THE COMPANY ONE KEEPS.

The fact of the matter is the Eurozone is a hodgepodge of different countries with different interests, outlooks on life, and certainly different mores.  However, none is so different than Cyprus, which is actually two countries on one little island, one part for the Turks and the other for the Greeks who up to partition a number of years ago were killing each other on a regular basis both on the island and across the Aegean. It is the Greek part that really is in the Euro zone and the part with the largest commercial business which just happens to be financial in nature (aside from tourism).

The Cypriots have never been particularly concerned about with whom they deal and the same holds true for their banks. Want to be a depositor, not a problem and few questions as well. There has always been a practice of bank secrecy and even in the face of Euroland regulations to the contrary, life goes on for the banking business as it has for decades.

Not surprisingly, over the years the banks have attracted what one might call a less that blue chip group of depositors from various and sundry locales: failed African states, Latin American former--and present--heads of state, Latin entrepreneurs engaged in single product agriculture, Middle Eastern thugs and most recently Russian oligarchs, who like many others across Europe are concerned about business conditions back home and taxes which they realy don't like paying.  The business hasn't changed much over the years; the numbers have just gotten bigger...very much bigger.

Now Cyprus is a rather small island and when you are stuck with that much money there are very few places in which to invest.  Not surprisingly, Cypriot bankers looked to greener pastures, such as the property markets of Portugal, Spain and Greece. Not surprisingly, the banks are now broke, the Cypriots as a result are broke as well but as added grief, the latest bunch who would like their deposits back are the afor-mentioned Russians and these are not very nice people who are cheek to jowl with the folks who run Russia who, too, are not nice people at all.  Not surprisingly, he banks have gone to the government, the government has gone to the EU asking for a bail out of the banks and the Germans have said "no way" or something like that in German.  If that wasn't bad enough, finding some resistance to their request the Russian depositors have gone to their government (it's that cheek to jowl thing) and low and behold the government has indicated that if the EU is not to be found helpful it is prepared to bail out Cyprus and it's banks!  Salvation!  Er, not so fast my friend.

The Russians will save the banks but then they will become the owners of the banking system and about the last thing the Euros and Uncle Sam wants to see is the Russian government with an off-shore banking system connected with Euroland.  No how, no way.  So it looks as though the first direct bail-out of banks in Euroland may be in Cyprus unless another form of sleight-of hand can be devised because there is one thing of which one can be sure; the Russian depositors will get their money.  Darn, the neighborhood is just going to hell.  Who knows who is going to move in next door while you're asleep?