Brits Warn of End of Euro and Possible Strategic Confrontation over Cyprus!
The Cyprus crisis could lead to the end of the euro as well as set off a strategic confrontation in the Eastern Mediterranean, according to commentaries in Britain’s Daily Telegraph and the Financial Times.
Jeremy Warner writes in today’s Daily Telegraph that the imposition of capital controls in Cyprus puts an end to the euro. It is not just the current closure of the banks, but the continued controls even after the bailout agreement is worked out, that is the danger. He writes that “if capital controls are introduced, it basically makes Cypriot euros into a national currency, rather than part of wider monetary union. The capital controls will severely limit your ability to get your euros out of Cyprus, rendering them essentially worthless in the wider Eurozone…. Monetary union is many things, but above all it is about free movement of money and a uniform value wherever it is spent. When these functions are disabled, then you cease to be part of a single currency.”
Tony Barber, writing in today’s Financial Times, goes one step further point to the obvious geopolitical aspects of Cyprus. It is closer to Syria and other hotspots than it is to Europe. He points to the question of Cyprus’ gas reserves in which talk of hocking them as part of the bail-out, would touch off a major dispute between Cyprus and Turkey. Ankara has already protested Cypriot claims to offshore gas reserves. Barber warns “Such a dispute would suck in Greece, traditional patron of the Greek Cypriots, and Israel, their partner in energy development. The U.S. whose 6th Fleet makes it the pre-eminent Mediterranean naval power, would be drawn in, and so would Britain with its two sovereign military bases in Cyprus…. Perhaps the thought that next year marks the 100th anniversary of the shooting of Archduke Franz Ferdinand will concentrate minds.”