After bank deposits above 100,000 EUR suffered a haircut, Cyprus and its president are looking for a solution to maintain the country’s attractiveness to foreign investors. The government may soon offer EU citizenship to Russians hit by the Euro Group measures.
The president explained yesterday in a speech to Russian businesspeople in Limassol on Sunday. The Cypriot government wants to limit the impact that the measures may have on the economy and on the “Russian business community”.
Moodys, which is the agency in charge of the Cyprus anti-money laundry investigation, estimates that Russian customers have deposited a total of €31 billion in Cypriot banks. Experts believe the move of these investors will strongly diminish the country’s attractiveness for investors and that its economy will shrink dramatically.
The visa restrictions imposed on Russians, obtaining citizenship from an EU member state could indeed be an attractive proposition. The government of Cyprus is also seeking to create other measures to help keep the country attractive for investors, including tax incentives for existing or new companies that conduct business in Cyprus.
Cyprus’ forced levy or “bail-in” might become more common in future bailouts. Germany’s Sueddeutsche Zeitung has reported that Michel Barnier is preparing a law that would tap bank investors and account holders in the future before any aid would be provided by the permanent euro bailout fund.
Cyprus’s model of making people with deposits greater than €100,000 help pay for bailouts might have an influence in the whole Europe and could frighten investors away from the euro zone.
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