Brush Fire Bailout – The Straw that Breaks the EU?

I’m always amazed when relatively minor events somehow conspire to change the course of history. In this example a lousy brush fire may be the catalyst for an unwinding of the EU.

Go back to January of 2009. A freighter (Monchesgorsk) carrying munitions from Iran and headed to Syria was interdicted by the USS San Antonio (this action was taken under UN mandate and the interdiction was made possible by “knowledgeable sources”. This development precipitated an international incident that included all of the big powers including the US, Germany and Russia. As this memo confirms, the ship was escorted to a port in Cyprus where there was a naval base.

What was in the 98 containers? What else? Munitions. The ship was transporting 120 mm, 122 mm, 125 mm, and 160 mm high explosives. Also included were 7.62 mm shell casings, compressed gunpowder, silver dollar-sized slugs, primer, and magnesium primers. All in all it came to about 2,000 pounds of super high explosives.

Cyprus didn’t want this crap. But the Germans French and Italians said they would not take it. The Americans made an offer of “assistance” in getting rid of it. But no one did a damn thing. As indicated in the above memo the entire cache of explosives was delivered to the naval base.

Guess what the local naval commander did? He stored all the explosives in a tent! It sat on the base with apparently no one doing anything about it until July 12th . Then an unfortunate thing happened. A brush fire got started near the tent. It spread with wind and the tent caught fire. KABOOM!

I know people who were fifteen miles away. It blew out windows even at that distance. Only a dozen people were killed (including the naval commander). But the explosion destroyed the largest electric generating facility on the island. The economy has hit the skids as a result.

So what happens today? The Central Bank of Cyprus has asked for a bailout, ASAP. A portion of the statement:

There is an imminent threat of Cyprus joining the European Union Support Mechanism, with everything bad that this entails.

Every day of inaction increases the problems and risks. We must act today, not tomorrow.

In economic terms Cyprus is a nothing. 2010 GDP was only $25b (Rhode Island is $50b). I don’t have a recent debt number but the CIA put external debt at $40b in 2008.

The economic problems of Cyprus have been caused by a catastrophe rather than economic mismanagement. All of the big powers (especially the UN) had a hand in this. As a result of these unique circumstances I anticipate that a very favorable support package is going to be made available to Cyprus.

Germany could (and probably will) write a big check. In the scheme of things the amounts are miniscule. But I do have a question on how all of this will be perceived.

Ireland, Portugal and of course, Greece have all been forced to accept crippling cut-backs. The people in these countries have paid a very big price already. There is nothing but misery in front of them for years. And Cyprus is about to get a blank check. The pot in Europe will be stirred again as a result. I wouldn’t be surprised that the problems in Cyprus end up on the streets of Athens.