Whatever happens the Cypriot people are going to be suffering for the next few years - just as they've been having an increasingly hard time in the last few. There's no avoiding the pain. But now is the time to see whether there are any Cypriot politicians with the balls to lead the country out of the Euro. Even better, the Cypriots should take the opportunity to leave the EU completely.
A Euro exit will mean that the newly resurrected Cypriot pound will be lower in value than the Euro. The value of people's savings will drop compared to the Euro, but that's unavoidable. While imports will be more expensive, it does mean that Cypriot exports will become cheap, and that tourism - the biggest sector of the economy outside banking - will become more attractive. In time the influx of tourists and the increase in exports will mean an increase in value for the Cypriot pound. And if banks have to fail, as seems likely, then that's what has to happen. Bleeding the people dry to keep the banks of life support ultimately does the economy no good.
Leaving the EU completely will also mean that Cyrpus would be in a better position regarding the influx of immigrants from Eastern Europe. It's a simmering issue in Cyrpus, which has had high rates of immigration from Romania, Bulgaria etc. It's precisely the issue which has given rise to the fascist Golden Dawn party in Greece, and the same thing could happen in Cyprus. The Greek Cypriot far-Right has never lost the desire for Enosis with Greece - a resurgent far-Right, whether it's Golden Dawn or some other local variant - will present even bigger problems in the future.
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