Yesterday Cyprus formally asked for a bailout from the EU.
Cyprus, the fifth euro zone country to seek emergency funding from Europe, may need a bailout of up to 10 billion euros — over half the size of its economy — officials said on Tuesday.Cyprus isn't on the radar of the global economy. They are very small. The meltdown in Greece certainly has knocked the Cyprus economy for a loop.
The Mediterranean island, with a banking sector heavily exposed to debt-crippled Greece, said on Monday it was formally applying for help from the European Union's rescue funds.
But what the news media is ignoring is that the start of the economic crisis in Cyprus can be pinpointed to a single event that happened almost exactly one year ago, and was the direct consequence of the actions of the American government.
In January of 2009, the MV Monchegorsk was stopped in the Red Sea by American warships. After searching the ship, explosive from Iran were found on board. This was a violation on a UN ban on Iranian weapons exports.
The ship was escorted to Cyprus. Wikileaks revealed that Hillary Clinton put political pressure on Cyprus to seize the cargo.
The explosives were transferred to the Evangelos Florakis Naval Base where 98 containers were stored, around 2,000 tonnes of munitions.
Then nothing happened for about two years.
The weapons were stored out in the open under clearly inappropriate conditions.
On July 11, 2011, all that dramatically changed when a small brush fire broke out on the base.
The explosion created a 600-meter wide crater and the near total destruction of the naval base.
Nearly every house in the nearby village of Zygi was damaged.
13 people were killed, including Captain Andreas Ioannides, the Commander of the Navy, and 61 wounded.
The most serious damage was to the nearby Vasilikos Power Station, which supplied nearly half of the electrical power to Cyprus. It was nearly totally destroyed.
This caused immediate rolling blackouts, which continue to today. To make matters worse, Cyprus uses desalinization for its water, thus causing water shortages across the island.
The destruction of the power station was an enormous hit on the economy of Cyprus.
The blast is also expected to take a heavy toll on the island's $24.66bn economy, with EU estimates putting the overall cost at $2.83bn. Fixing the power plant alone will cost $992m.A sudden hit to the economy of over 10% of GDP would be terrible for any nation. But for Cyprus it was a huge blow that the nation was not in a position to recover from.
Now, a year later, the nation needs a bailout for half of its economy. You can bet the austerity that will be expected in return will crush the life out of its working class.