Another scandal is erupting in the ongoing EU bailout saga. This time around, a report by the German foreign intelligence agency, the Bundesnachrichtendienst (BND), has revealed that foreign taxpayers will, in bailing out Cyprus, be helping make Russian mafiosos whole:
The BND report concluded that this “black money” amounted to €26 billion—about 150% of the country’s GDP. Money that the banks had plowed into Greek sovereign bonds and the housing bubble that came with a nationwide title-deed scandal of phenomenal proportions. And now the banks need at least €10 billion to stay afloat.
The BND report also lambastes Cyprus for creating a fertile ground for money laundering. While some laws have been passed and some institutions have been created to combat money laundering, they’re apparently just decoration; rules are simply not enforced. Money laundering is further facilitated by the ease with which rich Russians can obtain Cypriot nationality—and thus freedom to establish themselves financially anywhere in the EU, which according to the BND, 80 Russian oligarchs have already done.
There are over 40,000 mailbox companies in Cyprus. Many have large subsidiaries in Russia, and profits are siphoned off in Cyprus. To accede to the EU in 2004, Cyprus had to clean up its act a bit. But only on the surface. Finance activities strengthened, particularly when Cyprus became part of the Eurozone: at the peak, according to the BND report, financial services and banks accounted for up to 70% of the country’s economy. So much so that Cyprus, in turn, has become the largest foreign investor in Russia.
Shocking to hear that Cyprus never addressed serious concerns about its money laundering operations in the run-up to joining the Union! And taking mafia money and plowing it into Greek bonds…what could possibly go wrong?
We’ll see how this gets smoothed over. European technocrats will probably come up with some kind of “acceptable” solution over the heads of an increasingly agitated European public. And this slow pathetic dance will go on, for five more years by some people’s count.