The Cyprus bailout: as low as it gets?
- March 17, 2013
The Cyprus ‘bailout’ announcement marks a new threshold in the ongoing disgrace that we have come to label austerity. For the first time, the European Union, the IMF and a national government have announced that a levy will be exacted on individual savings without any process of consultation, in order to prevent the Cypriot banking system from collapsing.
According to the Cypriot president Nicos Anastasiades, this astounding measure was necessary, because otherwise ‘Cyprus would default and threaten to unravel investor confidence in the eurozone.’ But not to worry, because IMF head Christine Lagarde believes that ‘ the proposal is sustainable for the Cyprus economy.’
No one appears to care too much about whether this proposal is sustainable – or desirable – for the savers who are going to lose their money, and the arrogance of those who came up with this deal is only matched by their myopic stupidity.
Actions like this make a mockery of the values of solidarity and democracy that supposedly underpin the European Union – and are more likely to bring about the EU’s long term disintegration. They will also undermine the principle of trust that makes people want to put their money in banks in the first place – thereby accelerating the decline of the institutions these ‘bailouts’ are intended to save.
Even Forbes magazine has called the bailout deal ‘ probably the single most inexplicably irresponsible decision in banking supervision in the advanced world since the 1930s.’ Forbes has no doubt where the primary responsibility lies, arguing that:
The ultimate source of Europe”s financial malaise is Germany. The German financial establishment was complicit from the beginning in the inflating of some of the bubbles in the afflicted nations. Now it is not only disowning its role in causation but, by forcing austerity on national governments and refusing to allow more than token inflation of the euro, it is turning the knife in those nations” wounds.
No doubt, but the Cyprus bailout deal is the culmination of a process that many institutions and governments bear responsibility for. Predictably the British rightwing press has placed an ‘EU versus Brits’ interpretation on the events in Cyprus, while the government has promised that soldiers will be compensated for their losses – the only people who are ever worthy of protection, it seems.
But the implications of the Cypriot bailout deal go far beyond the obsessions of the europhobic press. The difference between the blatant larceny of actually taxing individual savers and pouring billions of public money into failed banks is on one level not that great.
Both processes imply the socialisation of losses incurred by powerful financial institutions, in which the public is expected to bear the burden of a crisis that was caused by the behavior of banks and the deregulated system that successive governments have presided over.
The ‘austerity’ packages that have been imposed across the eurozone; the wage cuts and wage freezes; the endless sado-economic ‘solutions’ inflicted by government after government are all a form of larceny, however oblique and indirect, that is no less unjust that what is being proposed in Cyprus.
But the decision taken by the Cypriot government, and the IMF and EU bureaucrats suggests that the political/financial nexus that has attempted to ‘manage’ the crisis now believes that it can get away with anything. And unless that belief is changed, they will continue to behave in the same way, and Cyprus may not be the last country where savers may want to think twice before putting their money in a bank again.