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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A father’s murderous rage, the first victims of mass killers and Trump’s phantom campaign

From the family courts to the US election campaigns.

On 21 June, Ben Butler was found guilty of murdering his six-year-old daughter, Ellie. She had head injuries that looked like she’d been in a car crash, according to the pathologist, possibly the result of being thrown against a wall. Her mother, Jennie Gray, 36, was found guilty of perverting the course of justice, placing a fake 999 call after the girl was already dead.

When the trial first started, I clicked on a link and saw a picture of Ben and Ellie. My heart started pounding. I recognised them: as a baby, Ellie had been taken away from Butler and Gray (who were separated) after social services suggested he had been shaking her. He had been convicted of abuse but the conviction was overturned on appeal. So then he wanted his daughter back.

That’s when I spoke to him. He had approached the Daily Mail, where I then worked, to tell his story: a father unjustly separated from his beloved child by uncaring bureaucracy. I sent a writer to interview him and he gave her the full works, painting himself as a father victimised by a court system that despises men and casually breaks up families on the say-so of faceless council apparatchiks.

The Mail didn’t run the story; I suspect that Butler and Gray, being separated, didn’t seem sufficiently sympathetic. I had to tell him. He raged down the phone at me with a vigour I can remember half a decade later. Yet here’s the rub. I went away thinking: “Well, I’d be pretty angry if I was falsely ­accused and my child was taken away from me.” How can you distinguish the legitimate anger of a man who suffered a miscarriage of justice from the hair-trigger rage of a violent, controlling abuser?

In 2012, a family court judge believed in the first version of Ben Butler. Eleven months after her father regained custody of her, Ellie Butler was dead.

 

Red flags

Social workers and judges will never get it right 100 per cent of the time, but there does seem to be one “red flag” that was downplayed in Ben Butler’s history. In 2005, he pleaded guilty to assaulting his ex-girlfriend Hannah Hillman after throttling her outside a nightclub. He also accepted a caution for beating her up outside a pub in Croydon. (He had other convictions for violence.) The family judge knew this.

Butler also battered Jennie Gray. As an accessory to his crime, she will attract little sympathy – her parents disowned her after Ellie’s death – and it is hard to see how any mother could choose a violent brute over her own child. However, even if we cannot excuse her behaviour, we need to understand why she didn’t leave: what “coercive control” means in practice. We also need to fight the perception that domestic violence is somehow different from “real” violence. It’s not; it’s just easier to get away with.

 

Shooter stats

On the same theme, it was no surprise to learn that the Orlando gunman who killed 49 people at a gay club had beaten up his ex-wife. Everytown for Gun Safety, a gun control group, looked at FBI data on mass killings and found that 16 per cent of attackers had previously been charged with domestic violence, and 57 per cent of the killings included a family member. The Sandy Hook gunman’s first victim was his mother.

 

Paper candidate

Does Donald Trump’s presidential campaign exist if he is not on television saying something appalling about minorities? On 20 June, his campaign manager Corey Lew­andowski quit (or was pushed out). The news was broken to the media by Trump’s 27-year-old chief press officer, Hope Hicks. She was talent-spotted by The Donald after working for his daughter Ivanka, and had never even volunteered on a campaign before, never mind orchestrated national media coverage for a presidential candidate.

At least there aren’t that many staffers for her to keep in line. The online magazine Slate’s Jamelle Bouie reported that Trump currently has 30 staffers nationwide. Three-zero. By contrast, Bouie writes, “Team Clinton has hired 50 people in Ohio alone.” Trump has also spent a big fat zero on advertising in swing states – though he would argue his appearances on 24-hour news channels and Twitter are all the advertising he needs. And he has only $1.3m in his campaign war chest (Clinton has $42.5m).

It feels as though Trump’s big orange visage is the facial equivalent of a Potemkin village: there’s nothing behind the façade.

 

Divided Johnsons

Oh, to be a fly on the wall at the Johnson family Christmas celebrations. As Boris made much of his late conversion to Leave, the rest of the clan – his sister Rachel, father Stanley and brothers, Leo and Jo – all declared for Remain. Truly, another great British institution torn apart by the referendum.

 

Grrr-eat revelations

The highlight of my week has been a friend’s Facebook thread where she asked everyone to share a surprising true fact about themselves. They were universally amazing, from suffering a cardiac arrest during a job interview to being bitten by a tiger. I highly recommend repeating the experience with your own friends. Who knows what you’ll find out? (PS: If it’s juicy, let me know.)

Peter Wilby is away

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 23 June 2016 issue of the New Statesman, Divided Britain