Cypriots angry at bail-out at their expense
Punish the poor, protect big investors and retain Cyprus as an offshore banking haven for oligarchs. That was the meaning of the measure rammed down the throats of Cypriots over the weekend under the direction of the infamous Troika.
Instead of restructuring broken banks, the right-wing government was told by the European Union, the European Central Bank and the IMF to cut the value of ordinary people’s deposits as the price for an £8.6 billion bail-out.
But if they thought it was a clever move, they have been proved completely wrong. Fears immediately grew of a run on banks around Europe after panic-stricken scenes in Cyprus. Cash points ran out as savers tried to pre-empt government measures to dock their accounts.
Even as an emergency session of the Cyprus parliament began, there were warnings that the Cyprus crisis could spark off of the next global financial crisis. Savers in Greece, Italy, Portugal and Spain may also panic if they think they are next. Anti-austerity strikes and demonstrations around Europe are adding to the tension.
Eurozone finance ministers in Brussels and Berlin want to take 6.75% of the savings of those with less than €100,000 and 9.9% of those with over that amount. Cyprus’ new president Nicos Anastasiades’ claims that the measure will mainly hit Russian oligarchs who use the island for money-laundering has failed to convince as pensioners and life-savings are hit hard.
Financial experts like David Kotok of Cumberland advisors have expressed amazement:
The madness of this decision about Cyprus is unfathomable. We expect runs on Cypriot banks when they open on Tuesday. Europe has found a new way to shoot itself in the foot.
So is Cyprus – a small country of 1.1 million – simply a unique case? Well, of course every country is special, not least Cyprus, which has been divided into two for 40 years since being invaded by Turkey in 1974. Unemployment stands at a record high of 15%.
Yet the banking sector has mushroomed – fuelled by speculation in the island’s property market – to become more than eight times the size of the nation's economy. The Russian mafia has exploited Cypriot banks for money-laundering and rubs shoulders with native property-speculating millionaires in the luxury villas on the coastline.
And, in addition to its tax-evading oligarchs, the Russian government has strategic reasons for retaining influence there. It is a stop-off point for ships supplying the Assad dictatorship with arms. British bases on the island are to be turned into NATO bases, under a secret agreement made last autumn.
The rulers of Europe, desperate to save the euro, are bearing down on ordinary people to impose the needs of the banks and the economic system over which they preside.
The needs of the ordinary people of Cyprus as well as modest pensioners from cold climates, let alone the country’s fragile eco-systems many of which have been destroyed by rampant speculative building, count for nothing in this entire debacle.
But this is the pattern, not only in Cyprus, but also in Ireland, Spain, Italy and UK. The demands of millions of people to end austerity have been ignored. In Italy, where a majority voted against further cuts, the electorate is left disenfranchised.
The disarray at the top of the European Union is leading to dismay in significant circles. Today the Financial Times commented:
The biggest risk is political. The prescription of universal austerity combined with kid-gloves treatment of big investors in banks is increasingly toxic to European voters. Leaders have just added fuel to the fire.
Leaving the Euro, however, as some politicians in Cyprus and Britain are threatening to do, will not solve the deep debt crisis that lies behind the dictatorship of the Troika. That will require taking the power from the bankers and their political allies and re-structuring the economic system so that it works for people and not profiteering speculators.
A World to Win secretary
18 March 2013