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20.04.2017 - 08: 46

What will happen with Cyprus if Greece returns to the drachma?

Economic commentary of current events.

In Greece again at the government level discussions began to withdraw from the euro zone and return to the drachma. Cypriot and Greek economies are closely linked and interdependent. Therefore, what is happening requires close attention.


Recently, the media published a letter written by a group of economists, including Nobel laureate Cyprus Christoforos Pissaridis, who currently directs the Laboratory of research of economic growth in the St. Petersburg State University.

The letter was written in the genre of economic thriller. Scientists are extremely skeptical about the prospects of the Greek drachma in the case of restoration. With a weak economy, a new drachma devalue quickly. Deposits in the conversion will lose more than half of its value. Personal loans have to forget the international capital markets. Chance of a lack of fuel, food and medicine. Outside the euro zone, and without the control of the European institutions, the country will lose the last chance of the need for radical reform of the economy. As a result, the once-tenth of Europe's economy will become a poor and closed from the outside world with a booking for a high level of corruption and lawlessness.

Similar prospects could expect and Cyprus, where 2013 year amid difficult negotiations with the EU and IMF-right parties are thrown into the public field, the idea of ​​a return to the pound. It is noteworthy that the authors of the letter are sure that the new US administration led by Donald Trump intends to contribute to a weakening of the euro zone and the EU, and therefore urges the Greek government and the population (the main treatment of recipients) to the consolidation of the euro area, rather than to escape from it.

The fact that new discussions about the drachma and the appropriate treatment of economists is quite revealing. Against the background of migration problems, the success of right-wing and populist parties, the existence of a crisis in the whole European Union is at its weakest state in history. Not surprisingly, the recurrence of ideas return to national currencies become a systemic phenomenon. In Spain, there are discussions about the peseta, the Italians are nostalgic for the lira in February, just four political parties have made a declaration Italexit prospects. The leader of the "National Front" Marine Le Pen of France urges to destroy the euro area (Euro-element of blackmail!) And Cyprus mentions among the first countries followed by France should leave the eurozone.

There are many studies of individual countries and the effects of the output of entire groups of the euro area. Most - surface, but there are very serious economic model. Interested readers can recommend a study led by the famous British economist Roger Bootle of Capital Economics.1 consulting companies Despite the fact that the report of nearly five years, many forecasts are relevant in the light of today's events. New-old debate on the return of national currencies are explained at least by two factors: the macroeconomic, political and psychological.


Euro - a unique experiment in the economic history of mankind. However, over the years 18 coexistence in a single currency area, Europeans still can not understand: is it good or not? National elites controlled by European bureaucracy, answer the question positively. Opposition parties and ordinary citizens, especially in the countries of the Mediterranean periphery, believe the opposite. Economists have been working on both camps, resulting in their arguments for and against. At first, of course, more opportunities, but the second appeal directly to the people and find understanding, which is always much appreciated, even in the era of the great disappointment in democracy.

Axiomatic arguments in favor of the euro area it is logical to look at the pages of textbooks on macroeconomics. Coordination of monetary policy, price alignment within the boundaries of the single market, reducing to zero the cost of transaction costs (reciprocal currency conversion). During the existence of the euro area statistics clearly fixes and a significant reduction in inflation in it. Today, most economists fear deflation (in Cyprus - for the last three years), carrying with them the risks of a different nature. The aforementioned Marine Le Pen, speaking at campaign rallies that "where there is the euro, there is increase in prices, taxes and unemployment, decreased wages and pensions," very creatively controlled by economic statistics.

In addition, the eurozone one of the main architects of the positive consequences for the Member States considered the possibility to attract outside money at low rates. Indeed, if you are in one currency 18 conjunction with other countries, the ratio of the creditors will be different than a country alone. Whatever may be said, the common currency of the loan increases the level of trust. Outside the euro zone countries with high levels of public debt in relation to GDP, as Greece, Spain, Portugal, would be unable to gain access to relatively cheap foreign loans. The catch is that the level of debt would not be so high if countries kept their currencies. A typical example of a complex casuistry in the form of a vicious circle in the economic debate.

Euro opponents believe that its very existence is a mistake, as a result of which a large part of the economic sovereignty in the hands of a bureaucratic superstructure (EU) with the quasi-status. States made it impossible to control the rate of their currencies to solve their own problems. In particular, the deliberate weakening of the incentive for producers in the country.

However, it remains possible for a government bond issue borrowing. But here, too, all is not well. Attempts to finance the current deficit without exchange control - the controversial issues of economic theory on the basis of bad practices. Recall that the debt crisis in Europe in 2010-2013 years began with the collapse of the market of Greek bonds. The crisis has strengthened the position of both sides. Critics of the euro is convinced that if countries were their own currency, the deal would be a lot easier difficulties. Advocates point out that all the fault of poor financial discipline Burned countries and habit of living beyond their means. Without a single regulator (ECB), somehow limiting appetite, the effects of dolce vita could be much worse.

Subjunctive verifitsiruesh no cost. Discussion "for" or "against" the euro is still relevant. This was debated in international forums, social networks and the tavernas. But maybe this is the case when "there is nothing more complex than simple"? In fact, the entire economy is placed in the border triangle of money, budget-taxes. Introduction of the euro deprived the country of currency regulation function (money), leaving the budget and taxes in the hands of national governments and central banks. The problem is that all parties make up one whole, and can not exist separately. Economic Triangle broken, start a chain of crises, including in Cyprus.

Weather forecast for eurooptimists disappointing. In the next decade, one-piece trilateral economic policy is not visible for Europe. On the transfer of the two remaining powers on budget and taxes in the supranational competence of Brussels will have to forget. At least, right-wing politicians, playing their cards to the voters, will do everything to prevent this from happen.

CTRESSOTERAPIYA against globalization

Psychological underlying reason for the return of the discussions to "their money" is no less interesting. Karl Marx once called the money "universal equivalent", meaning only the economic sense. But it turned out that this is an analogue of confidence, calmness and independence in a broad sense. Its currency is perceived not only as an economic unit, but also as a symbol of the state independence, a kind of talisman that brings together people, banks and the government.

Globalization is merciless to the nation-states, especially those lagging behind or even drop down from it. People experience anxiety before the neoliberal fundamentalism, suffering from economic "freedom", as a rule, turns out to be illusory, and generating a sense of loneliness and abandonment. They realize that they have sold a dream, that they may never be realized. Talk about a return to the drachma, pound, lira, escudo poorly justified economically. However, they have become a kind of stressoterapiey against globalization, softening in the minds of neo-liberal ideas of the world as a set of rational self-interested individuals, managed from a single integration center. Politicians are well aware of this. There is a mutual interest: emergency psychological assistance during an episode of "neurosis of globalization" in exchange for votes.

Postcapitalism - it's about CYPRUS

While Europe went through various crises, most gambling policy called for desertion from the euro zone, the British journalist Pol Meyson wrote a book about postkapitalizm1, which quickly became a bestseller economic.

Easy and affordable, using a clear economic analysis, the author shows the futility of further development of the global capitalist society - the era in which destined to live to its readers. Prospects for the future, he sees in the new formation under the code name "postcapitalism". Developing new rules to this postcapitalism come, it is necessary to review the practice of economic relations for the benefit of a number of industries. Green energy, IT-technologies, (based on the open source code and free copying files), Innovation and Environmental Medicine, a nonprofit tourism, banks time and wiki-tehnologii2 (especially in education).

This set is not accidental, as is able to deny the benefits of the modern elite to protect the freedom of speculative capital, low wages, militarism, intellectual property and carbon energy. According to Mason, the bad news is that these elite controlled almost all governments in the world, the good - that they have no support and unpopular among the majority of the population. The main agents of future change - of course, people. This - the main social force, providing the transition to the new system. The author calls this its primary audience - "the most educated generation in the history of mankind with a high level of relationship." And yet Mason makes a special rate on a traditional society with strong socialist and class traditions.

Cyprus referred to in the book context, together with supranational financial tyranny in 2013 year (the "troika" of creditors), and withdrawal of deposits "in connection with the threat of the coming to power of movements opposed to neo-liberalism." But when reading the "most important book about the current state of the economy and society" (quoted from one review) there is a strong sense that the characteristics required for the transition to postcapitalism, correlate well with the structure and specialization of the Cypriot economy. High level of education and strong social ties, patriarchal (in a good sense) society, the development of green economy, tourism and medicine - in the presence of almost all the necessary "post-capitalist" set. If we add the socialist tradition and the political weight of the forces that are popular among the population, we can say with certainty that postcapitalism - it's about Cyprus.

A source: Successful business

Author: Vladimir Izotov

Tags: Cyprus, Greece, Economy, Eurozone, EU Research