An Inconvenient Series of Truths
The current financial crisis in one of the EU’s outposts, Cyprus, clearly exemplifies and demonstrates some undeniable negotiating truths.
The problem with the offer of the 10bn euro EU and IMF bailout of Cyprus was that it came with the condition that Cyprus had to raise 5.8bn euros from a raid on Cypriot savings accounts. This had to be approved by the Cypriot parliament; they overwhelmingly rejected the package with 36 MPs voting against it, 19 abstaining and none in favor.
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Commercial negotiators need to temper their ambition in the knowledge that there may very well be competitors in the marketplace. In the Cypriot example, it turns out that Cyprus has attracted money through its lower taxes and wealthy Russians hold between a third and half of all Cypriot deposits. Russian private and corporate deposits are believed to total about $30bn and the Russian president, Vladimir Putin is on record as calling the bailout deal “unfair, unprofessional and dangerous”. From a political standpoint, EU leaders will want to avoid further Russian influence in one of their country’s affairs – especially one so strategically important, geographically placed as it is in the eastern Mediterranean.
The EU has promised to stand by their Cypriot allies, but there is a real risk that the country will to all intents and purposes go bust and that there will be no money to distribute through the banking system. Already, cash machines are running out with no explanation and the banks have ceased normal trading. The German Finance Minister,