On March 20th Dmitry Medvedev, Premier Minister of Russia, expressed his opinion on the current situation in Cyprus . This instantly became one of the top news in the Russia-speaking internet community.
What does the banking crisis in Cyprus mean? What are the reasons for it? What may be the consequences of the Cyprus crisis for the country and the entire eurozone? Let’s ponder on these questions together.
Dmitry Medvedev On Cyprus and Eurozone Prospects
As we have just mentioned, yesterday, on March 20th, Dmitry Medvedev arranged a press conference of the correspondents of major European media. During the press conference, he gave his own estimation of the current situation in Cyprus and its consequences of the entire world.
First of all, he compared the EU to a bull in a china shop. He wonders if Europe is bored and missing crisis phenomena seen in 2008-2009.
He doesn’t deny the possibility of deliberate destruction of Cyprus ’s banking system. In this case, he reminds, Cyprus will face multiple claims coming from private and institutional investors and even governments.
He assumes that the consequences of a banking collapse in Cyprus may be much more devastating than Western media expect.
He doesn’t deny the possibility of Russia raising the question of denouncing the agreement with Cyprus , which will be aimed at avoiding double taxation.
He also assumes that the worst-case scenario (once implemented) may well cause another major crisis. More and more experts around the globe share his point of view.
What Didn’t Medvedev Told EU Media?
According to Eugene Olkhovsky, ’s leading expert, top-ranking officials never say 100% of the truth because they (as opposed to journalists) know more and therefore can see the overall picture and conduct more comprehensive analysis. Moreover, they can influence events.
Medvedev concealed the following facts:
Russia is a party concerned. Cyprus keeps asking Russia for financial support. Not so long ago, the Finance Minister of Cyprus along with multiple bankers came to Moscow to discuss the situation. In such a situation, it is always beneficial for the lender to provide a gloomy outlook. That is why President Putin, Premier Medvedev and other top-ranking Russian officials gave on and the same pessimistic outlook.
Russia seems to have foreseen the current situation in Cyprus . It is not accidental that on March 14th (2 days before the start of the financial and banking crisis in Cyprus , the Russian Ministry of Finance offered Cyprus financial support in exchange for the information on Russian offshore depositors. However, Cyprus declined the offer.
At the same time, smart offshore depositors of Russian origin managed to withdraw from Cyprus banks over €2bn right in advance of the crisis. A natural question arises: who are those smart Russians who stored over €2bn in Cyprus banks alone? Probably, those guys are close to the Russian authorities.
Not let’s have a look at the common European currency. Even despite the fact, that the entire Internet community is discussing the current situation in Cyprus and predicting a Euro collapse, the common currency won’t collapse against other majors.
The chart below, courtesy of Alpari, reflects the current state of affairs in the market of EURSD. Take a look at it. We can see a break out of the bearish sloping channel and divergence.
PAFILIA (www.pafilia.ru), Cyprus ’s biggest private construction company, reports:
At the same time, Cyprus ’s housing market somehow manages to withstand the unbearable pressure. On the contrary, foreign investors seem to have become more interested in the local housing market.
Therefore, Premier Medvedev is right: somebody is trying to play the Cyprus “trump card”. Another question is what is the point in all that? The market goes flattish even under such severe pressure initiated by the negative info coming from Cyprus …
