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Cypriots lie in wait

Even if there is a bailout, Cyprus can expect a similar regressive spiral of austerity, unemployment and low growth.
Last modified: 25 Mar 2013 00:35
If liquidity assistance were to be stopped, Cyprus' financial system would come to a standstill [Reuters]

It has been seven nights but still I'm surprised how quickly the chill sets in as soon as the sun goes down here in Nicosia. 

The nights have produced all the drama of the past week.

MPs in parliament debated the terms of the first controversial EU/IMF bailout package as demonstrators bellowed their outrage outside. Then, in a move without precedent on Tuesday night, they rejected the plan.

They went on to debate a new set of measures designed to placate the international lenders. On Friday, in another flurry of voting, new laws were passed that gave the governor of the Central Bank of Cyprus sweeping powers to shut down failing banks and, again historic, impose currency controls to prevent the flight of capital from Cyprus when, or rather if the banks do eventually reopen.

On Sunday night as I write, there's no-one inside parliament at all. The focus of talks has shifted to Brussels.

This has not stopped the world's press from gathering outside, once again, shivering away under bright lights doing our live reports in front of an empty building.

This is because it's very hard not to be struck by the feeling that something historic could be about to happen again.

Away in Brussels, the latest reports suggest Cypriot President Nicos Anastasiades is refusing to cave in to pressure to close the country's biggest bank.

He may or may not have threatened to resign and call a referendum on the next steps.

A message from his Twitter account reads: "We are doing our utmost for Cyprus". 

Cypriots can do little more than wait and hope that his utmost is good enough.

Expectation 

The capital was calm this evening. People went to church and met in cafes, children played in the street. 

There is a fortitude among the people I've met here that, in the face of everything this week, has been impressive.

Almost anyone you ask will tell you this fortitude is to do with the Turkish invasion of northern Cyprus in 1974, which was in response to a military coup on the island which was backed by the Athens government.

Those were Cyprus' darkest days, they say. Having survived that, we'll survive now.

The truth is no one knows how dark things could become.

If no deal is reached and the ECB cuts off emergency liquidity assistance then, following a sequence of events that is hard to predict, the banks will collapse, deposits will disappear and, with no help forthcoming from the eurozone, the flow of euros will dry up.

They would have to start printing Cyprus pounds with no discernible value. How would salaries be paid? Who would accept them? Imports of vital supplies, including medicine, would slow or cease.

What an extraordinary turnaround for people on this small, divided island who less than a year ago might have been forgiven for thinking that things were going ok: a relatively healthy economy, vibrant tourism industry, a property boom and lots of investment from rich Russians and Brits.

Now, many face ruin.

Even if there is a bailout, Cyprus can expect a similar regressive spiral of austerity, unemployment and low growth that has blighted their kin in Greece.

Appalling options both.

But as Olli Rehn, the EU's economy commissioner, said on Sunday in Brussels: there are no optimal solutions for Cyprus, only hard choices. As one of the men who designed the plan, he should know.

Follow Al Jazeera's Jonah Hull on Twitter: @Jonahhull