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Resistance by Cypriots deepens eurozone crisis

The deepening crisis in Cyprus, where every single MP voted against plans to steal a portion of people’s savings, has thrown eurozone leaders into turmoil. Clearly the snail pace of parliamentary processes forcing through austerity is proving too slow for Europe’s ruling elites.

Cypriot MPs effectively rejected the blackmail letter drawn up by Berlin and sent via the dreaded Troika of European Union, European Central Bank and the International Monetary Fund.

Cyprus says NO

Buoyed up by the huge anger uniting its people and to everyone’s surprise, not even the MPs of the right-wing government voted in favour of the ‘deal’ which would have seen the EU dipping its hands into every bank account to extract 10% of any money they can find.

In saying ‘No’, the MPs joined the growing resistance across Europe – from Italy, to Spain and Greece – to austerity measures that are designed to rescue a capitalist system that is drowning in debt.

The attack on savings – while leaving bank creditors out of the frame – is a new tactic designed to extract tribute for the sovereign debt monster affecting so many countries blown up in the wake of the Great Global Crash of 2007-8.

Even the Church of Cyprus’ Archbishop Chrysostomos is with the opposition, at least for the moment: "The entire wealth of the Church is at the disposal of the country ... so that we can stand on our own two feet and not on those of foreigners." The church is a major shareholder in Cyprus's third-largest domestic lender, Hellenic Bank.

Banks and the stock market remain closed. No one knows when (or should that be if?) they will reopen. The 1.1 million population of the small island, as well as the bevy of foreign tax-avoiders are denied access to their funds. But the threat of a Europe-wide bank run contagion is very real. People everywhere are eyeing up the security of their savings. Those that have any.

The fragile peace engineered by the co-conspirators of the Troika in the form of a Europe-wide banking union has been shattered. In a sign of nervousness in other eurozone countries, Spain’s finance minister declared savings accounts in his country “sacred”, adding Cyprus was “special and unique”. Wishful thinking.

But as Cypriot finance minister Michael Sarris flew to Moscow seeking help, much to the consternation of EU officials, the problems mounted. Even if Russia granted an extension of an existing loan and reduced the interest rate, it wouldn’t make a difference. Cyprus may even offer newly-discovered gas resources.

Wolfgang Schäuble, German finance minister, is insisting that the Troika’s plan prevails.
After the vote in Cyprus, he said: “Cyprus is living with a banking sector with low taxes and favourable laws that is completely overdrawn and that makes Cyprus bankrupt. This business model is not sustainable.”

With the two big Cypriot banks living off emergency liquidity from the central bank, the real possibility is that the country will be ejected from the euro, plunging the single currency into a downward spiral.

Cyprus is part of a growing global contagion which austerity policies have deepened.
Inflation is rising just as manufacturing is declining. With only the faintest signs of life in the US economy, investors have now begun to assess the likelihood – and catastrophic consequences – of an end to the years of historically low interest rates.

Ben Bernanke, chairman of the US Federal Reserve ominously began a speech with these words: “Why are long-term interest rates so low in the United States and in other major industrial countries?” Later today, he’s expected to give his views on the end of quantitative easing.

With these new developments in an increasingly desperate situation, our attention must turn from just resisting austerity to replacing the bankrupt system altogether. A global network of peoples’ assemblies has to take control of the banks and the financial networks. Then they could be converted into a democratically run not-for-profit service to co-operative enterprises producing for need.  

Gerry Gold
Economics editor
20 March 2013

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