The Cyprus euro exit proposal adds to signs of shifting debate

The Cyprus euro exit proposal adds to signs of shifting debate


By Christos Meliopoulos – Nicosia

The communist party AKEL’s proposal in Cyprus on a way out of the fiscal memorandum and out of the eurozone has been greeted by a large number of local politicians and commentators dismissingly; by some even as a repressed wish of a party that could not express itself while in government of an EU country.

AKEL’s Secretary General Andros Kyprianou(photo) would welcome any added credibility value to his party’s proposal. A visit to London which ends today (10th May) should have at least made him feel more confident, as his views were met with honest interest from politicians, diplomats and trade unionists.

The fact is of course that euroscepticism runs high in the UK, where politicians – even pro-European ones – as well as many of the most revered economic analysts can’t see the point any more. “This in not a union of a currency, rather the union of a common fear,” commented a high profile analyst of an institute based in the British capital dealing with European issues.

Mr Kyprianou has presented the AKEL proposal as a basis for discussion. He personally understands that rejecting the memorandum prescribed for Cyprus, which subsequently means leaving the monetary union, would scare off the Cypriot people. However, he also believes that the number of people willing to at least listen to such a proposal is larger than when the debate over the memorandum content started at the end of last summer.

But, as Greece has learnt, the unnerving uncertainty over a country’s currency can prolong the pain. A leading British Cypriot businessman, very active in finance, recently held an amiable discussion with leading Cypriot officials. The businessman started referring to recent profitable deals he secured or is trying to secure from the Far East to the Balkans. “What about Cyprus? Have you thought of investing there?” asked one of the other party in a gentle manner, yet with hints of criticism. The businessman smiled politely and somewhat apologetically replied with honesty and regret: “Who would put money in a country that could leave the euro willingly or unwillingly and see his investment get devalued by 50%-60% overnight?” The Cypriot official disputed the extent of such devaluation but conceded his interlocutor’s point.

The short dialogue reveals Cyprus’s dire position. Talk of going back to the Cypriot pound causes fear and keeps investors away. The current situation has the same effect. The question is which scenario would bring a happy end sooner.

The situation right now is that a decision to leave the euro might be socially (more) acceptable given the pain the periphery suffers; but financially and certainly politically it still seems to the majority of politicians, analysts and probably people as a no-go zone, rather an unconvincing sci-fi scenario. Yet, one can’t miss the signs of a shift in the debate over the inevitability of the common currency.