As crisis grows, Cypriots think the unthinkable: a euro exit

In Nicosia, Nathalie Savaricas finds the mood turning towards a drastic solution to ‘the pit of hell’ blamed on Brussels

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The Independent Online

While Cyprus’s President spent today in Brussels in last-ditch talks to stave off a banking collapse and  secure a €10bn (£8.5bn) bailout, many Greek Cypriots were reassessing their ties with the eurozone.

The owner of one of the country’s largest retail and distribution groups, who spoke on condition of anonymity, told The Independent he favoured a return to the country’s national currency – the Cypriot pound – as the only way to limit the damage to the economy.

“To put it simply: we’re going to have to go through hell whether we go the European way or alone,” he said. “But the European way is an endless pit of hell, whereas if go back to our national currency we’ll eventually rebound like we did after 1974.”

After overcoming the Turkish invasion of 1974, when its GDP plummeted drastically, Cyprus managed to quickly turn its economy around. It used its sun and sea to attract tourists while low corporate rates, lax banking regulations and a stable jurisdiction brought in investments – especially nouveau riche Russians who needed to place their money safely following the collapse of the Soviet Union in the 1990s. Tourism and financial services constitute the main drivers of the Greek Cypriot economy.

The idea of taxing bank deposits as a means of raising the €5.8bn that Cyprus needs to secure its bailout and avoid bankruptcy – which remained an option on the debating table last night, though not in its original form – has led to a swell of resentment from ordinary Cypriots towards Europe. “It [is] a bloodless invasion by friends,” the entrepreneur said.

The businessman explained that he believes the best option for Cyprus is to gain control of its monetary policy and limit the damage of the island’s impaired credibility and confidence, arguing that the advantages of exiting the euro outweigh the negatives.

The businessman’s analysis is reflective of growing sentiments across the island. A recent survey conducted by Insight Market Research for Sigma media group suggests that two out of three Greek Cypriots now favour an exit from the Eurozone. Compare that with 17 March, when research conducted by Insight Market Research and University of Nicosia indicated that 62 per cent of Cypriots were favourable towards the European Union.

Cyprus joined the EU in 2004 and the single currency in 2008, mainly for political reasons – as security against its old foe Turkey. At the time, the nation island enjoyed a healthy economy.

“[The] European Union is not what we expected them to be,” said a pensioner called Loukas, 69, while he sipped on his Cypriot coffee on the popular pedestrian Ledra Street. “We need their help and now they’re going for our throats.” The pensioner, who was a singer and a builder of kaiki, wooden fishing boats used in the Aegean, said that joining the single currency was a mistake and he lamented the lack of Russian help in the current crisis.

An archaeology student, Anastasia, 22, sells lottery tickets in the street to make ends meet. She admits Cyprus made a series of mistakes but said European demands to qualify for its $10bn bailout are infuriating, when neighbouring Greece received a series of loans in the hundreds of billions during its financial crisis. “Merkel is trying to achieve what Germany didn’t manage to get in two World Wars,” she said. “They want to weaken our country, which is rich in natural resources, and tap into our natural gas.”

For the past week, Jacob’s manufacturing business has suffered because of the cash shortage on the island. Banks have been closed for a week and local cheques and credit cards are being rejected.

“Disaster struck and we lost. This government should end this here, instead stealing money on top of it,” he said, referencing the tax on deposits. “We’re being led to disaster with a mathematical certainty,” the businessman said. “Let’s hit rock bottom alone – without a noose choking us around our necks.”

Unemployed Andreas Anchileou, 47, receives €650 a month. He’s confused about the situation and doesn’t really know what to think of his European partners.

“All I know is we never should have joined the euro,” he said. “When the Cypriot pound was around, I had a job. Things in Europe are much better in theory than in practice.”

Hubert Faustmann, associate professor of history and political science at the University of Nicosia, said Cypriots see Europe’s stance on the bailout as a hostile act rather than a rescue package.

“This is a very emotional response to the destruction of the economic basis of Cyprus as the Greek Cypriots view it,” he said.

However, he does not believe that the anti-euro sentiment will be realised in an exit from the single currency.

“Once cooler heads prevail, I do believe that Greek Cypriots will feel very bitterly about the European Union but they’ll not leave it.”