An Inconvenient Series of Truths


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.
  • Try to ensure that you get as close to the decision-maker(s) as you can.
    See above. 

  • 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

Written by Robin Copland at 14:00

1 Comments :

Edward Baines said...
One is led to believe that Vladimir Putin has a personal stake in the outcome of these negotiations!
March 20, 2013 03:20

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