Cyprus is paying a painful price for bowing to international capital

Being controlled by global financial interests does not benefit ordinary people, their economy or democracy, writes the Jubilee Debt Campaign's Tim Jones.

A small country is being brought to its knees by a huge banking system which has recklessly been lent money from overseas. Controls on money leaving the country have had to be introduced. The size of the debts owed mean there is no way the government can simply bailout the banks. For Cyprus in 2013 read also Iceland in 2008.

Both small islands let themselves become home to casino banks many times the size of their actual economies. Banks borrowed money from overseas, lending it on again in even greater quantities. But when these loans could not be paid, the banks were bust, threatening the savings of all those with accounts in the banks, including normally Icelanders and Cypriots who had no idea their money was being put on a global roulette wheel.

In 2008, the Icelandic government could simply not afford to bailout its banks. Instead it sought to protect savings of domestic Icelanders, a limited bailout, whilst letting the reckless banks go bust to their foreign creditors. Iceland inevitably went through a crisis, but its economy is now growing, unemployment falling, and its experience measures favourably against that of Ireland, Spain and even the UK.

Iceland’s approach is a good lens through which to try to assess what is happening in Cyprus. The original plan of last week was madness, hitting domestic savers however small their savings. Now the deal rightly protects Cypriots who had been told by the EU that their deposits up-to €100,000 were safe.

Depositors over €100,000 will see their claims taken into a bad-bank, from which they could get back very little. Reckless lenders to banks via bonds will also take a hit on their loans, unlike under the original plan. This appears to be fair; there is no reason why Cypriot or other taxpayers should bailout reckless lenders such as rich Russians, hiding their money away in a secretive tax haven. In many ways it repeats the Icelandic experience. However, by hitting Cypriots as well as foreigners, it could have major ramifications for Cyprus’ businesses. It is also questionable whether the EU is only allowing this approach this time because it is rich Russians who are set to lose out, not German, French and British banks.

And so we come to the "help" from the EU through bailout loans. Cyprus’ government cannot afford to protect all the deposits under €100,000, even though the EU has brought in a collective rule to that effect. Not having its own currency, Cyprus has no ability to bring in inventive policies to keep money moving round the economy. But by taking €10 billion of loans from the EU and IMF, Cyprus is taking on a further debt of 60 per cent of national income, on top of the over 60 per cent already owed, and with national income set to crash. These loans are not payable, yet as with Greece, Portugal and Ireland today, or Africa and Latin America in the 1980s and 1990s, huge suffering is about to be imposed in the name of trying to pay.

True assistance from the EU would be to provide this support as grants, a policy which would be fair given that it is to protect the EU wide deposit protection policy, and necessary because of the existence of the single-currency. The European Central Bank could create the one-off money to do so, with no visible impact anywhere else.

Cyprus is not Iceland. The single currency, and the failure to discriminate between domestic and foreign lenders to banks, means the crisis for the Cypriot people is set to be far worse. The EU should be giving real help to prevent the destruction of the economy and many peoples lives.

Much debate in Cyprus has seemed to be driven by the fear of what will happen if all the foreign financiers leave. But it is the very same people who have driven the country into crisis. The controls on moving money out of Cyprus need to be rigorously enforced to give some protection, just as they were in Iceland, and in Argentina following its default in 2001, and Malaysia during the Asian Financial Crisis. Thankfully the EU is turning a blind eye to the Lisbon treaty which prevents all regulations on the movement of money between countries. But the pity is that other such regulations were not used to prevent the reckless lending into the country in the first place.

Regulations on the movement of money between countries were common-place in the decades after the second world war, a period when there were hardly any debt crises. After they began to be removed in the 1970s, such crises have become common place, affecting every continent from Latin America and Europe, to East and Central Asia and now Europe today.

The crisis in Cyprus shows how damaging the banking industry can be when it gets too large, just as in Iceland, Ireland, Spain and the UK. For the country to emerge from this crisis, Cyprus, like so many other countries, needs to get control over its banks in order to get them to invest in productive industries, rather than being part of a global speculation and tax avoidance ring.

Being controlled by global financial interests does not benefit ordinary people, their economy or democracy. Whilst Cyprus is going someway to making reckless lenders share in the pain, the failure to truly discriminate between domestic and foreign debts, and the lack of real help from the EU, means much suffering lies ahead.

Photograph: Getty Images

Tim Jones is policy officer at Jubilee Debt Campaign. Jubilee Debt Campaign is part of a global movement demanding freedom from the slavery of unjust debts and a new financial system that puts people first.

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Appearing in a book is strange – being an actual character must be stranger

Much as it jolts me to come across a reference to my music in something I'm reading, at least it's not me.

I was happily immersed in the world of a novel the other day, Rachel Elliott’s Whispers Through a Megaphone, when suddenly I was jolted back into reality by my own appearance in the book. One of the characters hears someone singing and is told, “‘It’s Leonora. She sings with her window open.’ ‘She’s good – sounds like Tracey Thorn.’ ‘She does, doesn’t she.’”

It was as if I’d walked on stage while still being in the audience. It’s happened to me before, and is always startling, a kind of breaking of the fourth wall. From being the reader, addressed equally and anonymously, you become, even momentarily, a minor character or a representative of something. In this instance it was flattering, but the thing is, you have no control over what the writer uses you to mean.

In David Nicholls’s Starter for Ten, set in the mid-Eighties, the lead character, Brian – a hapless student, failing in both love and University Challenge – hopes that he is about to have sex with a girl. “We stay up for an hour or so, drinking whisky, sitting on the bed next to each other and talking and listening to Tapestry and the new Everything But the Girl album.” Ah, I realised, here I represent the kind of singer people listen to when they’re trying, though possibly failing, to get laid.

Fast-forward a few years, to the mid-Nineties of Bret Easton Ellis’s Glamorama, a book constructed from lists of people and things, clothes and music, which apparently indicate the vacuousness of modern life. “I dash into the Paul Smith store on Bond Street, where I purchase a smart-looking navy-gray raincoat. Everything But the Girl’s ‘Missing’ plays over everything” and later, “In the limo heading toward Charing Cross Road Everything But the Girl’s ‘Wrong’ plays while I’m studying the small white envelope . . .” Here I’m being used to represent the way bands become briefly ubiquitous: our songs are a soundtrack to the sleazy glamour of the novel.

These mentions are all fine; it’s only the music that features, not me. Spotting yourself as an actual character in someone’s novel must be more shocking: one of the perils of, for instance, being married to a novelist. I think of Claire Bloom and Philip Roth. First she wrote a memoir about how ghastly it was being married to him, then he wrote a novel about how ghastly it was to be married to someone very like her. Books as revenge: that’s very different indeed.

Few people who had ever met Morrissey emerged from his memoir unscathed (me included), but particularly Geoff Travis of Rough Trade. He was hung, drawn and quartered in the book, yet seems to have maintained a dignified silence. But it’s hard knowing how to deal with real people in memoirs. In mine, I chose not to name one character, a boy who broke my 18-year-old heart. Feverish speculation among old friends, all of whom guessed wrong, proved how much attention they’d been paying to me at the time. I also wrote about my teenage band, the Marine Girls, and then sent the chapter to the other members for approval. Which led to a fresh outbreak of hostilities and not-speaking, 25 years after we’d broken up. Don’t you just love bands?

Worrying about any of this would stop anyone ever writing anything. Luckily it didn’t deter John Niven, whose scabrous music-biz novel, Kill Your Friends, mixes larger-than-life monsters such as the fictional A&R man Steven Stelfox with real people: and not just celebs (Goldie, the Spice Girls), but record company executives (Ferdy Unger-Hamilton, Rob Stringer) known best to those of us in the biz, and presumably thrilled to have made it into a book. John confirmed to me recently: “In the end I got more grief from people I left out of the book than those I put in. Such is the ego of the music industry. I heard of one executive who bought about 30 copies and would sign them for bands, saying, ‘This was based on me.’ You create the Devil and people are lining up to say, ‘Yep. I’m that guy.’”

In other words, as I suspected, there’s only one thing worse than being written about. 

Tracey Thorn is a musician and writer, best known as one half of Everything but the Girl. She writes the fortnightly “Off the Record” column for the New Statesman. Her latest book is Naked at the Albert Hall.

This article first appeared in the 06 April 2016 issue of the New Statesman, The longest hatred