They Just Let Anyone In!
If you haven’t noticed – and it’s likely you have not, attention has now moved on elsewhere – the financial task for Cyprus is now quite a bit steeper than was the case at first (that’s from the FT, so in English; free, but registration required). We had been talking about the country being asked to contribute €7 billion to get a €10 billion bailout; now the tab has risen to €13 billion for that €10 billion bailout.
Among other things, this is going to mean an even BIGGER hit to those holding accounts in excess of the €100,000 threshold at the island’s two biggest banks. Yes, many of these are Russian nationals. So that now, as Die Zeit reports, the Cypriot government has come up with a scheme to at least offer an easier path to EU citizenship for high-net-worth individuals.
The Die Zeit piece (no byline) states right off that this measure is meant as outright compensation for confiscation – i.e. for the monetary losses these people are incurring as Cyprus tries to grab the money it needs. And indeed, it further reports that President Anastasiades first announced the measure in a presentation he made yesterday before a group of Russian businessmen in Limassol (Cyprus’ second-biggest city, so filled with Russians that many just call it “Limassolgrad”!).
But does this move make sense? How receptive were those Russian businessmen likely to have been? “OK, you’ll never be able to trust our banks ever again, but do stay anyway for the sake of the nice warm Mediterranean sea-breezes and
the souvlaki!”
Unlikely – at least as far as Cyprus itself is concerned. But remember that it is EU citizenship that is on offer, meaning in the form of an EU passport. Yes, Cyprus had already made it quite easy for foreigners to enter the island (well, the 59% non-Turkish part that it actually controls), but now it is ready to extend that ease of movement to the rest of the EU, as these people will be “foreigners” no more! Yes: baptized anew as EU citizens, so come on in, make yourself at home! It’s understandable that the duped Russians, and whichever other rich foreigners, would be pleased to take advantage of this, but mainly then to move on elsewhere within the EU, in search of other places to put their money with a minimum of questions asked. (Maybe Luxembourg, although apparently bank secrecy is about to disappear there; maybe Austria, then; or there are always the Channel Islands.)
A comparison here with the EU’s Schengen Area might be useful. That’s a bit different (and Cyprus is not part of the Schengen Area), it has to do with making possible a huge area within which you don’t have to show any documentation at national borders, whether you are a foreigner or not – but, crucially, this is made possible and politically palatable only by increasing vigilance at the outside borders of that Schengen Area and ensuring that people are admitted everywhere according to a common set of standards. Yes, among these standards is that you’re in if you have an EU passport, so those rich foreigners in Cyprus taking up the government’s new offer will be in good shape to travel – and even move house – wherever they want.
The point here is to contrast the common admittance standards enforced at the Schengen Area borders with the far-from-common criteria used by EU states to award citizenship. As we see, Cyprus intends to water down those criteria drastically when it comes to the passports it awards, yet those passports will of course be just as valid as those of any other EU citizens. This is apparently fully within the Cypriot government’s power. Can one be forgiven for detecting in this new gesture not only an attempt to make it up to the Russian depositors for the confiscated money, but also a raised middle finger pointed in the direction of the rest of the EU?
Time to Clamp Down the Lid?
Then again, there already are capital controls imposed on Cyprus in connection with the latest crisis, i.e. strict limits on moving money out of or into the island’s financial institutions. These were said to be necessary, although they are certainly regrettable because they are a blot on the EU’s record: it’s supposed to be all about the free movement among member-states of goods, services, money, people, ideas, and the like. But now that we’ve violated that when it comes to money, can’t we do the same when it comes to people, at least people who happen to carry a Cypriot EU passport?
And an administrative aside: Close observers of this site will have noticed how I prefer to discover bits of news to discuss via Twitter, but this one I had to find elsewhere. Die Zeit has been Germany’s premier forum for commentary for some time, ever since it was founded shortly after the Second World War, i.e. way back in the newsprint-and-ink era, but at times that renown has also meant “stodgy.” I mean, just look at their Twitter-feed! They apparently only got started with it last February – yes, 2013! – they tweet only about once per week, and can boast of only 936 followers! (Yes, including €S.) They are still an excellent source of articles on what’s happening in Germany and elsewhere, though.
