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Cyprus: Grand Theft Euro

category greece / turkey / cyprus | economy | feature author Tuesday March 19, 2013 18:38author by Paul Bowman - Workers Solidarity Movement Report this post to the editors

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This Saturday morning Cypriot people woke up to the news that they were about to be robbed. In a pre-planned ambush scheduled to coincide with a local bank holiday weekend, Eurozone apparatchiks threatened to bankrupt the Cypriot banking system by immediate withdrawal of the ECB liquidity support.

The "deal" forced on the Cypriots by Frankfurt means a "bail-out" of the banks to the tune of 17 billion euros, roughly equivalent to the annual GDP of the Republic that makes up the EU-recognised part of this divided island. But only 10 billion will be provided by the ECB and IMF, the other 7 billion will be taken by a combination of a 1.4 billion privatisation programme, but in bulk by robbing anyone with a bank account in Cyprus.


Cyprus: Grand Theft Euro

This Saturday morning Cypriot people woke up to the news that they were about to be robbed. In a pre-planned ambush scheduled to coincide with a local bank holiday weekend, Eurozone apparatchiks threatened to bankrupt the Cypriot banking system by immediate withdrawal of the ECB liquidity support.

The "deal" forced on the Cypriots by Frankfurt means a "bail-out" of the banks to the tune of 17 billion euros, roughly equivalent to the annual GDP of the Republic that makes up the EU-recognised part of this divided island. But only 10 billion will be provided by the ECB and IMF, the other 7 billion will be taken by a combination of a 1.4 billion privatisation programme, but in bulk by robbing anyone with a bank account in Cyprus.

Despite cynical attempts by the Germans to spin this as targetting shady Russian oligarchs who have used Cypriot banks as money laundering havens for their ill-gotten loot, the reality is that two-thirds of deposits are still held by ordinary citizens. The opportunity to take the money only from the accounts of the unsecured deposits of more than 100,000 euros was dropped in favour of breaking the spirit of deposit insurance which is supposed to guarantee all deposits of less than 100,000 from bank failure or loss. In this case they have avoided breaking the letter of the law by the legal nicety of claiming the confiscation is a new government tax, rather than losses due to bank failure, which is what deposit insurance is supposed to cover.

But this is a legalistic fig-leaf which ignores the effect on the role of deposit insurance in reassuring ordinary households that their income is safe in the bank. That is, the whole purpose of the protection is to avoid the possibility of bank runs - when all depositors all try and withdraw their money at once, causing a collapse of the bank, such as with Northern Rock five years ago.

Financial commentators across the board have been agog at the potentially disastrous stupidity of this move, which lest we forget has been in preparation since Cyprus first announced it would need a bail-out in June 2012, after major losses in the Greek debt write-down. As such, it can hardly be claimed as a fumble under time pressure.

Last year's Eurozone crisis at one stage threatened what are called "sovereign bank runs" on the economies of Italy and, above all Spain. At one point the amount of money being withdrawn from Spanish bank accounts and sent abroad got to the level of not only putting the Eurozone TARGET2 system of inter-central bank settlements under serious strain, it raised the spectre of a sovereign run on Spain itself, effectively a bank run on the whole country - the outcome of which would be the chaotic breakdown of the Eurozone itself. The crisis was only averted by the ECB stepping in, tearing up the rule book and telling the markets it was prepared to do "whatever it takes" to prevent Spanish or Italian sovereign bond yield spreads going into breakdown territory.

The threat of the ECB printing press, combined with the unofficial acceptance that the German's wanted things to quiet down in Europe, in the lead-up to their general election this coming Autumn, was enough to convince the markets to end speculating on Eurozone breakdown for now. On top of that, the official deal that was announced, was the creating of a European banking union, with Eurozone-wide deposit insurance, systems for the orderly wind-up of failed banks without depositor loss, a unified regulatory system and so on. All of which, despite being promised for some vaguely defined point in the future, rather than delivered, was intended precisely to avert the possibility of sovereign runs in precarious countries in the Eurozone. All that effort has now been thrown away in an act of astonishing stupidity by Frankfurt with this confiscation of 6.75% of Cypriot deposits under 100,000. It's no wonder that the financial papers and blogs are awash with disbelief.

What most commentators don't go into though, is the naked class warfare agenda behind this strategic blunder. The programme of making ordinary workers pay for the crisis the rich created, from Greece to Portugal and Ireland and now Cyprus, is the dogma that makes such stupidity comprehensible. Only dogma can overcome sense, above a certain minimal level of collective wit and intelligence, and no one is suggesting that the personnel of the ECB or the European Commission are all half-wits.

In addition to the general class principle of robbing to poor to give to the rich, we must also note, as have others, the fact that all through the so-called Eurozone "debt" crisis, the tempo of events has been set by the rhythm of the German electoral calendar. From the delays in resolving the initial Greek crisis in 2010 in order to wait until the regional Nord-Rhein Westfalen election had passed - delays which plunged Greece into a chaotic social breakdown which continues to worsen - to the current situation. The chief executive of PIMCO, the world's largest bond dealer, Mohammed El Arian obliquely referenced this in a typically astute but diplomatically coded piece in the FT.

One of Frankfurt's motives that he alluded to was the fear of being seen to encourage "moral hazard". That is, that the hardliners feel that all this talk by the buffoons in the media of "the end of the eurocrisis" has encouraged "complacency" amongts us peripherals, and made us think that we've got away with it and can now legitimately put basic welfare and subsistance issues back on the agenda. But cracking the whip has another useful function for the German right. In the run-up to their election, financial sadism exercised against "the lazy mediterraneans" goes down very well with their electorate, projecting an image of toughness and fiscal rectitude. Bullies always like to demonstrate their power by beating up the little kids in the playground.

What happens in the next few days, whether the Cypriot parliament will vote to accept this deal, in a vote that has been postponed twice already; whether the banks will be shelled out by runs when they finally re-open tomorrow; whether the bovine international markets will take fright at the sudden "reappearance" of a eurocrisis that they had in their ruminant ignorance thought, only last week, had been put to bed; all this is to be seen over the next days. But as many commentators have already said, even without being able to predict the future, Paddy's day 2013 could well go down in history as the day they threw the euro away. In the meantime our struggle continues for a Europe fit for all workers to live and prosper in. A struggle against our supposed leaders, not in spite of them, but because of them.

Paul Bowman

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author by MARIOS - date Thu Mar 28, 2013 06:34author email syspirosi_atakton at mail dot comauthor address author phone Report this post to the editors

“Cyprus: neither the haircut, nor the hairdresser – notes on the present conjuncture”

The haircut of bank savings and the other memorandum measures forthcoming cannot be explained through the prism of a good or a bad management of the economy. After all, only a week ago, the government of this place was in the hands of the left-wing AKEL, which accepted and pushed through memorandum laws without even having agreed on the final memorandum – and of course, without ever receiving any money from the much-hyped loan. The vast disappointment of the people for the financial decay was shown in the last elections with the bringing about to power of DISY.

The socialisation of the damages at the expense of the small savers should not come as any surprise. The neoliberal logic demands the nullification of social achievements [in the sense of previous social/labour victories –– trans.] the privatisation of public wealth and capital’s compensation for its damages to be paid by the workers, at any give moment.

It was very quickly proven that Anastasiadis [trans: the Cypriot president] was unable to stand by his pre-electoral pledges and to convince the neoliberal “friends of his” in Europe to support the policies he himself had announced. [Outside] support for the local elites that Anastasiadis was hoping for crashed against the interests of the stronger, supra-national elites which aimed at gaining from the domestic wealth. The haircut of all savings was a desperate pledge by the government to limit the losses of domestic capital, whose interests it represents.

In the period ahead, the state will utilise a number of strategies to attempt to absorb the social shock: it will pledge national interests and the prospect of natural gas –– and for those who won’t buy neither, it will deploy brutal repression in the name of law and order.

As observed at the first few gatherings against the proposed law for the savings’ haircut, reaction to it come from across the entire political spectrum. We, as part of the wider anti-authoritarian space, do not consider any authority to be able to manage our lives. We do not de facto align ourselves with anyone who articulates an anti-memorandum discourse, nor do we believe that there can be any socially just solution under the current capitalist system. Today’s systemic crisis is for us yet another field of action for the development of a social movement of subversion. And we will therefore cooperate with all who share this perspective.

Crouch of the disorderly

comrades from the anarchist/ anti-authoritarian space

Nicosia, March 19 2013

The text above was distributed in Nicosia during the protest gathering outside the cypriot parliament

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author by MARIOS - date Thu Mar 28, 2013 06:38author email syspirosi_atakton at mail dot comauthor address author phone Report this post to the editors

Key points from the conversation between Radio 98FM (Greek alternative radio) and Syspirosi Atakton (Anarchist group in Cyprus).

98FM: How did you see the “No” from the parliament?

Syspirosi Atakton: We felt that the NO,from politicians, was like a reflex, because as it turned later there was no “Plan B” nor a path for a change so they continued the negotiations hoping for something better.
When the neoliberal president was elected he was expecting that the Plan A would be the same austerity measures applied in the other countries. He was caught off guard and that is mainly why they voted no. They wanted to keep their deposits intact and support for the big capital. All in all the no was not something revolutionary, they were serving their interests and their deposits. All those reports on the heroic NO of the Cypriots was more like a fairytale that was easy to sell.

98FM: We want some more details about the society in Cyprus.

SA: The following points were made to explain how an environment was created with which social acceptance for the current system was achieved:- In Cyprus for a number of years all the political parties and syndicates have been working together to gain social acceptance for the current system. There was a stability in employment and some rises on salaries. However, this was nothing compared to the profits made by the banking system and the tourism industry. This led to a general social acceptance of the way the banking system worked.- Since 1974 there was a flow of foreign capital in Cyprus that created the bubble of the banking system. At the beginning it was from Lebanon, then from Yugoslavia and more recently the Russia. The political party of the left were supporting this and therefore there was no critisism of this system from any political parties nor mainstream media. - The social acceptance of the banking system and the events of Mari (a big explosion at a naval base which killed 13 people) after which there seem to be an alliance between the neo-nazi party (ELAM) and the neoliberals (DISI) against the then left government, had a great part in the rise of DISI in the presidential elections but also in generating the opinion that there was only one solution to our problem (the austerity measures and the help from troica ).

98FM: What about the archbishop and his offer to the state the ??belongings?? of the church.

SA: At first we need to state out that the same person said similar things during the Annan referendum. He said he will give to every refugee, of the war of 1974, a plot of land if they voted no. He never gave anything to anyone!! The truth is that the archbishop is really close to neo nazi and nationalistic views and he is a supporter of the current president. The church has 800m of property of estates. They own hotels, the Hellenic bank in Cyprus and KEO (local beer industry). But at the same time they don’t have the required liquidity to help and we doubt they can sell their property with the economical unbalance in Cyprus.

98FM: What about the natural gas?

SA: There is the common belief that the extraction of natural gas will save Cyprus from economic destruction. But until now we have not had any concrete information as to what the actual value of it is or whether we will extract it in 2, 5 or even 10 years. They are using the potential for natural gas in order to try and keep people calm and avoid organised resistance. Another important piece of information on this matter is that the left party AKEL, who was the government for the last 5 years (until the end of February), made agreements and (new) alliances with Israel regarding the natural gas. As a consequence Cyprus lost alliances with the countries of middle east like Syria and Egypt who were our natural. In the end Israel re-established their connections/alliances with Turkey and now it remains to be seen whether Israel is actually our ally or not.

98FM: Our mainstream media were presenting the situation in Cyprus as disastrous. Empty supermarkets, pharmacies out of stock etc. Was it true?

SA: We had these pictures in our mainstream media as well, but as it turned out later those pictures were taken from different situations and potentially in different countries. The media were trying to create a sense of panic and in a way terrorise people, so that they would accept the cuts as the only solution. The truth is that people were calm enough. There was food and medicines and everything was working well except business like petrol stations that required cash to provide for petrol as people were only using their credit cards.

98FM: What do you think will happen now? Will people rise up for the situation?

SA: We expect that people will get to the streets. Two years ago unemployment was estimated on 1%. Now it is 14% and we expect it to be double in 6 months. It will be impossible to keep people calm and reassured with rates of unemployment always rising. Let’s take as an example the people working in the banks, which until now that was a really safe and well-paid job. People will get fired and they won’t be able to pay their debts for their car or their house or even their kid’s education. We don’t think the current system will be able to control the anger of these people. Already during this week we have seen different things in the streets. The change is imminent.

The duration of the conversation was around 1h15. For more information or questions you can contact us anytime

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