent capital controls will also be in place by the time the banks reopen, under the new plans. There may be fewer cars on the roads, but a Lukoil petrol station on the way to Laiki's headquarters said its trade was actually booming – people were using what money they had to stock up, in case supplies ran out, said Artemis Psaro, the manager. That headquarters itself, new, all steel and glass and outside tubes, will stand like so many new HQs across the developed world, as a monument to folly. It will also be a monument to misfortune, for both Cypriots and their new leader, Nicos Anastasiades.

In AJ's, a fashionable wine bar near the lingerie shops, a sole table was occupied yesterday lunchtime. The four young women, secretaries, were eating "while the ship sank", they said. "We have to have confidence in the president," said Christiana Philippou, 28. Maria Ioannou disagreed. "No one can save Cyprus now," she said, tucking into her salad like a condemned woman on the eve of execution.

"No one, not the president, not Merkel, not anybody."

© Telegraph

Irish Independent

Editors Choice

Also in World News