Cyprus

On the edge of a catastrophic slump

www.socialistworld.net, 25/04/2013
website of the committee for a workers' international, CWI

Socialist polices needed to resolve crisis in the interests of majority

Niall Mulholland, CWI

Niall Mulholland, who recently visited Cyprus, looks at the disastrous consequences of the Anastasiades government’s bailout deal with the Troika, and the alternatives put forward by the Left.

The weather in Cyprus at this time of year is warm, with a refreshing breeze blowing over the island. The same pleasant balance cannot be said about the economy, which is in meltdown.

Cypriot society is in a state of shock after weeks of economic and political turmoil. Cypriot banks faced collapse after a steep fall in the value of Greek government bonds, many of which were bought by the Cypriot banks. This was linked to the savage bail-out package imposed on Greece by the Troika.

In March, the Cypriot government, led by President Nicos Anastasiades, agreed to a 10 billion euro bail-out package with the Troika (the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF), after the Bank of Cyprus and Laiki became insolvent. In return, Cyprus was told it must raise 5.8bn euros. The agreement saw bank depositors with more than 100,000 euros face big levies, hitting many small businesses.

The country’s second largest bank, Laiki Bank, was closed down and its 9 billion worth of debts taken on by the Bank of Cyprus. After a two-week closure, banks reopened on 28 March but with strict controls on the amount people can withdraw each day.

But as if this was not bad enough, the already stunned and angry Greek Cypriots were later told that the bailout had ballooned from 17 billion euro to 23 billion. Cyprus has to find 6 billion more than the 7 billion mooted when the preliminary agreement was reached on 25 March.

President Anastasiades’ right wing government had already decided to impose swingeing austerity measures, bank closures, property taxes, privatisations of the three most profitable semi-state sector companies (electricity, telecommunications, and ports) and many sector job losses. They are even considering selling part of the gold supplies of the Central Bank, worth 400 million euro.

“Returning Cyprus to the Stone Age”

Adding to the country’s woes, is the long running crisis at Cyprus Airlines which is near bankrupt. The government is threatening to close it entirely or to make a deal with unions that would see a halving of the 1,030 workforce and the number of planes cut from 11 to 6. Cyprus Airline’s bleak future, along with the country’s economic turmoil, has ‘numbed’ summer tourist bookings, which is a crucial part of the economy.

Political scandal surrounds the government. Anastasiades has been forced to strenuously deny that he knew a legislative bill was being prepared for the deeply unpopular ‘haircut’ of all bank depositors prior to the European Group meeting in March. Popular anger is aroused by reports that insider information enabled the rich to take out millions of euro from bank deposits before 15 March.

Officially the Cypriot economy is due to fall by 8.7% this year and by 3.9% in 2014. But many economists believe there will be a 10% fall in 2013, and a plummet of anything between 15-25% by the end of next year.

“Returning Cyprus to the Stone Age”, is how one commentator dramatically described the next months. Certainly people are finding their standard of living increasingly precarious. The government was recently forced to provide an emergency 3 million euro to small famers, whose livestock were starving due to the sudden bank credit restrictions. More people are switching from cars to (poor) public transport to save money. On weekends, instead of heading for the cooler mountains, families are now opting for the cheaper alternative of strolling along Nicosia’s ‘old town’, where they linger for hours over a single coffee or soft drink.

Even sporting events are hit hard by the economic crisis. One of the main football clubs, Omonia, is in financial crisis and facing a sudden withdrawal of sponsorship.

The government tries to dampen popular opposition to austerity by claiming the measures will not be as harsh as previously planned because some privatisations will be pushed back to 2018, there will less cuts in education and the repayment of the bail-out loans will start after 10 years and will take 12 more years (in total, Cyprus will, in effect, be under the control of Troika for the next 22 years).

But this is cold comfort to the working class and middle classes who face years of austerity, job losses or emigration. Unemployment is already sitting at 14%. ‘Social markets’ (modern soup kitchens) are springing up everywhere. Working people also expect that, like Greece, the Troika will be in Nicosia every few months, demanding a new wave of cuts in return for bailout conditions.

‘Worst since 1974’

The newspapers are full of despair. It is generally felt that the crisis is the worst since the 1974 Turkish army invasion. There is understandable widespread outrage amongst Greek Cypriots at the bailout conditions and a perception that, once again, small Cyprus is, de facto, under neo-colonial rule; this time from the Berlin government, in the interests of German capital and for electoral gain. But sometimes this outrage in Cyprus takes a potentially divisive, nationalist direction. Marios Leonida Evriviades, a professor of international relations at Panteion University in Athens, wrote about the “econcide” (destruction of an economy) and “Cratocide” (destruction of a state) imposed by Chancellor Merkel’s government in Berlin, and compared it to the Nazis’s annexation of Czechoslovakia in 1938. He went on to talk of “Nazi-sympathizing Turkey” confiscating private property in 1942.

The trade unions and Left needs to ensure they lead mass struggles against austerity or there is a danger that nationalist forces and even the far right will gain the initiative.

This needs to include deepening relations with working people in North Cyprus, who have suffered their own austerity cuts for years, as well developing common struggle with the working people in other countries of southern Europe that are hit by the Troika’s austerity policies. Otherwise the two right wing administrations may try to whip up nationalism on either side of the Green Line, diverting the class interests of the whole island’s working people.

So far, apart from organising some protests during the March crisis, the unions have given no real lead to working people. The right wing unions are in talks with the government about ‘managing’ the crisis. The Left unions, linked to AKEL (Greek Cypriot communist party), rhetorically oppose cuts but do not call for any firm action.

Members of New Internationalist Left (CWI Cyprus) participate in a broad campaign against austerity initiated mainly by forces affiliated to AKEL, the ‘Movement Against Privatisation and Austerity’, but criticise its lack of a fighting programme to effectively oppose austerity and for a real alternative. One leading figure in the campaign claims that there is “no need for a programme – we are a movement”.

But the economic crisis is deep and will only get worse. A radical alternative must therefore be posed. If the unions and Left fails to resist effectively, other populist, nationalist ‘anti-austerity’ campaigns can make headway. Ominously, Cypriot fascists, who are trying to emulate their cousins in Golden Dawn, in Greece, are now handing out anti-austerity leaflets in parts of Nicosia where they previously did not venture. These people can be a grave threat to immigrants and the Left. They must be resolutely opposed by a united workers’ movement that campaigns against the poison of racism and ultra-nationalism and for jobs, with a living wage, for all.

Referendum call

AKEL has called for a referendum, to allow the people to accept or reject the bailout deal. This was also taken up by the small Green party and an independent candidate in presidential elections held at the start of 2013. While the demand for a referendum gained an echo amongst some workers and youth who were furious at Troika-imposed austerity, it appears to have declined in recent weeks. AKEL and the former presidential candidate, Lilikas, both now put their hopes in the parliament rejecting the memorandum. However there are groups still collecting signatures in an attempt to force a referendum.

There is little possibility that the present government will opt for political suicide by calling a referendum on the bail-out deal.

In truth, AKEL’s campaign for a referendum is largely token and used by the party leadership to avoid other issues. In government until recently, AKEL cultivated a friendly relationship towards big business, the banks and the Russian oligarchs who spirited billions into Cypriot banks, preparing the ground for economic bust. In recent weeks, heightened government propaganda warning that there is no ‘Plan B’ and that leaving the euro and returning to the Cypriot pound currency would see the country “go back centuries”, is used to try to counter the popular call for a euro-exit. Nevertheless the issue remains live and can gather more force once austerity starts to bite deeply AKEL will unveil next week its proposals on how to leave the euro. Economists regularly appear on TV discussing a euro-exit. The influential Greek Cypriot Archbishop also raised the prospect of Cyprus leaving the euro-zone. This is in marked contrast to other euro-crisis countries, like Greece and Ireland, where although there is huge opposition to austerity most workers are fearful of leaping into the ‘unknown’ of euro-exit. Cyprus, however, only joined the euro-zone in 2008, at the start of the currency’s crisis. Cypriots therefore associate euro membership with seemingly endless financial turmoil, extreme austerity and looming slump.

Euro-exit?

But the New Internationalist Left warns that, on the basis of the continuation of the capitalist system, breaking from the euro and a return to the Cyprus pound will not mean refuge from austerity and stagnation. Certainly exiting would allow devaluation of the Cyprus currency but the boost to exports would be limited, given Cyprus’s lack of materials to sell abroad (the much-vaunted discovery of oil and gas supplies off Cyprus’s shores are years away from possible exploitation and the industry will be dominated by multi-national companies in the interests of their major shareholders). Currency devaluation would also result in a rise in import costs and therefore a hike in the cost of living. This ‘imported inflation’, along with likely government attempts to deal with paying off national debts by printing money, would cut into people’s savings.

Apart from the New Internationalist Left, none of the rest of the Left puts forward a clear, class-based analysis to the crisis or a socialist programme for change. Inevitably various ideas are temporarily fashionable at this early stage of the economic crisis and impending class confrontations. Some look to a ‘co-operatives’ based economy as an alternative, for example.

Unlike Greece, which, in effect, has suffered 28 years of austerity, many Cypriots are unprepared for the very hard landing ahead after years of economic boom. But looming class battles will radicalise more and more Cypriots in the next months and years.

In anticipation of coming struggles, the New Internationalist Left puts forward a socialist alternative. This includes repudiating the debt, nationalisation of the banks under democratic public control and management, opposing privatisations, breaking with the bosses’ euro, and for the public ownership of the key industries and major utilities, to enable the economy to be democratically planned to serve the needs of the majority, not the profits of bankers and the speculator minority.

All this immediately raises the prospect of Cyprus being forced out of the eurozone and even the EU. A workers’ government needs to plan to deal with exit from the euro and for a return to a national currency (the pound) while countering any illusions that this could provide a solution on the basis of capitalism. Adopting a new currency must be incorporated as part of a socialist programme. The struggle for the socialist transformation of society is just as relevant for Greece, Portugal, Spain and other euro-crisis countries, and beyond. A socialist federation of European states, founded on an equal and voluntary basis, is the only way to fully realise genuine co-operation amongst the working people of Europe and the utilising of the rich resources of the economy for the benefit of the great majority. This is particularly the case for small Cyprus.

A new powerful Left needs to be built in Cyprus, with the aim of forming a government based on the needs of working people. The situation facing Cypriot society is desperate and set to get much worse. Only a bold, socialist, internationalist programme can resolve the crisis in the interests of the majority.