Just when you thought it was safe to take your eye off the European economy, Cyprus throws you a curve ball.
The small nation of Cyprus voted “no” on a bailout that would have levied a tax on savings accounts held in Cyprus’ banks. Instead, the precarious economy of Cyprus remains exactly that. And that raises the question — at this point, is it just easier for the eurozone to kick someone out than risk stability of the euro?
Years of bailouts to EU member nations won’t make rescuing Cyprus’ economy any easier. There is a huge hole in the Cypriot banking system and it’s got to be filled. The rest of Europe, and particularly the Germans, are suffering bailout fatigue.
And, Russia’s cozy relations with Cyprus — and the number of Russians who use Cypriot banks to stash their cash — have done no favors for the Mediterranean island when it comes to getting in the good graces of the EU.
There has been some talk of a Russian energy company trading cash for access to Cypriot natural gas. But that’s a deal Cypriots might not be prepared to make.