Cypriot crisis is a boon for “Switzerland of the Baltic”

“For Russian businessmen and savers seeking a new bridgehead in the eurozone, Latvia is an ideal choice,” writes Martin Ehl in Hospodářské noviny. The political analyst reminds the newspaper’s readers that the country, which has been dubbed a post-Soviet Switzerland, is home to a large Russian minority [27 per cent of the population] and a dynamic banking sector. It is also set to join the eurozone on January 1, 2014.”

Ehl continues—

Non residents’ deposits represent €10bn, which is equivalent — as it is for Switzerland — to 60 per cent of all deposits in the country. Reforms adopted in response to the crisis in 2009 have reduced the weight of the banking sector in the Latvian economy, at the same time, in contrast to Cyprus, banking supervision was also reinforced. […] According to unofficial sources, certain transactions emanating from Cyprus have already been refused, because they did not comply with anti-money laundering regulations.

To calm fears that Latvia might suffer the same fate as Cyprus, the day after the agreement, Latvian Prime Minister Valdis Dombrovskis remarked on his Twitter account that “Latvia will not make any particular effort to attract Cypriot deposits. The country believes that business with foreign economies is highly risky, and that is why it has been strictly regulated.”

However, adds Ehl, “Russian savers and oligarchs will certainly see a greater role for Latvia as a financial link to the European Union, because once the country has joined the eurozone, it will form part of the core of the currency bloc, unlike the Mediterranean countries which have been stricken by the crisis.”