Increasingly over the past few years, Cyprus bankers have been the go-to guys when the Russian Mafia, and your basic Russian zillionaire, wanted to launder their ill-gotten funds. The Bank of Cyprus has more branch offices in Russia than in Cyprus.
Cypriot bankers paid slightly higher interest rates than the rest of Europe through a technique known as the Ponzi Scheme. Cypriot bankers are world renown for taking a smuggler's attitude to the business of banking.
When Cypriot banks got in trouble, an obvious eventuality, there was no way that austerity would work - the tiny nation's banking industry dwarfs the rest of their economy. Simply bailing out the banks would have just transferred assets from German businessmen to Russian gangsters while propping up the Ponzi Scheme.
Sucking assets out of bank accounts to pay for the bailout may, on first blush, appear and insane plan to make Ma and Pa Constantinou pay for the idylls of the rich. But the real reason for this plan is to suck assets out of the Russian Mob.
My bet is the Cypriot parliament would rather let their nation's economy collapse than disappoint the Russian plutocrats who lavish them with bribes.
My bet was right.
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