Cyprus bank crisis rocks Europe


The outrage of workers in Cyprus against a plan to “save” the country’s finances by seizing cash in small depositors’ accounts forced the country’s parliament to vote unanimously in late March against it. The plan was intended to avert the wrath of the International Monetary Fund, the European Central Bank, and the European Commission.

This “troika” of powers had settled on the island nation as next in their list of “debt-ridden” countries whose finances needed to be re-arranged to try to restore the profits and wealth of the continent’s richest and most powerful.

A week later a new plan was put forward, one tailored to not require government approval, and putting more of the main burden on bigger depositors—especially Russian magnates who have used the country as an offshore tax haven—and on the banks’ bond and share holders. But there is no doubt in anyone’s mind that those being directly soaked will find indirect ways to recoup their losses by dipping into the pockets of the island’s workers.

Still, just the fact that Cypriots loudly and repeatedly said “No!” has inspired workers throughout the region. Such inspiration is all the more crucial as the spillover from the Cyprus crisis will be quick and massive both inside and outside its borders. That spillover includes expected runs on banks, not only in Cyprus but in every European country on whose finances the troika have cast scornful eyes. The recurring theme among workers interviewed is, “They threatened to steal our cash once; who’s to say they won’t actually do it next time?”

Radical author Thanasis Kampagiannis wrote that “Cyprus bank deposits will take a dive. Ironically, that makes the cost of recapitalizing them even greater.” This, in turn, means further extractions from depositors as well as austerity measures, which then means further deepening of the recession, which weakens profits and tax revenues, and on and on.

Some of the more oblivious and/or duplicitous business columnists (such as The New York Times’ Andrew Ross Sorkin) argued that Cyprus was so small and unique that its crisis would have little impact elsewhere. But in fact the biggest blow to Cypriot bank stability was a product of the country’s very interconnectedness, i.e. the “haircut” imposed on Greek banks—which hold huge amounts of Cypriot bank deposits—in return for the “bailing out” of Greece. This is symptomatic of “fixes” to crises under capitalism. The schizophrenic mutual dependence on the one hand, and competition on the other, of economic and political institutions mean “solutions” to one entity’s problems must take place at the expense of others—with, in times of crisis, snowballing devastation.

The forcing of losses on bank investors, and big rather than small depositors, was viewed by the troika as easier to put over politically, while still knowing that they could come back later and demand further austerity measures to be imposed on the country’s workers by other means. (The Germans went so far as to appear to be the saviors of the country’s pensions, rejecting a Cypriot government plan to seize them.)

Besides political expediency, the continent’s wealthiest and most powerful forces wanted to use the occasion to partially rein in speculative capital. It’s worth noting in passing, however, that the biggest of these Russian investors, Dmitry Rybolovlev, made his fortune not in financial speculation, but in the down and dirty fields of potash fertilizer extraction—a fact deserving to be mulled over by those obsessed with the supposed supremacy of finance capital (or even more narrowly “debt”) in today’s global economy.

In any case, the real reason for the Eurozone’s instability is not speculative capital. The mushrooming of the latter is only a symptom of a prolonged global crisis leaving fewer avenues for productive investment, a crisis playing out in a market system that puts inherent barriers in the way of cross-national institutions, much less actual unification.

Such barriers can be seen in the contending pulls facing a country like Cyprus, which is integrally connected to the region as a whole yet is also forced by other nations’ ruling classes to stand on its own—at the expense of its workers—in a crisis. For instance, Nicos Trimikliniotis, a professor at the University of Nicosia, pointed to the geostrategic importance of the island. He wrote in The Bullet: Cyprus “is well-integrated in the regional economic system; in this sense it is also a border economy, operating as a bridge and a hub in the eastern Mediterranean. It is a southern European economy open to the west as an EU member since 2004, which is connected to northeast Africa, Middle East and Asia, drawing on the labor reserves, tourism and financial services exported from its neighbors…

“With the collapse of Beirut as a financial center in the early 1980s, its geographical location, good relations with its Arab neighbors and with the eastern bloc, and later the collapse of the USSR and its allies, allowed the sector to grow massively.”

He also pointed to a wide array of regional and global players with potential stakes in newly discovered gas reserves off the Cypriot coast, such as the U.S., the EU, Russia, Turkey, Egypt, and Israel. (The Cyprus government’s first plan would have pledged profits from these reserves to rich bank depositors in exchange for the money seized from their accounts.)

All these connections mean that the economies concerned feel the bruises when Cyprus stumbles, yet each can only see its way clear to telling the island to pick itself up without any assistance.

A workers’ solution to the crisis

Several radical authors have pointed out that these events present both the need and the opportunity to forge a genuine workers’ alternative, drawing its potential from the willingness shown by Cypriot workers (and their allies in Greece and elsewhere) to mobilize against such outrages as the proposed deposits theft.

Commenting on the proposed seizure of small depositors’ cash, Kevin Ovenden, a leader of the UK’s Respect party, wrote: “What was meant to be sacred—private property and the essential private contractual relationship—has become profaned; not at the hands of some North Korean ‘communist terror,’ but by the partisans of re-turbocharging the neoliberal model.”

A Left seriously claiming to defend workers, he wrote, would have to lead a fight to take control of the banks, using the crisis as proof of the realism of such a proposal: “The Cypriot state … has just shown that this is not only possible but … is actually how this free market system operates.” It would also mean nationalizing the currency in “a direct break or rupture with the Eurozone and EU.

“That is to say that if the agencies of capitalism, in the interests of capitalism, can take over the banks and seize deposits, then so can the Left for entirely different interests and with different effect.”

And he argued against managing the crisis on behalf of capital, as many reformist left parties on the continent propose: “If the liberal capitalists cannot succeed in protecting rights of private property, there is no reason to imagine that we can. Rather, there is every reason to base our arguments and agitation on an anti-capitalist position. Depositors in banks are not a social class. [Listen closely, Strike Debt activists!] They are not a uniform interest group, and are not a potential bloc that the Left can mobilize, lead and rest on. For us, nationalizing the banks means protecting working people and the middle class at the expense of big business and finance.”

The Cypriot heist, he argued, poses the question of whether there needs to be “a renegotiation of austerity or a radical rupture with it—not as a policy dilemma of government, but as a political argument around which masses of people may be mobilized to have political effect.” [emphasis added]

In contrast to this stance, he points to statements by officials in the former Communist Party government—which had approved a draconian austerity plan and was then voted out—that bank takeovers were at best provocations “that would prevent winning broader [i.e. middle-class or even ruling-class] political support,” and were at worst “futile.” But, Ovenden pointed out, the futility was in not taking radical measures, which resulted not only in demobilizing workers but in the CP’s own dismissal by voters.

Ovenden concluded: “What the Left says and does now matters. First, can it encourage radical mass mobilization that can shift the political calculus. If it does not, the rise of the fascist Golden Dawn in Greece shows that there are others who will. “Cyprus and our response to it is a moment to advance an argument for just such a break.”

In the same vein, radical economics professor Richard Wolff told “Democracy Now”: “[T]here is surely one argument here for the left—if they can seize banks and deposits to benefit bankers and other big depositors, then so can the left, but for other purposes.”

Dimitris Hilaris, a member of OKDE, Greek section of the Fourth International, also warned of illusions in reformist “solutions” that shy away from breaks with the rulers’ euro-solutions. He predicted that the deal’s reduction of the national income “will hit the working class. If the big capital funds lose about 40% of their investment, the insurance funds of the workers will collapse together with a number of small-medium enterprises. Unemployment will rise. And the upcoming memorandum will reduce the workers’ wages for a second time.”

This scenario, wrote Hilaris, increases the urgency of forging “an antisystemic and workers’ alternative. It is the only way that the argument over the public control of the banking system can be implemented. It is an inevitable condition for a left which is actually fighting to change the balance of forces now and does not postpone the fight for one remote and uncertain future.”

Hilaris said a government could claim to be genuinely “left,” not to say communist, “only under the condition that it paves the road of rupture with the ruling economic and political framework. And this requires an extra-parliamentary and extra-institutionalist action that can produce new structures of workers’ self-organization.”

An OKDE-Spartakos statement argued that a workers’ solution should begin with the demand for nationalization of the banks without compensation in a single public banking entity under workers’ control, combined with the unilateral cancellation of the debt and the nationalization of foreign trade, “requests objectively leading to the rupture with the EU and the Eurozone.”

Such steps can only avoid being reversed if they are part of motion toward fighting for workers’ power in society as a whole—and, in the Cypriot context, throughout the Mediterranean region, especially given the myriad ties to that region mentioned above.

Fortunately, signs of potential receptivity to such a radical vision have come not only in the form of Cypriot workers’ brave “no!” but also in the regional political and solidarity meetings occurring at the very same time in the late March World Social Forum in Tunisia. Among those in attendance are revolutionaries from across southern Europe, the Middle East, and North Africa who are using the forum to discuss just such crises and how to meet them with broader solidarity, fiercer militancy, and a more revolutionary analysis and program.

Photo: ABC News