[Marxism] German imperialism has imposed humiliating conditions on Cyprus

Juan Andres Gallardo juanagallardo at gmail.com
Tue Apr 9 19:14:29 MDT 2013


Economic crisis
German imperialism has imposed humiliating conditions on Cyprus

by : Juan Chingo
Thursday 28 March 2013

Thursday, March 28, 2013

Chancellor Angela Merkel, together with the IMF and the European Central
Bank, has succeeded, under extreme circumstances, in imposing draconian and
humiliating economic conditions on Cyprus. In this way, Cyprus has avoided
bankruptcy, which would almost certainly have led to it leaving the
Eurozone immediately.

The plan is as harsh as the previous one, which was rejected by parliament
last week, with only some minor technical modifications. In exchange for
not affecting small savers, it imposes fees on large depositors (including
many rich Russians) and other investors, and restrictions on the movement
of capital. The losses are going to be substantial despite the fact that in
the weeks before bank accounts were frozen there was apparently a large
scale flight of capital, as the government’s plans were leaked to the
Russian and local oligarchs. With the decision to liquidate the Laiki Bank,
the second-largest bank in Cyprus, the Eurozone leaders have for the first
time since the beginning of the euro crisis at the end of 2009 refused to
come to the aid of a financial institution. The entire banking sector will
be restructured, putting an end to the island’s business model. The
agreement does not require parliamentary approval.

Although the article ‘A new phase in the crisis of the euro’
written before this agreement, when there was uncertainty over the fate of
Cyprus, it is still relevant today for the following economic and political

(1) The bailout programme and the austerity imposed with it are going to be
brutal. José Manuel Durão Barroso, President of the European Commission,
has warned of an economic shock in the region. Many people will lose their
jobs, and their efforts to have a better life will be wasted. Their
pensions, saved during their whole lives, could suffer the same fate as the
deposits and be wiped out. It is the beginning of a long ordeal.

(2) Russia has sharply criticised the bailout agreement for Cyprus: Prime
Minister Dmitry Medvedev accused the EU of robbery. Russian state
television compared the confiscation of rich investors – many of them from
Russia – to the expropriation of the Jews by Nazi Germany. Although the
commercial ties between the EU and Russia are too strong to be broken by
what has happened on the island, the relationship has deteriorated.

(3) As we expected, Cyprus is a turning point in the treatment of savers
and debtor countries. On Monday March 25, the President of the Eurogroup,
Jeroen Dijsselbloem, stated that the fee imposed on bank accounts in Cyprus
established a precedent and that this could also happen in other countries,
which made the European stock markets fall. After Cyprus, confidence in the
banking system has deteriorated, even for small savers.

(4) Although an agreement was finally reached, the tough negotiations
clearly show the growing gap between the northern European creditor
countries and the debtor countries of southern Europe, among which,
political differences could soon become more dangerous than the monetary
crisis, openly threatening the political foundations of the Eurozone.

(5) Finally, in Cyprus, as a result of the government’s weakness and its
lack of a majority in parliament to impose the entire programme, the
situation is very uncertain. Everything will depend on how the bailout is
applied, on the ‘degree of social consensus’ and on the response of the
population – which is still shocked by the measures imposed by the big
European powers and endorsed by its own government. In other words, we can
ask: has the threat of an exit from the Eurozone by Cyprus been avoided or
only postponed?


[1 <http://www.ft-ci.org/article.php3?id_article=6273#nh1>]

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