Cyprus Drama Deepens


The resolution of the Cypriot bank crisis is still a knot, awaiting disentanglement. The legislature voted 36 against and 19 abstained on the EU-sponsored bailout scheme, effectively freezing any forward movement on the issue. Moscow is capitalizing on the crisis, with PM Dmitry Medvedev calling the EU a "bull in a china shop"; conincidentally, the Soviet-esque seizure of assets awaiting Cyprus is not only deeply unpopular, but also makes Europe look rather bad.

Nicosia might yet turn to Russia for a bailout, but it is doubtful whether the 1,1 million nation will succeed in this bid - earlier, Russia offered $4 billion to Iceland in the thick of the island nation's banking crisis, but that offer did not materialize beyond the political show it produced.

Adamantly, the EU is refusing to let any one of of the Eurozone members declare bankruptcy. While such a move would be socially expensive, it would be a dose of bad-tasting, but necessary medicine for the fiscal problems brought on by unreturnable debt.

However, the bigger problem remains a collapse of the confidence in the euro and a massive sellout by investors following a sovereign default by a member; in that case, hyperinflation might just become a much bigger problem on top of those already plaguing Europe.