After
ECB's silent coups against Ireland
and Italy, Frankfurt will keep
sending ultimatums to the eurozone governments. If they don't bailout
the banks, or impose austerity, it threatens to sink the economy into
chaos by cutting liquidity. The pretext is always the huge public
debt. But when Cyprus' turn comes, there is a 'slight' problem:
Cyprus did not have a significant debt.
The real
problem of Cyprus was not the public debt, but the speculation of its
private banks. In collaboration with Greek bankers and thanks to
ECB's tolerance, they were burdened with Greek bonds - which was
worse than trash. According to Pampos Papageorgiou, a Cypriot
politician with the Progressive Party of Working People (AKEL),
Deutsche Bank and other foreign banks were trying to get rid of them.
They offered them with discount and Cypriot banks bought them.
Papageorgiou concludes that, it is surprising that the supervising
authorities, primarily the Cypriot supervising authority, and the
ECB, did not react to that.
Demetris
Christofias, former President of Cyprus, says that the governor of
the Cypriot central bank instead of supervising the banks, was trying
- by violating statutes as well as his own role - to impose the
neoliberal policy on the Cypriot government.
Speculation
will end with a clack and a whimper, with the infamous PSI, Greece's
bankruptcy, the big haircut.
In 2012, the
EU and Greece's creditors decide to reduce the Greek debt with the
famous haircut. Anyone with Greek bonds would exchange them with new
ones with a nominal value reduced by 53%. Greek and other European
banks had bonds, but they were recapitalized. Therefore, taxpayers
paid the price. The ECB also had bonds, but they were excluded from
the haircut. 15,000 families had also invested in those bonds and
thought they had chosen a safe investment. With the haircut, they
lost most of their savings. Seventeen people committed suicide for
this reason.
At the same
time, the Greek government suddenly turned the deposits of public
bodies and of social security funds into bonds that were
automatically cut. The funds alone lost 16.2 billion euros this way.
In order to save the banks, the EU forced Greece to get yet another
loan and its public debt skyrocketed.
At the same
time, Cypriot banks that were gathering Greek bonds through
speculative transactions, felt like the rug was pulled from under
their feet.
After the
haircut, Cyprus depends on ECB's liquidity and the bank comes to
impose its terms: a new memorandum. Pampos Papageorgiou states that,
there is a moment in the Cypriot crisis where Asmussen, a member of
the executive board of the ECB, got up and said that 'if there is no
solution, if you do not accept, the funding of Cyprus Popular Bank
stops as of tomorrow'. Therefore, a bank would have shut down and
this would have a domino effect on the rest of the banking system. It
was a blackmail that was possible due to ELA
(Emergency Liquidity Assistance).
Stavros
Tombazos, associate professor at the Department of Social and
Political Sciences of the University of Cyprus, says that the way the
EU institutions have treated Cyprus is undemocratic. The Parliament
was forced to vote the laws that the memorandums prescribe, under the
threat of a greater disaster. That's why we are talking about debt
colonies, as in the case of Greece. It's a new form of dictatorship.
Christofias
administration accepts the memorandum, but now, the EU asks for more.
As Tombazos
says, they waited for the government to change in February 2013, and
renegotiate the memorandum on extortionate terms with the new
Right-Wing government.
The EU will
experiment with a new weapon in Cyprus, the bail-in, the confiscation
of citizens' deposits. This time, Brussels and Frankfurt are involved
in a geopolitical game, as well. Berlin uses the EU mechanisms to hit
the Russian capital in Cyprus. Christofias says that, when this harm
was done, they used the crisis, in order to attack the Russian
capital because the haircut cost billions to the Russians.
As
Papageorgiou says, before the enforcement of the bail-in, a report by
the German intelligence was published, saying that Cyprus was a place
of money laundering. It was a kind of propaganda because Cyprus was
neither better, nor worse than the other financial centers. Almost
three years later, they announce with great fanfare, the exit of
Cyprus from the memorandum. But again, the truth is 'slightly'
different. This experiment has condemned Cyprus in a state of
deflation, of zero development, of an abrupt transfer of wealth from
the bottom up, of nonstop immigration and of a misery, in general,
that is not only financial but social, as well.
Finally,
Tombazos concludes that, all these years of crisis, the profits of
businesses in Cyprus have not decreased at all. Salaries drop in
Cyprus, but profits don't. In this way, there is a rise of the degree
of exploitation of labor force.
Information
taken from the new documentary This
Is Not A Coup
by
Aris Chatzistefanou
Related:
"Confessions of an Economic Hitman"
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