Cyprus looks for plan B

There is no plan B.

At 10am Cyprus time, the Cypriot government started to hammer out another vote on whether they have a plan B to present to the European Central Bank. If they do not have an alternative to the mooted deposit tax by Monday, the bank will cut off emergency liquidity assistance to Cyprus' two biggest banks, plunging them into bankruptcy, and putting Cyprus on a path which will inevitably lead them to an exit from the euro, and possibly the EU altogether.

Cyprus does not, currently, have a plan B.

The plans to be put in front of Parliament cover the winding up of Laiki, one of the two troubled banks (the other is the Bank of Cyprus), splitting it into "good" and "bad" banks, hopefully ensuring that the depositors in the good bank – those with insured deposits under €100,000 – do not immediately withdraw their money once the banks reopen.

That proposal has received a "cautious" response from eurozone finance ministers, according to the Financial Times, but doesn't go anywhere near solving the problem.

In giving the Monday deadline, the European diplomats and ministers who ultimately hold sway over Cyprus also clarified their position about what an acceptable solution would be, and in doing so made things much, much worse.

We already knew that their initial proposal to the Cypriot government offered a loan of €10bn and required the government come up with a further €7bn itself in order to fund the €17bn needed for recapitalisation of the banks. But, reports Felix Salmon:

The stated reason why Europe won’t lend more than €10 billion is that Europe refuses to allow Cyprus’s debt level rise above a certain level.

That means that, at a stroke, most of Cyprus' alternative solutions are bust. It can't take a loan from the Russian government, it can't borrow from its own pension funds, it can't confiscate deposits and replace them with post-dated bonds.

The EU is basically confirming to Cyprus that its options are:

  1. Pass the deposit tax.
  2. Find some other tax which will get €7bn – a little under a third of GDP – in a weekend.
  3. Leave the eurozone.

In a way, though, the background situation has got better for Cyprus in the last week. On Monday, the country was deathly afraid of the deposit tax because it could have signalled the death of Cyprus as a destination for offshore banking. That appears to have been the reason why it took the disastrous choice to "spread the pain" by hitting insured depositors with a tax on top of uninsured.

Now, it doesn't have to worry about that, because its role as an offshore banking destination is dead already. It is, bluntly, inconceivable that the "solution" to the crisis, whatever it is, won't result in deposit flight from overseas depositors. The only hope left is to ensure that it doesn't also result in Cypriots moving their money offshore.

With that in mind, it may turn out to be the case that the best solution for Cyprus is the one it was offered at the start: soak the (largely foreign) rich with a 15 per cent deposit tax, look after the poor's deposits, and move on to trying to find an alternative basis for its economy.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Craig Oliver, Cameron's attack dog, finally bites

A new book reveals the spiteful after life of Downing Street's unlikely spin doctor.

It must be hard being a spin doctor: always in the shadows but always on-message. The murky control that the role requires might explain why David Cameron’s former director of communications Craig Oliver has rushed out his political memoirs so soon after his boss left Downing Street. Now that he has been freed from the shackles of power, Oliver has chosen to expose the bitterness that lingers among those on the losing side in the EU referendum.

The book, which is aptly titled Unleashing Demons, made headlines with its revelation that Cameron felt “badly let down” by Theresa May during the campaign, and that some in the Remain camp regarded the then home secretary as an “enemy agent”. It makes for gripping reading – yet seems uncharacteristically provocative in style for a man who eschewed the sweary spin doctor stereotype, instead advising Cameron to “be Zen” while Tory civil war raged during the Brexit campaign.

It may be not only politicians who find the book a tough read. Oliver’s visceral account of his side’s defeat on 24 June includes a description of how he staggered in a daze down Whitehall until he retched “harder than I have done in my life. Nothing comes up. I retch again – so hard, it feels as if I’ll turn inside out.”

It’s easy to see why losing hit Oliver – who was knighted in Cameron’s resignation honours list – so hard. Arguably, this was the first time the 47-year-old father-of-three had ever failed at anything. The son of a former police chief constable, he grew up in Scotland, went to a state school and studied English at St Andrews University. He then became a broadcast journalist, holding senior posts at the BBC, ITV and Channel 4.

When the former News of the World editor Andy Coulson resigned as No 10’s communications director in January 2011 because of unceasing references in the press to his alleged involvement in the phone-hacking scandal, Oliver was not the obvious replacement. But he was seen as a scandal-free BBC pen-pusher who exuded calm authority, and that won him the job. The Cameron administration, tainted by its association with the Murdoch media empire, needed somebody uncontroversial who could blend into the background.

It wasn’t just Oliver’s relative blandness that recommended him. At the BBC, he had made his name revamping the corporation’s flagship News at Ten by identifying the news angles that would resonate with Middle England. The Conservatives then put this skill to very good use during their 2015 election campaign. His broadcast expertise also qualified him to sharpen up the then prime minister’s image.

Oliver’s own sense of style, however, was widely ridiculed when he showed up for his first week at Downing Street looking every inch the metropolitan media male with a trendy man bag and expensive Beats by Dre headphones, iPad in hand.

His apparent lack of political affiliation caused a stir at Westminster. Political hacks were perplexed by his anti-spin attitude. His style was the antithesis of the attack-dog mode popularised by Alastair Campbell and Damian McBride in the New Labour years. As Robert Peston told the Daily Mail: “Despite working closely with Oliver for three years, I had no clue about his politics or that he was interested in politics.” Five years on, critics still cast aspersions and question his commitment to the Conservative cause.

Oliver survived despite early wobbles. The most sinister of these was the allegation that in 2012 he tried to prevent the Daily Telegraph publishing a story about expenses claimed by the then culture secretary, Maria Miller, using her links to the Leveson inquiry as leverage – an accusation that Downing Street denied. Nevertheless, he became indispensable to Cameron, one of a handful of trusted advisers always at the prime minister’s side.

Newspapers grumbled about Oliver’s preference for broadcast and social media over print. “He’s made it clear he [Oliver] doesn’t give a s*** about us, so I don’t really give a s*** about him,” a veteran correspondent from a national newspaper told Politico.

Yet that approach was why he was hired. There was the occasional gaffe, including the clumsy shot of a stern-looking Cameron, apparently on the phone to President Obama discussing Putin’s incursion into Ukraine, which was widely mocked on Twitter. But overall, reducing Downing Street’s dependence on print media worked: Scotland voted against independence in 2014 and the Tories won a majority in the 2015 general election.

Then came Brexit, a blow to the whole Cameroon inner circle. In his rush to set the record straight and defend Cameron’s legacy – as well as his own – Oliver has finally broken free of the toned-down, straight-guy persona he perfected in power. His memoir is spiteful and melodramatic, like something straight from the mouth of Malcolm Tucker in The Thick of It. Perhaps, with this vengeful encore to his mild political career, the unlikely spin doctor has finally fulfilled his potential. 

This article first appeared in the 29 September 2016 issue of the New Statesman, May’s new Tories