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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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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