Cyprus: Popular rage derails proposed bank heist

Issue 

Not a single politician in Cyrpus's parliament voted for a brutal austerity deal that would see the government receive bailout funds in return for direct taxes on ordinary people's savings when it was put to legislators on March 19.

After days of angry protests on the streets and furious negotiations behind closed doors between the "troika" of the European Union, European Central Bank and International Monetary and Cyprus's government, a new deal for a 10 billion euro bailout was finally secured on March 24.

Unlike the original deal, it doesn't tax the savings of those with worth less than 100,000 euros in their accounts. However, those with more than 100,0000 euros will be hit with a 9.9% levy to pay for the bail out.

However, popular anger remains huge.

When news of the original agreement between Anastasiades' government and the “troika” of the European Union, European Central Bank and International Monetary Fund leaked out, it caused fury and fear in Cyprus.

On March 18, there was mass turmoil in Cyprus and a run on the banks as panicked depositors tried to withdraw their money, forcing the closure of the banks. The panic spread to other European countries.

The Cypriot government and the troika proposed a revised agreement that would have exempted depositors with less than 20,000 euros. But that did not appease anyone. When the country's parliament voted on the agreement on March 19, not a single member of parliament voted in favour. Even MPs from the president's own party abstained.

Europe's financial crisis has clearly reached a new stage. Cypriot parliament is the first governmental institution to reject the austerity demands of the troika.

Below, British socialist Kevin Ovenden looks at the situation. it is taken from the introduction to a longer article at US Socialist Worker.

* * *

Despite the desperate protestations of Cyprus' government, it is now clear that the Cypriot delegation, in talks with the troika that lasted into the early hours of the morning of March 16, opted to sacrifice the mass of the population through raiding whatever deposits they had in the domestic banking system.

Centre-right Cypriot President Nicos Anastasiades was caught between two demands. On the one hand, the demand of the troika that bank depositors take a “hair-cut” worth 5.8 billion euros in return for a 10 billion euro bailout for the banks ― plus austerity piled on top of that, in an economy suffering a double-dip recession.

On the other was the settled policy of the Cypriot elite: to maintain its role as a tax haven for hot and dodgy money, two-thirds of it coming from Russian oligarchs.

The International Monetary Fund and German finance ministry were prepared to throw the burden onto Russian capitalists; Anastasiades opted to spread it to Cypriot retirees, workers, farmers and struggling small business owners.

No one involved in the talks says that the outcome ― both the proposed measure to rip off Cypriot bank depositors or the inevitable social and political upheaval that followed ― was intended.

The dysfunctionality of the European response to a now renewed crisis could not be clearer. It is as if all the principal actors have chosen to be the prisoner of events and then ― by way of a kind of collective Stockholm Syndrome ― disavow responsibility for their own actions.

The deal was, predictably, both unacceptable to the mass of the Cypriot population and viewed almost universally as a harbinger of further bank heists.

The rational response in such a situation is to get your money out. Thus, the bailout agreement precipitated the kind of 1930s-style bank panic that many policymakers around the world congratulated themselves on avoiding four years ago.

The bank robbery was also viscerally opposed by two other groups.

First, the Cypriot business class. It has been utterly dependent on the island's tax-haven status for a decade and a half, and so it rebelled.

One of its main spokespeople in the US, the former governor of the central bank of Cyprus, Athanasios Orphanides, told any business journalist who would listen on March 19 that the powerful states of the EU had enforced a kind of apartheid across the continent, where the law facilitated the expropriation of the weak by the strong.

He virtually genuflected in front of the Statue of Liberty, hailing the doctrine of equality before the law in an effort to persuade Wall Street and Capitol Hill of the unfairness of it all.

Second, Moscow. Staggeringly, the Eurozone finance ministers did not even inform, let alone consult, the Russian government about their plan to extort possibly up to 4 billion euros from Russian business interests.

Russia's President Vladimir Putin was rebuffed, and his government moved swiftly to consider its own independent intervention.

There are deep and bitter divisions among Russia's oligarchs, with Putin at the head of the state and representing one wing. He indicated that there were certain hostile interests whose hair he would shed no tears over clipping.

The Russian finance ministry toyed with demanding a version of the Lagarde List ― an inventory of tax evasion among the Greek rich who stashed their money overseas when the debt crisis hit.

But whether it was friends or factional opponents of the Russian government who were to suffer, Putin's position was clear. If any oligarch was to get a buzz cut, have their liquidity frozen or be thrown in the slammer, it was to be a Kremlin decision, and no one else's.

The Cypriot finance minister tendered his resignation; it was not accepted. So he headed off to Moscow for talks while his bosses sought new negotiations with the troika and getting something ―anything ― through the Cypriot parliament.

On March 19, the Cypriot parliament not only rejected the original deal, but it rejected a revised package exempting those with deposits under 20,000 euros.

It did not just reject the deal. Not a single member of parliament voted for it. Thirty-six MPs voted against, and 19 MPs from the president's party abstained.

The Cypriot vote is a watershed. For the first time in three years of the banking and sovereign debt crisis in Europe, a governmental institution has voted no. That crisis is, of course, an expression of a deeper global slump.

But the ways it has manifested itself have depended on the particular architecture of the competing interests that make up the EU.

In Greece, the parliament ― at the price of bleeding the political center--voted through savage austerity measures put forward in the so-called Memorandums. In 2011, that also meant a hit for holders of Greek sovereign debt. This pushed the Cypriot banks over the edge.

The Italian political class, in its majority, voted for pain and accepted, as did their Greek counterparts, the imposition of an unelected prime minister, Mario Monti, to see it through. Last month, there was an electoral revolt against the Italian political class.

And now there is little Cyprus. Not only the mass of people, but now also a political institution ― the Cypriot parliament ― has said no.

A small child ― Cyprus joined the EU in 2004 and the single currency in 2008; it accounts for just 0.2% of the EU's economic output ― has told the rest that the emperor has no clothes.

The profound significance of this will continue to play out. There is now both a desperate scramble to reassemble some deal over Cyprus's banks (Russian takeover? Exceptional European Central Bank cash? Creative destruction?) and deepening criticism across Southern Europe toward those politicians who said the only game in town was to accept austerity in order to secure a bailout of the financial system.

The failure of the Cypriot parliament to agree to the bank heist on was total. The political positions of the MPs, still more so the interests of the conflicting social classes in Cyprus, are far from uniform.

With the Cypriot business class opposing the troika, with Russian oligarch depositors alienated and with Moscow floating alternatives, a number of even center-right MPs could find a backbone to oppose austerity. Even Anastasiades' Democratic Rally could slither into abstention.

But those parameters will change. In the combination of conflicting pressures that produced the “Cypriot No”, there is one central element for the radical left. It is the mobilisation ― and with it, the political agency ― of the mass of the people in Cyprus who took to the streets outside the parliament on March 19, with the backing of, among others, the official opposition party.

That means not being oblivious to the cracks and fissures that are opening up in official politics as a parliament of an EU state bucks the austerity trend. But it also means firmly standing independent of those conflicting elite interests, even while exploiting their mutual clashes.

All sorts of voices in Cyprus and across Europe will now seek to gather political strength to plot their preferred way out the crisis.

The radical left should have its own voice, based upon extending the kind of mobilisations we've seen in Cyprus so far and upon a trajectory of fundamentally breaking with a failed system.


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