Crisis in Cyprus threatens EU role, legitimacy
BERLIN – By rejecting an EU bailout and turning to Russia for help, Cyprus has exposed the growing frustration and dwindling solidarity within the European Union, a bloc meant to bring the continent closer together after World War II.
While talks about a Russian rescue appeared stalled Friday, experts noted that the idea of seeking Russian money alone raised doubts about the legitimacy of the European project – notably over perceived German dominance and threats to national sovereignty. The extraordinary spectacle of an EU member seeking salvation from the old Cold War enemy has raised deep questions about how far Europe can or will go to take care of its own.
“It will raise many issues about the legitimacy of the European Union,” said Vassilis Monastiriotis, an expert on southeastern Europe at the London School of Economics. “(Other) countries may seek financial help from China or Arab states and this may disintegrate the European Union, making it less relevant as an institution.”
Ever since the financial crisis five years ago put pressure on heavily indebted countries – from Greece to Portugal to Ireland – the bailouts have become as much a political as an economic issue, with wealthy Germany taking on the role of bogeyman because of its insistence on strict austerity measures as a condition for help.
The proposed bailout for Cyprus ratcheted up the potential pain by demanding for the first time that depositors help pay for the rescue with their own savings.
Senior European lawmakers raised the alarm Thursday at the possibility of letting Russia ride to the rescue of a nation that represents – with a mere 0.2 percent – a tiny part of the eurozone economy. Many Russians have business interests and hefty bank deposits on the island, and Moscow – flush with oil and gas rubles – could easily afford to extend a 2.5 billion euro loan that it gave Cyprus in 2011 and lower repayment rates.
In return for provide fresh cash or taking over one of the island’s ailing banks, analysts have suggested that Russia might demand an interest in natural gas fields that Cyprus has discovered in the Mediterranean.
But Russia’s finance minister, Anton Siluanov, told Russian news agencies that investors weren’t interested and a Russian loan would push Cyprus over the debt limit demanded by the EU.
“We need a European solution to the Cyprus problem, not an external one,” European Parliament lawmakers from across the political spectrum said in a statement.