The current financial crisis in one of the EU's outposts,
Cyprus, clearly exemplifies and demonstrates some undeniable
negotiating truths.
- Make sure that the deal on offer is one that can be sold within
your counterpart's organisation.
The problem with the offer of the 10bn euro EU and IMF bailout of
Cyprus was that it came with the condition that Cyprus had to raise
5.8bn euros from a raid on Cypriot savings accounts. This had
to be approved by the Cypriot parliament; they overwhelmingly
rejected the package with 36 MPs voting against it, 19 abstaining
and none in favour.
- Beware interested third parties hovering in the
background
Commercial negotiators need to temper their ambition in the
knowledge that there may very well be competitors in the
marketplace. In the Cypriot example, it turns out that Cyprus
has attracted money through its lower taxes and wealthy Russians
hold between a third and half of all Cypriot deposits.
Russian private and corporate deposits are believed to total about
$30bn and the Russian president, Vladimir Putin is on record as
calling the bailout deal "unfair, unprofessional and
dangerous". From a political standpoint, EU leaders will want
to avoid further Russian influence in one of their country's
affairs - especially one so strategically important, geographically
placed as it is in the eastern Mediterranean.
- Understand the consequences and costs of "no deal"
The EU has promised to stand by their Cypriot allies, but there is
a real risk that the country will to all intents and purposes go
bust and that there will be no money to distribute through the
banking system. Already, cash machines are running out with
no explanation and the banks have ceased normal trading. The
German Finance Minister, Wolfgang Schaeuble warned Cyprus that its
crisis-stricken banks might never be able to reopen if it rejected
the bailout. From the Cypriot perspective, dropping out of
the Eurozone, reverting back to the Cypriot pound and not reforming
its banking structure is akin to financial suicide. From the
EU's perspective - see point above!
In the meantime, talks continue. Cyprus's finance minister
is in Moscow to seek help from Russia. Michalis Sarris,
Cyprus's finance minister said after talks with Russian finance
minister Anton Siluanov, "there were no offers, nothing concrete,"
but he added, "we are happy with a good beginning."
Cypriot President Nicos Anastasiades is holding the emergency
meeting of party leaders and the central bank governor in Nicosia
to "examine alternative plans to address the situation that may
arise following... the parliamentary vote", his office said.
Mr Anastasiades, who was elected to the presidency on 24 February,
will also hold a cabinet meeting and talks with the European Union,
European Central Bank and International Monetary Fund (IMF).
Bank mergers, a bond issue, and more Russian funding are possible
other options.
The good news, from a negotiating perspective is that people are
still talking and still looking for negotiated solutions. The
bad news is that negotiating involves concessions which, in turn,
involve costs. Who pays and how much - these would seem to be
the burning questions! The alternative - no deal at all -
does not bear thinking about.
Robin Copland