Cyprus Bailout | Russia Threatens to Dump its Reserve Euros

Cyprus Bailout | Russia Threatens to Dump its Reserve Euros

Reuters is quoting Russian Prime Minister Dmitry Medvedev as saying that they

‘…may need to review the share of euros it holds in its central bank reserves over the euro zone’s bungled handling of a bailout of Cyprus.’

This unguarded threat by Russia to cash in its estimated €200bn reserve is not the first time it has been used but it gives a clear picture of Russia’s economic cold war.

An economic war may leave people and physical infrastructures unharmed but, just like hackers attacking computer systems, by disrupting a country’s economy the country is weakened in its ability to operate in the global market. Strong currencies buy commodities and assets more cheaply and drive up the price paid in other currencies. Without cheap raw materials to manufacture goods a country’s products will be too expensive to attract buyers when matched against goods manufactured by countries who bought raw materials more cheaply.

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