Cyprus isn't something happening "over there"

Europe – and that includes Britain – is unavoidably connected.

In case anyone thought that the bank and sovereign debt crisis that has engulfed certain parts of the eurozone has produced all its dramatic twists, events this weekend came as a rude awakener.

Eurozone leaders agreed early on Saturday morning a deal to bailout and restructure the Cypriot banking sector.

The most controversial part of the deal sees a tax levied on depositors to raise about 5.8 billion euros, to add to the €10 billion committed by the Eurozone and (probably) IMF. A 9.9 per cent levy will be imposed to deposits over 100.000, while deposits below 100.000 will face a levy of 6.75 per cent.

So for the first time depositors, who were considered sacrosanct until now, are forced to share the cost of a bail-out.

A lot has been said about how this decision was reached. The blame shifts depending who one talks to, but the Financial Times give a good account. It seems that considerations about the future of Cyprus as an off-shore financial centre played a role when deciding how widely to spread the pain among depositors in Cypriot banks. It was feared that taxing only non-resident depositors would scare investors away.

So the main bone of contention (in an overall contentious decision) is that smaller depositors are put on the firing line, in a move that is seen as unfair and dangerous. Asking working people and pensioners to sacrifice their savings in the service of a failed banking sector is indeed cruel. But WSJ’s Simon Dixon makes a fair point, there is an element of fairness when asking locals to contribute to the bail out of their country’s banking sector, especially when that sector represents such a huge part of the country’s economy.

Many argue that it should not have come to this at all, that depositors should have been spared all together. But as Hugo Dixon of Reuters argues the Eurozone and the Cypriot government had very little choice. Imposing a haircut on government debt, like it was done in Greece’s case, was not possible because most of the country’s sovereign debt is held under English law (making a Greek-style restructuring hard) and the remaining is held by Cypriot banks, making a hair-cut self-defeating.

Hence the decision to impose a tax on depositors, many of whom are non-resident, predominately Russian and in many cases suspect of money-laundering. It would have been a hard task politically to explain to taxpayers across the Eurozone why they should contribute more to a bail-out that would have, to some extent, helped Russian oligarchs.

The most important thing that one should consider is what would be the cost of an alternative. In the absence of a bail-out deal (one that the Cypriot government had delayed long enough) Cypriot banks (which are already under ECB life-support) would collapse, taking the Cypriot economy with them. Lest we forget that the banking sector in Cyprus is more than 5 times the Cypriot economy.

The one good thing that can come out of this is the de facto reduction of Cyprus’ banking sector to a size closer to the EU average, as the Eurogroup statement, that followed the bailout agreement, calls for. As we have seen in other European countries like Ireland and the UK, an oversized financial sector holds huge risks for the host country, especially for one whose economy is as small as that of Cyprus. To a large extent this is a banking crisis, rather than a “euro-crisis” and no matter what the structural inefficiencies of Eurozone’s governance (and European politicians inability so far to separate bank from sovereign debt) what Cyprus is faced with is the collapse of a banking sector that grew too big for its own good and made far too many bad decisions.

There is still a lot to play for, not least a parliamentary vote to approve the bail-out deal. Until then there is time and room to reconsider how the burden will be spread among depositors, and there are many proposals on the table on how to shield small depositors and reduce their contribution to the bail-out pot of money. Some reports talk about reducing to 3 per cent the levy imposed to deposits up to €100.000.

One last thing. The situation in Cyprus shows that in an interconnected world we are not immune to what happens “over there”. Capital as well as people are mobile, the banking sector interconnected and as a result banks and people’s savings are affected, irrespectively whether we are part of the Eurozone or not. The fact that British citizens who live and hold deposits in Cyprus will have to be part of the bail-out levy shows how important it is for the British government to be as involved as possible in Eurozone governance and EU-wide efforts to address the systemic faults of Europe’s financial sector.

Photograph: Getty Images

Petros Fassoulas is the chairman of European Movement UK

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There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.