Cyprus standing on the edge of the abyss

Socialist policies needed to resolve crisis in the interests of majority By Niall Mulholland, CWI Niall Mulholland, who recently visited Cyprus, looks at the disastrous consequences of the Anastasiades government’s bailout deal with the Troika, and the alternatives put forward by the Left. The weather in Cyprus at this time of year is warm, with a refreshing breeze blowing over the island. The same pleasant balance cannot be said about the economy, which is in meltdown. Cypriot society is in a state of shock after weeks of economic and political turmoil. Cypriot banks faced collapse after a steep fall in the value of Greek government bonds, many of which were bought by the Cypriot banks. This was linked to the savage bail-out package imposed on Greece by the Troika. In March, the Cypriot government, led by President Nicos Anastasiades, agreed to a 10 billion euro bail-out package with the Troika (the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF), after the Bank of Cyprus and Laiki became insolvent. In return, Cyprus was told it must raise 5.8bn euros. The agreement saw bank depositors with more than 100,000 euros face big levies, hitting many small businesses. The country’s second largest bank, Laiki Bank, was closed down and its 9 billion worth of debts taken on by the Bank of Cyprus. After a two-week closure, banks reopened on 28 March but with strict controls on the amount people can withdraw each day. But as if this was not bad enough, the already stunned and angry Greek Cypriots were later told that the bailout had ballooned from 17 billion euro to 23 billion. Cyprus has to find 6 billion more than the 7 billion mooted when the preliminary agreement was reached on 25 March. President Anastasiades’ right wing government had already decided to impose swingeing austerity measures, bank closures, property taxes, privatisations of the three most profitable semi-state sector companies (electricity, telecommunications, and ports) and many sector job losses. They are even considering selling part of the gold supplies of the Central Bank, worth 400 million euro. “Returning Cyprus to the Stone Age” Adding to the country’s woes, is the long running crisis at Cyprus Airlines which is near bankrupt. The government is threatening to close it entirely or to make a deal with unions that would see a halving of the 1,030 workforce and the number of planes cut from 11 to 6. Cyprus Airline’s bleak future, along with the country’s economic turmoil, has ‘numbed’ summer tourist bookings, which is a crucial part of the economy. Political scandal surrounds the government. Anastasiades has been forced to strenuously deny that he knew a legislative bill was being prepared for the deeply unpopular ‘haircut’ of all bank depositors prior to the European Group meeting in March. Popular anger is aroused by reports that insider information enabled the rich to take out millions of euro from bank deposits before 15 March. Officially the Cypriot economy is due to fall by 8.7% this year and by 3.9% in 2014. But many economists believe there will be a 10% fall in 2013, and a plummet of anything between 15-25% by the end of next year. “Returning Cyprus to the Stone Age”, is how one commentator dramatically described the next months. Certainly people are finding their standard of living increasingly precarious. The government was recently forced to provide an emergency 3 million euro to small famers, whose livestock were starving due to the sudden bank credit restrictions. More people are switching from cars to (poor) public transport to save money. On weekends, instead of heading for the cooler mountains, families are now opting for the cheaper alternative of strolling along Nicosia’s ‘old town’, where they linger for hours over a single coffee or soft drink. Even sporting events are hit hard by the economic crisis. One of the main football clubs, Omonia, is in financial crisis and facing a sudden withdrawal of sponsorship. The government tries to dampen popular opposition to austerity by claiming the measures will not be as harsh as previously planned because some privatisations will be pushed back to 2018, there will less cuts in education and the repayment of the bail-out loans will start after 10 years and will take 12 more years (in total, Cyprus will, in effect, be under the control of Troika for the next 22 years). But this is cold comfort to the working class and middle classes who face years of austerity, job losses or emigration. Unemployment is already sitting at 14%. ‘Social markets’ (modern soup kitchens) are springing up everywhere. Working people also expect that, like Greece, the Troika will be in Nicosia every few months, demanding a new wave of cuts in return for bailout conditions. ‘Worst since 1974’ The newspapers are full of despair. It is generally felt that the crisis is the worst since the 1974 Turkish army invasion. There is understandable widespread outrage amongst Greek Cypriots at the bailout conditions and a perception that, once again, small Cyprus is, de facto, under neo-colonial rule; this time from the Berlin government, in the interests of German capital and for electoral gain. But sometimes this outrage in Cyprus takes a potentially divisive, nationalist direction. Marios Leonida Evriviades, a professor of international relations at Panteion University in Athens, wrote about the “econcide” (destruction of an economy) and “Cratocide” (destruction of a state) imposed by Chancellor Merkel’s government in Berlin, and compared it to the Nazis’s annexation of Czechoslovakia in 1938. He went on to talk of “Nazi-sympathizing Turkey” confiscating private property in 1942. The trade unions and Left needs to ensure they lead mass struggles against austerity or there is a danger that nationalist forces and even the far right will gain the initiative. This needs to include deepening relations with working people in North Cyprus, who have suffered their own austerity cuts for years, as well developing common struggle with the working people in other countries of southern Europe that are hit by the Troika’s austerity policies. Otherwise the two right wing administrations may try to whip up nationalism on either side of the Green Line, diverting the class interests of the whole island’s working people. So far, apart from organising some protests during the March crisis, the unions have given no real lead to working people. The right wing unions are in talks with the government about ‘managing’ the crisis. The Left unions, linked to AKEL (Greek Cypriot communist party), rhetorically oppose cuts but do not call for any firm action. Members of New Internationalist Left (CWI Cyprus) participate in a broad campaign against austerity initiated mainly by forces affiliated to AKEL, the ‘Movement Against Privatisation and Austerity’, but criticise its lack of a fighting programme to effectively oppose austerity and for a real alternative. One leading figure in the campaign claims that there is “no need for a programme – we are a movement”. But the economic crisis is deep and will only get worse. A radical alternative must therefore be posed. If the unions and Left fails to resist effectively, other populist, nationalist ‘anti-austerity’ campaigns can make headway. Ominously, Cypriot fascists, who are trying to emulate their cousins in Golden Dawn, in Greece, are now handing out anti-austerity leaflets in parts of Nicosia where they previously did not venture. These people can be a grave threat to immigrants and the Left. They must be resolutely opposed by a united workers’ movement that campaigns against the poison of racism and ultra-nationalism and for jobs, with a living wage, for all. Referendum call AKEL has called for a referendum, to allow the people to accept or reject the bailout deal. This was also taken up by the small Green party and an independent candidate in presidential elections held at the start of 2013. While the demand for a referendum gained an echo amongst some workers and youth who were furious at Troika-imposed austerity, it appears to have declined in recent weeks. AKEL and the former presidential candidate, Lilikas, both now put their hopes in the parliament rejecting the memorandum. However there are groups still collecting signatures in an attempt to force a referendum. There is little possibility that the present government will opt for political suicide by calling a referendum on the bail-out deal. In truth, AKEL’s campaign for a referendum is largely token and used by the party leadership to avoid other issues. In government until recently, AKEL cultivated a friendly relationship towards big business, the banks and the Russian oligarchs who spirited billions into Cypriot banks, preparing the ground for economic bust. In recent weeks, heightened government propaganda warning that there is no ‘Plan B’ and that leaving the euro and returning to the Cypriot pound currency would see the country “go back centuries”, is used to try to counter the popular call for a euro-exit. Nevertheless the issue remains live and can gather more force once austerity starts to bite deeply AKEL will unveil next week its proposals on how to leave the euro. Economists regularly appear on TV discussing a euro-exit. The influential Greek Cypriot Archbishop also raised the prospect of Cyprus leaving the euro-zone. This is in marked contrast to other euro-crisis countries, like Greece and Ireland, where although there is huge opposition to austerity most workers are fearful of leaping into the ‘unknown’ of euro-exit. Cyprus, however, only joined the euro-zone in 2008, at the start of the currency’s crisis. Cypriots therefore associate euro membership with seemingly endless financial turmoil, extreme austerity and looming slump. Euro-exit? But the New Internationalist Left warns that, on the basis of the continuation of the capitalist system, breaking from the euro and a return to the Cyprus pound will not mean refuge from austerity and stagnation. Certainly exiting would allow devaluation of the Cyprus currency but the boost to exports would be limited, given Cyprus’s lack of materials to sell abroad (the much-vaunted discovery of oil and gas supplies off Cyprus’s shores are years away from possible exploitation and the industry will be dominated by multi-national companies in the interests of their major shareholders). Currency devaluation would also result in a rise in import costs and therefore a hike in the cost of living. This ‘imported inflation’, along with likely government attempts to deal with paying off national debts by printing money, would cut into people’s savings. Apart from the New Internationalist Left, none of the rest of the Left puts forward a clear, class-based analysis to the crisis or a socialist programme for change. Inevitably various ideas are temporarily fashionable at this early stage of the economic crisis and impending class confrontations. Some look to a ‘co-operatives’ based economy as an alternative, for example. Unlike Greece, which, in effect, has suffered 28 years of austerity, many Cypriots are unprepared for the very hard landing ahead after years of economic boom. But looming class battles will radicalise more and more Cypriots in the next months and years. In anticipation of coming struggles, the New Internationalist Left puts forward a socialist alternative. This includes repudiating the debt, nationalisation of the banks under democratic public control and management, opposing privatisations, breaking with the bosses’ euro, and for the public ownership of the key industries and major utilities, to enable the economy to be democratically planned to serve the needs of the majority, not the profits of bankers and the speculator minority. All this immediately raises the prospect of Cyprus being forced out of the eurozone and even the EU. A workers’ government needs to plan to deal with exit from the euro and for a return to a national currency (the pound) while countering any illusions that this could provide a solution on the basis of capitalism. Adopting a new currency must be incorporated as part of a socialist programme. The struggle for the socialist transformation of society is just as relevant for Greece, Portugal, Spain and other euro-crisis countries, and beyond. A socialist federation of European states, founded on an equal and voluntary basis, is the only way to fully realise genuine co-operation amongst the working people of Europe and the utilising of the rich resources of the economy for the benefit of the great majority. This is particularly the case for small Cyprus. A new powerful Left needs to be built in Cyprus, with the aim of forming a government based on the needs of working people. The situation facing Cypriot society is desperate and set to get much worse. Only a bold, socialist, internationalist programme can resolve the crisis in the interests of the majority.

New developments in Cyprus open new chapter of Eurozone turmoil

No trust in capitalist government! No austerity for the Euro! Kick out the Troika! For a socialist alternative! By Tony Saunois, CWI The eurozone crisis has dramatically intensified during the last week. It has blown away the optimism of the ruling class in recent months that they had resolved the crisis. Once again, the continuation of the eurozone, as currently constituted, is seriously threatened. The Cyprus crisis could also dramatically pose the viability of the euro. This time the threat has erupted not from one of the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain). The latest threat to the existence of the eurozone has come from Cyprus. It is a measure of the parlous state of the eurozone and the EU that Cyprus which accounts for 1:500 of the EU GDP (compared to Greece’s 2% of GDP), threatens the continuation of the current eurozone. These developments have intensified the crisis and raised again the spectre of rapid contagion to other countries, especially Italy, Spain and Portugal. Cyprus was also, at least initially, the first country to apparently call the bluff of the Troika. This threatens to set a “trend” for other eurozone countries to do likewise, something which Merkel and the other EU leaders are terrified of. While, at the time of writing, it remains unclear exactly how this new phase in the crisis will unfold, the developments in Cyprus represent the opening of a new chapter. Arrogantly, like a colonial master, the Troika insisted that the Cypriot government confiscate a percentage of the bank deposits held by both rich and poor, 9.9% for those holding over 100,000 euros and 6.75% for others, as a condition for a bail out of 16bn euros. The Troika would provide 10bn euros with an additional 5.8bn raised by the Cypriot government. This was perceived as a dictate by colonial rulers. Yiannaki Omiras, President of the Parliament, argued that, “Europe want Cyprus to return to be a country of limited sovereignty – neo-colonial”. The history of colonial rule under the Ottoman Empire and British imperialism is an important part of Cyprus’s history, fuelling opposition to measures being imposed by the Troika. The confiscation of a percentage of the deposits of all savers provoked a massive backlash in Cyprus and other EU countries caught in the centre of the storm, especially Italy, Portugal and Spain. In one stroke, the imposition of this measure fatally undermined the insurance guarantee for depositors throughout the EU. This can lead to a flight of capital from other weak economies in the EU, such as Portugal, Italy and Spain. If the Troika could impose this on Cyprus, then why not Italy, Spain or Portugal and other countries when the next bailout is needed? It was a blunder by Merkel and the Troika, driven by the ‘hard-line’ Dutch, Finns and Slovaks in support of Merkel and German imperialism. The deposit ‘tax’ threatened to trigger a run on the banks in other countries, as depositors withdraw money from their accounts in fear that they could loose at least a percentage of them. The consequences of this miscalculation – reflecting the arrogance of the EU leaders and that they are lashing around for solutions – has only intensified the crisis. President humiliated In Cyprus, the reaction to the Troika demands was such newly-elected President Nicolas Anastasiadis, in power for just over two weeks, was left humiliated. Bullied into accepting the deal in Brussels, Anastasiadis returned to Cyprus to face a revolt of the mass of the population and all the political parties, including his own. In the end, not a single MP voted for the deal and the governing party, DRP, abstained on the vote! They effectively called the bluff of the Troika, which, in turn, put the ball back into the Cypriot court, by threatening to cut off ECB funds in days, by Monday 25 March. Such a move would effectively put Cyprus outside the euro-zone and possibly even the EU itself. Developments in Cyprus can increase the pressure in other countries for the national governments to stand up to the Troika and the EU. However, the Troika will impose harsh conditions on Cyprus, to punish its people, as a warning to others that this will be their fate should they defy the Troika. Apart from the pressure by the mass of the population to oppose this measure there were other important factors which also allowed the Cypriot ruling class to withstand the demands of the Troika. Deal with other powers Unlike the Greek ruling class, the Cypriot rulers have the prospect to strike a deal with other capitalist powers outside the EU, in particular Russia. But the vote to reject the deal in the Cypriot parliament was not a vote against an austerity package. The cuts package had already been accepted by the previous government, led by AKEL (the Cypriot Communist Party), which has significant support amongst workers, and passed on to its successor. The bail out was a bail out of the banks, which together with tourism, are the mainstay of the Cypriot economy. Cypriot banking is awash with money from Russia – US$31bn invested in Cypriot banks by the Russian banking system alone - due to very favourable tax rates. The vote against the Troika package by the pro-capitalist parties was partly a vote to maintain Cyprus as an offshore tax haven. Banking, which is currently eight-times the size of the country’s GDP, has been teetering on collapse after being exposed to heavy losses as a result of the crisis in Greece. At the same time, Cyprus has gas reserves worth an estimated 475bn euro. This, the ruling class had hoped, would give them the opportunity to broker an alternative deal with Russia. This revealed a clash of national interests between the capitalist and imperialist powers. The prospect of Russia acquiring a share of the oil reserves, in return for at least a percentage of the bail out, enraged Merkel and German imperialism, in particular. Even US imperialism is disquieted at such a development. The extension of Russian influence into an EU country will aggravate tensions with German imperialism and other EU powers. Reflecting this threat, it appears that the Russian deal has collapsed. At this stage, Putin and the Russian oligarchs do not want to come into a sharp collision with Germany and other EU powers, which would threaten trade and other commercial interests. At the time of writing, the apparent collapse of this alternative deal has left the Cypriot government floundering around in a desperate search for a solution. Failure to secure one will possibly result in the ejection of Cyprus from the euro. This would undoubtedly provoke a major crisis in Cyprus. The introduction of a new currency would result in a massive devaluation and flight of capital from the country, massive hike inflation and a slashing of living standards. Moreover, it would also put the question of the viability of the euro back on centre stage of the crisis. This follows a respite in recent months during which the ruling classes in Europe have claimed that the euro crisis was ‘resolved’. Italy next? Yet it has already emerged following the dramatic elections in Italy. Despite the lack of a socialist alternative for the Italian workers and masses, a clear majority voted for the anti-austerity parties. The populist movement led by Beppe Grillo took 25% of the vote, campaigning against the euro, for a return of the lira and a restructuring of Italy’s mountain of 9 trillion euro public debt. There is still no government formed in Italy. Greece Italy, the EU’s third largest economy, would make the drama of the Greek crisis seem like a minor side show in comparison. Moreover, Spain and Portugal also set to follow an eruption of the euro-crisis in Italy. It is possible that the Cypriot government will be compelled to levy a higher tax on wealthy depositors and take other measures, such as nationalising the pension funds. This may allow Cyprus to remain in the euro for a period although this is far from certain. A new crisis would inevitably emerge, posing again the prospect of Cyprus’s ejection from the euro, if Italy, Spain or Portugal has not already gone through the exit door. Need for a socialist alternative. The crucial issue facing the Cypriot workers and middle class is the urgency of building a mass movement to reject any austerity programme demanded by the Troika and capitalism and to oppose any measures which see the masses help pay for a bail-out of the banks. Unfortunately, the leadership of AKEL is not organising a mass mobilisation and presenting an alternative programme to break with capitalism, as a way out of the crisis. In government, holding the presidency, until only two weeks ago, the party accepted the austerity package demanded by the EU and simply passed it on to the new government to implement. Today it calls for a “powerful response by the people” and “mass resistance”. It demands “the popularisation of the vision for the liberation of Cyprus from the suffocating embrace of the monopolies”. It urges people to take to the streets (AKEL Statement 16 March 2013). However, AKEL is not offering a concrete alternative of what should be done in the face of this crisis and the prospect of Cyprus being ejected from the euro. AKEL is currently calling for opposition to the Troika but not the eurozone. Yet membership of the eurozone means acceptance of the austerity demanded by the Troika. Many Cypriot workers and youth will ask what it did when it was in government. In the recent elections, AKEL lost up to 25% of its vote compared to 2008. There can be no trust in the capitalist government. In or out of the euro, these same capitalist politicians will attack the rights and living standards of the Cypriot working class. The Cypriot government, elected only two weeks ago on a promise of securing a ’softer’ bail out, is now largely discredited. Now it is urgent to fight for an alternative government of the workers and others exploited by capitalism. Such a government would oppose the terms of the bailout and reject the austerity programme demanded by the Troika. The banks should be immediately nationalised, under democratic workers’ control and management. Working people reject austerity to keep the euro. Such a government would face immediate ejection from the EU and the euro. A government of the working people of Cyprus would need to prepare for such a prospect. It would need to immediately introduce capital controls to prevent a flight of capital and for a new currency. An emergency economic programme would be necessary to defend the interests of workers and the poor. This would be possible on the basis of a democratic socialist plan of the economy through the nationalisation of the major companies and financial institutions. However this crisis of the EU is a crisis of the global capitalist system. A socialist government of the workers and poor in Cyprus would immediately face the wrath of European and global capitalism. Temporary loans and trade arrangements could be negotiated with other states as an interim step. But it would need also to forge links with the working people of Greece, Spain, Italy and Portugal. It would be necessary to appeal to them to follow such an example. Together the working peoples of these countries could form a democratic, voluntary federation of Mediterranean and Iberian states. This could be a bridge to reach over to the workers of the rest of Europe with the aim of forming a democratic socialist federation of European states as an alternative to the capitalist EU and Troika. The crisis in Cyprus has opened a new chapter in the crisis in the eurozone and the EU. It has illustrated that the crisis is far from resolved. Deeper and further crisis are certain to erupt in the coming weeks and months. On a capitalist basis there is no solution to the crisis. The struggle for a socialist alternative is now more imperative than ever.

Cyprus bailout, poor suffer while bond holders are protected

As another EU country goes for another financial bailout affecting millions and potentially having a larger knock on affect the crisis in the Euro zone goes from bad to worse. The emerging details of the so-called bailout agreement with Cyprus indicate that there is no change in the recipe book of Troika bailouts – senior bondholders will be protected while working people will be crucified. Small deposit holders in Cypriot banks will lose 6.75% of their savings overnight, while international speculators and bondholders are protected. The hawks of global capitalism are using the crisis to impose their neo-liberal model of capitalism to increase their profits. A €1.4bn privatisation programme will see Cypriot public services run down and sold off at rock bottom prices. This seems to be the worst of a bad lot of so-called bailouts. People in Cyprus now face a future of vicious austerity and devastation of society that point towards a Greek situation of societal collapse. Austerity policies have devastated economies across Europe. The eurozone has returned to recession and the EU as a whole saw a collapse of GDP of 0.6% in the last quarter of last year alone. Why are these policies still being pursued despite the clear evidence that they don’t work from the point of view of the economy as a whole? Because austerity is working – it’s working for the bondholders and speculators whose debts are being repaid and for a section of big business who have increased profits off the back of attack on wages and conditions. It underlines the need for common struggle and resistance across Europe and for a programme for radical socialist change – repudiating the debts to the bondholders, public investment to create jobs, and democratic planning of our economies to redevelop our economies in an environmentally and economically sustainable manner.” With extracts from Paul Murphy MEP of the socialist party http://www.paulmurphymep.eu/cyprus-bailout-ordinary-householders-paying-for-senior-bondholders?utm_source=twitterfeed&utm_medium=twitter