One of the most shocking developments in the ongoing Euro crisis was the bail out conditions which imposed a levy on the savings of ordinary Cypriots. These conditions were as we know, voted down by the Cypriot parliament but a new deal was patched together during the penultimate weekend in March, which will not be voted on and which will confiscate 60% from the savings of those who have more than €100,000.
According to the Reuters news agency: depositors in Bank of Cyprus will receive shares in the lender worth 37.5% of any savings over €100,000, while the rest may never be paid back. Cyprus Popular Bank, the country’s second biggest, will be closed and its guaranteed deposits of up to €100,000 transferred to the Bank of Cyprus.
Cypriot President Nicos Anastasiades, who has been in the job barely a month, said the risk of bankruptcy had been contained thanks to the bail-out but accused the 17-nation euro currency bloc of making “unprecedented demands that forced Cyprus to become an experiment”. By this he means the sequestration of depositor funds has never happened anywhere before and indeed there is now widespread speculation that this model may be repeated elsewhere instead of or in addition to the imposition of austerity measures.. The whole process has been accompanied by restrictions on cash withdrawals and financial transactions which again are unprecedented Although these accompanying measures are designed to stop an effective run on the bank, it’s hard to imagine that any confidence will remain among the Cypriot population in the wake of all this and as these restrictions are gradually eased.
By most accounts reaction in Cyprus seems to have been minimal, perhaps in state of shock. Employees of the Popular bank have staged protests over the pending loss of jobs and loss of retirement funds but the main reaction so far seems to have come from Cyprus youth. Thousands of school students staged a walk out and college students have organised marches.
Daniel Pitt, who writes regularly for the International Green Socialist and is a key part of our editorial team, has been conducting his own research before submitting the following:
There can be no illusion about the European Union’s workings and who it serves when reading the details of their latest ‘rescue package’ for failed Cypriot banks, including the expected draconian mass privatisations and slashing of state welfare. One awful detail does however stand out, the arbitrary levy on individual savings that could easily be imposed on other member states when they next come crawling to the tyrannical “troika” of the European Central Bank, the EU and the International Monetary Fund for another loan.
The troika was pushing for a 6.75% tax on every individual earning less than €100,000 in the bank rising to almost 10% for those who cross that threshold. The conservative Cypriot president closed all banks while he fought to hold his own supporters in line and reach a compromise with an opposition led by AKEL, the island’s communist party, and stave off mounting anger on the streets.
An infuriated response came from trade unionist organisation the Pancyprian Federation of Labour, who promised to oppose a €1.4 billion privatisation programme as part of the package, which they say will destroy what has been built on over decades, whilst AKEL said it would not agree or consent to measures that will condemn the whole of the Cypriot people, and in particular the workers, unemployed, the young generation or the pensioners to dead ends and poverty, just as other peoples in southern Europe have suffered.
Although this orchestrated pressure was ultimately insufficient to force a renegotiation of the terms favoured by the Troika, it is clear that only the mass movement of organised labour can halt such relentless and cruel attacks on working class communities. Now more than ever it is the left which needs to organise for a fairer, more sustainable alternative accountable to the Cypriot people.
This is spot-on from Daniel but I’m going to expand on this: One of the intriguing difficulties about predicting the outcome of this experiment by the Eurozone troika, is the complex history of Cyprus, the laboratory in which these new measures in defense of finance capital is to be carried out.
Cyprus is a former colony of the British empire, before that it was a colony of the Ottoman empire and before that, it was a colony of Byzantines and Alexander’s Greece. The British departed in 1960 leaving a Christian cleric, Archbishop Makarios as head of state. Given the Turkish rule for centuries prior to the first world war, was this accidental irony or impish malice? In any event Cypriots once free of the British gravitated towards Greece until in !974, emboldened by the Greek military junta, a Coup de tête placed Cyprus on course for rapid re-unification with Greece.
This was a dark period of modern history in Cyprus, with the far right in ascendancy the summary arrest of communists and an internecine struggle between those of Greek and those of Turkish origin. Turkish armed forces invaded the north, thousands of people were displaced and finally the British were back in the form of peacekeepers. The northern territory remains to this day as a separate republic, recognised only by Turkey. The Cypriot parliament has reserved seats for representatives of the Turkish population which have remained unfilled. Ironically and fairly recently, Turkish entry into the EEC and the Euro fell short at the last moment when a resolution of the Cyprus argument seemed within reach.
The BBC speculates: “Residents of northern Cyprus have had to deal with international isolation for decades, but they are now monitoring the financial and banking crisis in the Republic of Cyprus extremely closely.” “Could the crisis in the Republic of Cyprus in time, produce an opportunity to end the division of the island”?
The second important schism is in the Cypriot labour movement. The PEO which Daniel mentions, is one of two major trade union confederations, the other being SEK. The PEO can be best described as historically anti-communist whereas the SEK has been pro-communist. The quote from the PEO is interesting given its political leanings but communism has to be understood in the post-soviet era as Euro-communism i.e. reformist. The same needs to be said about AKEL which historically is the Cypriot communist party. AKEL holds 19 out of 56 seats in the Cypriot parliament and held the presidency from !988 until a few weeks ago.
The loss of the executive office must be seen by AKEL supporters (and one that I’m in contact with) as a massive reversal in fortunes or a massive backwards step in the struggle for socialism but in reality, AKEL had already embarked on the road of austerity measures and that is no good basis for an expectation that their core working class vote would turn out. Progressive reformist platforms are pretty much dead in the water now that western capitalism has become mired in a deep and seemingly insoluble crisis.
One solution suggested by my contact on the island was a deal with Russia. Though AKEL may have lost it’s teeth long ago and may now need to rediscover them, it has ties with Russia as a former member of the Comintern (the communist international). At present however Russia seems to be in no mood for bold propositions. For sure Cyprus has strategic importance but the Russians are not desperately in need of a new Mediterranean base. Cyprus has potential for offshore oil but apparently not enough potential to act as good collateral.
Daniel is absolutely correct when he says “Now more than ever it is the left which needs to organise for a fairer, more sustainable alternative accountable to the Cypriot people”. But at the same time there is an opportunity here to heal the rift between the two major wings of the labour movement and the rift between the Greek and Turkish communities. At the moment north western Cyprus is not in crisis but the two communities trade with eachother.
There is an altogether darker perspective which we see a taste of in the growing anti-German sentiment. It’s important to stress that this is not the work of German imperialism, rather this is an imperialism which at least for now transcends the nation state. It’s something that Lenin called “the highest stage of capitalism” back in 1916, which remains an excellent analysis of the modern world dominated by finance capital. The division of Cyprus along the two fracture lines that I’ve raised must be confronted if they are not to feed into a turn in the wrong direction. United we stand, divided we fall!
Going back to the concept of laboratory experiment, one has to wonder whether the troika have thought this through. As a student of Marx, I suspect not. Conspiracy theorists would have it that such things are meticulously planned but history suggests that blunder and hope for the best are more usual (Iraq and Libya for example). In addition to this classical and neoclassical economics negate any real understanding of class struggle.
The raiding of bank accounts will panic investors and they will move like a herd not like a rational collective. It will also impact disastrously on the middle class layers of Cypriot society pushing them into alliance with the workers, who if they rebound constructively, will have the heads of big business and finance capital in their sights. They know that the troika almost came to impound the meager savings of the least prosperous and may come again, if destroying jobs and austerity fail to deliver.
The whole edifice of modern capitalism hinges on confidence and the repercussions of events in Cyprus will echo all over Europe. There is already speculation that this experiment where bank deposits are confiscated to prop up the hegemony of the super rich, will be rolled out anywhere from Poland to the Ireland. The UK may be sitting pretty on the outside of the Eurozone but is still heavily in debt and finance capital is still firmly in charge.
A very clear pattern is emerging when everywhere in Europe the welfare states are being demolished and the working class are facing increased hardship. Add to this the demolition of the middle classes as suggested by the Cyprus model and the choice is being starkly revealed between slavery and socialism. We shall wait and see.
Joanne Telfer and Daniel Pitt