By KEVIN OVENDEN
My previous post was written early on Monday morning, London time.
Since then events have proceeded rapidly and dramatically. They will continue to do so. This update is meant to highlight the political significance of some of those developments in a fast moving crisis.
1) Despite desperate protestations it is now clear, as I had stated previously, that it was the Cypriot delegation in talks with the Troika in the early hours of Saturday morning that opted to sacrifice the mass of the population through raiding whatever deposits they had in the domestic banking system.
Centre-right Cypriot president Nikos Anastasiadis was caught between Scylla and Charybdis: between the demand that depositors take a “hair-cut” (a forced “bail-in”) of €5.8 billion in return for a bail-out of €10 billion for the banks (plus austerity piled on an economy in a double-dip recession) on the one hand. On the other was the settled policy of the Cypriot elite to maintain its role as a tax-haven for hot and dodgy money — two thirds of it from Russian oligarchs.
The IMF and German Finance Ministry were prepared to throw the burden onto Russian capitalists; Anastasiadis opted to spread it to the Cypriot pensioner, worker, farmer and struggling hotelier.
2) No one in the talks says that the outcome — both the proposed measures and the obvious social/political upheaval that followed — was intended. The dysfunctionality of the European response to a now renewed crisis could not be clearer. It is as if all the principal actors have chosen to be the prisoners of events and then — by way of a kind of collective Stockholm Syndrome — disavow responsibility for their own actions.
3) The deal was, entirely predictably, both unacceptable to the mass of the Cypriot population and also seen near universally as a harbinger of further bank heists, the rational response to which is to get your money out, thus precipitating the kind of 1930s bank run that policy-makers from Ben Bernanke to Gordon Brown congratulated themselves four years ago on avoiding.
The bank robbery was also viscerally opposed by two other groups.
First, the Cypriot business class. It has been utterly dependent on the island’s tax haven status for a decade and a half. It rebelled. One of its main spokespeople in the US, the former governor of the central bank of Cyprus Athanasios Orphanides, told any business journalist who would listen on Tuesday that the powerful states of the EU had enforced a kind of apartheid across the continent where the law facilitated the expropriation of the weak by the strong.
He virtually genuflected in front of the Statue of Liberty, hailing the doctrine of equality before the law in an effort to persuade Wall Street and Capitol Hill of the unfairness of it all.
Second, Moscow. Staggeringly, the Eurozone finance ministers did not even inform, let alone consult, the Russian government about their plan to extort possibly up to €4 billion from Russian business interests.
Russia’s president Vladimir Putin was rebuffed and his government moved swiftly to explore its own independent intervention. There is a deep, bitter division between Russia’s oligarchs, with Putin at the head of the state and representing one wing. He indicated that there were certain hostile interests whose hair he would shed no tears over clipping. The Russian finance ministry toyed with demanding a version of the Lagarde List — an inventory of dodgy dealing modelled on the IMF chief’s list of the Greek rich’s overseas holdings.
But whether it was friends or factional opponents of the Russian government who were to suffer, Putin’s position was clear. If any oligarch was to get a buzz cut, have their liquidity frozen or be thrown in the slammer, it was to be a Kremlin decision and no one else’s.
The Cypriot finance minister tendered his resignation; it was not accepted. So he headed off to Moscow for talks while his bosses sought renegotiation with the Troika and getting something, anything, through the Cypriot parliament.
It didn’t just reject it. Not a single MP voted for it. Thirty-six MPs voted against, 19 of the president’s party’s MPs abstained. No one voted in favour.
The Cypriot vote is a watershed. For the first time in three years of the banking and sovereign debt crisis in Europe an institution has voted no. That crisis is, of course, an expression of a deeper global slump. But the ways it has manifested have depended on the particular architecture of the competing interests that make up the EU.
The Greek parliament — at the price of bleeding the political centre — voted through the savage austerity memoranda, which in 2011 also meant a hit for holders of Greek sovereign debt. That move pushed the Cypriot banks over the edge.
The Italian political class, in its majority, voted for the pain and accepted, as did their Greek counterparts, the imposition of a non-elected prime minister, Mario Monti, to see it through. Last month saw an electoral revolt against the Italian political class.
Now there is little Cyprus. Not only the mass of people, but now also an institution — the Cypriot parliament — has said no. A small child (Cyprus joined the EU in 2004 and the single currency in 2008, accounting for just 0.2 percent of the union’s economic output) has told the rest that the emperor has no clothes.
The profound significance of that will play out as there is now both a desperate scramble to reassemble some deal over Cyprus’s banks (Russian takeover? Exceptional European Central Bank cash? Creative destruction?), and deepening opprobrium across the south of Europe at those politicians who said that the only game in town was austerity in order to secure a bailout.
5) The failure of the Cypriot parliament to agree to the bank heist on Tuesday was total. The political positions of the MPs, still more so the interests of the conflicting social classes in Cyprus, are far from uniform.
With the Cypriot business class opposing the Troika, with Russian-oligarch depositors alienated and with Moscow floating alternatives, even a number of centre-right MPs could find a backbone. Even those of Anastasiades’ Democratic Rally could slither into abstention.
But those parameters will change. In the combination of conflicting pressures that produced the Cypriot “no” there is one central element for the radical Left. It is the mobilisation — and with it political agency — of the mass of the people in Cyprus who took to the streets outside the parliament on Tuesday with the backing of, among others, the official opposition Akel party.
That means not being oblivious to the cracks and fissures that are opening up in official politics as a parliament of an EU state bucks the austerity trend. But it also means firmly standing independent of those conflicting elite interests, even while exploiting their mutual clashes.
All sorts of voices in Cyprus and across Europe will now seek to gather political strength to plot their preferred way out the crisis.
As my previous post argued — the radical Left should have its own voice, based upon extending the kind of mobilisations we’ve seen in Cyprus so far, and upon a trajectory of fundamentally breaking with a failed system.