The soul searching in Brussels is underway after Cyprus became the first member state to reject the conditions of EU assistance.
Liberal MEP Guy Verhofstadt roared across the European parliament floor: “What happened on Saturday morning?”
At such a crucial juncture in EU history surely Brussels would come out fighting. Instead, Economic Commissioner Olli Rehn left his spokesperson Olivier Bailly to explain the raid on savings plan.
Bailly said: “Whilst this programme did not in all elements correspond to the Commission’s proposal and preferences, the Commission felt a duty to support it since the alternatives put forward were more risky and less supportive for the Cypriot economy.”
Germany is in an election year and is showing signs of bailout fatigue, and blames Cyprus for a mess of its own making.
Zsolt Darvas from the Bruguel Institute think-tank told euronews: “I think that the room for manoeuvre from the side of eurozone partners is extremely limited. I cannot imagine that the German Bundestag will simply say, right, the Cypriot parliament does not want to tax rich Russian depositors, so now the German tax payers will come in.”
The visit of Cypriot Finance Minister Michael Sarris to Moscow clearly irritated European parliament president Martin Schultz who said: “We need a European solution, a solution within the European Union, within the eurozone, I think we should not show the outside world that the EU is unable to solve its own problems within our own structures.”
Euronews correspondent Efi Koutsokosta takes the story to Boston where she spoke to Athanasios Orphanides, who was Governor of the Central Bank of Cyprus between 2007 to 2012.
Efi Koutsokosta, euronews: “So what’s next for Cyprus? Is there a plan B?”
Athanasios Orphanides: “I hope that there are plans both in Cyprus and in other European governments. What we see is the result of the European government decision on Cyprus, which pushes Cyprus to seek help from Russia. This is a very sad development for the European Union project.”
euronews: “What role will Moscow play from now on?”
Athanasios Orphanides: “Russia has a near monopoly, to a large extent, of gas supply to continental Europe and there are significant gas finds in the territorial waters off Cyprus. From an economic perspective the blackmail that European governments have forced on Cyprus is essentially pushing Cyprus to work with Russia and this is going to lead to higher gas prices and tremendous economic cost for Europe. I hope that European leaders can actually meet their responsibilities and find a European solution to this problem before it gets worse.”
euronews: “Do you think Germany will change its game plan when they have already said ‘We are not going to pay’?”
Athanasios Orphanides: “Frankly it’s unfortunate to continue to hear unhelpful comments from Germany. I have to say it’s not surprising. It’s known that the reason that the Cypriot government was blackmailed was because of an internal dispute associated with the September elections in Germany.”
euronews: “Let’s look ahead. What is going to happen when the banks re-open and what are the consequences for the other fragile economies such those in Greece, Spain and Portugal?”
Athanasios Orphanides: “Under the circumstances it’s very difficult to re-open the banks in Cyprus before a solution to the situation is developed. Let’s put these things into perspective. European governments got together and asked the Cypriot government to confiscate deposits deposited in Cypriot banks. How would a depositor with his deposits in Spanish banks, for example, feel sure that European governments won’t do the same with Spain?”
euronews: “Do you envisage a Cypriot exit from the European Union?”
Athanasios Orphanides: “Frankly is this what the citizens of Spain, France or even Germany want? Do we really want to see the death of the European Union project? Personally I used to be very optimistic on Europe and a big believer in the European integration project, but I became less and less so. Citizens in different member states of the European Union are not treated equally under the law.”
euronews: “Is this the beginning of the end of eurozone?”
Athanasios Orphanides: “I believe that unless European governments reverse the course that was outlined over the weekend, yes it is.”