Marx wrote in the 18th Brumaire that history repeats itself first as a tragedy and then as a farce. This is what is happening in Cyprus. We are witnessing a situation similar to two years ago when the EU put pressure on Greece to accept a bail-out, but this time around 56 Cypriot politicians have created a huge problem for capitalists across Europe.
Marx wrote in the 18th Brumaire that history repeats itself first as a tragedy and then as a farce. This is what is happening in Cyprus. We are witnessing a situation similar to two years ago when the EU put pressure on Greece to accept a bail-out, but this time around 56 Cypriot politicians have created a huge problem for capitalists across Europe.
The bail-out that the newly elected President Nicos Anastasiades formally asked for at the recent European summit merely follows the previous four requests in Europe. Cyprus was going to be the fifth economy of the euro zone to be intervened in after Ireland, Greece, Portugal and Spain. Yet the no vote in the National Parliament of Cyprus has sent alarm bells ringing for European governments and the financial markets. Cyprus has been under the spotlight since last year when the government announced the need for a bail-out. This was done before the Presidential elections of February 2013.
Election Results
On 24 February Cyprus held the first round of its Presidential election where the right-wing candidate, Nicos Anastasiades (DISY Party) came first with 45% of the vote. The result was a referendum on the policies of the Communist Party (AKEL) that had held the Presidency up to these elections. It got a relatively good result with 27% of the votes with the nationalist party (DIKO) getting about 25%.
But the real indication of the social mood was the increase in abstentions. In Cyprus voting is compulsory (and you risk a fine if you don’t vote) and yet there was an increase of 7% in abstentions in the first round where the turnout was 83%. Workers and youth were voting with their feet. This weakened AKEL in the second round. What was the point of voting at all if all parties had agreed that the people had to pay their “share of the burden”? It was only a question of how big the share had to be. It was impossible for AKEL to enthuse voters with a programme that keeps Cyprus within the straight-jacket of capitalism, and particularly casino capitalism!
The speech by the then President Demetris Christofias (AKEL) in November 2012, saying that the “pill was going to be bitter”, was putting a red carpet out for the right wing to enter the Presidential palace. Voters must have been wondering what a Communist Party was for if it was not going to stand for the interests of working people.
On 3 August 2011 DIKO had already withdrawn from the coalition citing its differences over a resolution of the Cypriot conflict and consequently leaving AKEL with a minority government. Since that date the Cypriot Government has stumbled from one crisis to another, having for instance voted several times for a fiscal amnesty. The class lines of government policy were blurring and so too was its electoral base. So Cyprus has lived through two years of financial troubles, as well as accidents with a huge economic impact [such as the explosion of a power plant that had a terrible effect on the economy, an explosion that still provokes huge polemics in Cyprus today] and the bursting of the housing bubble.
With the announcement of austerity measures as part of a package to re-negotiate the loan with Russia, many just lost faith in the ruling Communist Party. But it is also true that less than 25% of the voters that had supported AKEL in 2008 abandoned it. Many stayed at home not willing to vote for the “solutions” of the Cypriot right wing and not happy with the chauvinist position of the nationalist party (DIKO). Meanwhile, EDEK, the socialist party, continues its race towards oblivion. All of this is what paved the way for the victory of DISY in the second round.
AKEL has a militant and loyal working class base that knew that the party of the bourgeoisie (DISY) would attack the workers and the youth as soon as they entered office. And they were right! But simply voting for AKEL is not enough. And for a section of the working class even simply voting for the AKEL as a means of stopping the right wing failed to have its attraction. What was required was an opposition within the party against the mistaken policies of AKEL in the previous months to prevent the disaster that we face today.
The result in the second round of voting gave the right-wing DISY, led by Nicos Anastasiades, 57.48% of the vote. The level of abstention (18.42%) was the highest in the history of presidential elections in Cyprus. AKEL’s candidate, Stavros Malas, got 42.67%.
The new Government that came out of the elections decided to follow the line that the Irish, Greek and Portuguese governments had followed. They welcomed the Troika to the Cyprus but the people of Cyprus had a different opinion.
Anastasiades is seen by the different European governments and the bureaucrats at the top of the European Central Bank and International Monetary Fund as a man that one can do business with. They are right about that. They are determined to ignore the pressure from the streets against the unpopular measures that Cypriots are going to have to swallow. But Cyprus is a small island, and the members of the Cypriot Parliament know that people will not forget what is happening in an age of austerity.
This was going to be the first bail-out where the majority of the population was going to pay directly from their savings, breaking the myth that savings were not going to be touched. Depositors were to lose up to 10 percent of their savings as part of a €10 billion bail-out for Cyprus as was agreed on Friday, March 15th.
People with less than €100,000 in the bank faced a 6.75 percent levy, while those with more would have paid 9.9 percent. The one-off tax was expected to raise €5.8 billion, about half of the total bail-out. This was the way for EU bureaucrats to justify the fact that they were saving another country after having promised that no other bail out would take place after Greece.
The so-called social-democrat Dutch Finance Minister, Jeroen Djisselbloem, who chairs the Eurogroup, commented that “as it is a contribution to the financial stability of Cyprus, it seems just to ask for a contribution from all deposit holders.” Cypriots did not share the vision of the Dutchman. Also the US government urged the EU to reach an agreement that is “responsible and fair and ensures financial stability.”
In fact, even the President renegotiated the initial terms and on Monday an extraordinary meeting of the Eurogroup [Euro zone countries] eased the conditions. It was now to be a 15.6 percent levy on savers holding more than €100,000, not just 9.9%, and those with less than 20,000 Euros would not be levied. But this only served to reveal the “weakness” of the northern countries of the Eurozone and strengthened the case for deputies in the Cypriot Parliament to reject the deal and renegotiate. Even the government party (DISY) abstained.
“Our” banks are to remain closed until Thursday [i.e. today, March 21st]. The Government is trying to prevent a bank run from anxious savers but the vote has actually further increased the feeling of insecurity among the electorate.
The Finance Minister resigned but the President rejected the resignation. The same Finance Minister is now making a trip to Moscow trying to broker a deal with the Russian oligarchs that have their money in Cypriot banks. The thousands of Cypriots that surrounding the Parliament cheered at the rejection of the plan and they will be aware of what the next step is. They have one certainty and that is they do not want to see their country torn apart as they have seen in Greece, where society is being destroyed by the effects of the capitalist crisis.
Now is the time to draw the conclusion that it is not a choice of being in or out of the European Union or of greater or less involvement with Russia. Already the Russian state-run gas giant Gazprom is offering to restructure Cyprus’s bad bank debt in return for control over the island’s recently discovered gas reserves that the Cypriot government was going to develop with the involvement of Israeli companies.
It All Started To Go Wrong
Illusions in the previous Government, as we explained in our previous article had been built on the solution to the “border problem” [between the north and the south], as well as the idea that it would be possible to keep some of the so-called “privileges” that Cypriot workers had won in the past (indexation of salaries, high level of wages, decent pensions, etc). All this had given AKEL some room to manoeuvre.
But when the Communist President Demetris Christofias announced severe cuts and austerity measures as a way of gaining time to renegotiate the loan from Russia and also to show his willingness to do business with the ECB, the CP quickly lost the authority it had gained in the past. The problem was that all this was not enough for the EU officials but it was too much to swallow for many Cypriots workers that had started mobilisations against Government policy.
It was a difficult task for Christofias to present himself as a Communist and avoid being criticised by the workers while at the same time being in a minority government and trying to carry out the tasks of the EU Presidency. This acrobatic manoeuvre destroyed his credibility with a sizeable chunk of the population. In the end, trying to please both the European bourgeoisie and Cypriot workers was not possible. This is something that has to be taken on board by all leaders of the left and workers’ organisations in Europe. A “third way” is not possible.
Over a year ago the government had to bail out the Laiki Bank (Popular Bank) with over €1.8bn due to the Bank’s greedy policy of buying Greek bonds cheaply that after a few months, and due to the Greek crisis, were worth nothing. The Government should have nationalised the bank paying no compensation and tackling the problem there and then. Accepting the rules of capitalism meant that they had to accept its dynamics and after that, cuts had to be made. So the government started to cut.
We reported on the wave of industrial unrest. A few weeks ago, the communist union PEO of the construction workers went on strike against the government. They were sending a strong message to change course but it was probably too late for many as the elections result show.
Cyprus is a tax haven. There is an estimated €20 billion from Russian depositors in Cypriot banks paying little or no taxes. Tax fraud is rife and AKEL had done very little to tackle this and develop a logical policy, even from a social-democratic point of view let alone a communist one, of reducing the size of the banking and speculative sector in the country. Today, it is estimated that GDP will shrink by 3.5% this year. Last year it shrank by 2.4% and the EU has forecast a reduction of 1.4% in GDP in 2014. This was before the Parliament rejected the deal.
True Nature of the System
Michalis Sarris, the new Finance Minister, is said to have reluctantly agreed to the package. “I am not happy with this outcome in the sense that I wish I was not the minister that had to do this,” he said. “The system did not leave us with any options.” He added that it was no longer possible to make large bank withdrawals. This brought back memories of the historical Wall Street crash.
The crisis in Cyprus demonstrates that the European banking crisis is far from over. Cypriot banks have a huge amount of deposits considering the size of the country (it is estimated that due to a massive increase in Russian cash deposits the banking sector is eight times bigger than the island’s economy of 17bn Euros). The banking crisis that is still unfolding will again affect banks in Greece, Russia, the Ukraine as well as other European countries such as the Czech Republic, Bulgaria, Romania and Slovakia (their banks have a huge “exposure” to Cypriot bonds). This in turn will have an impact on the Eurozone as a whole. So, despite the words of Mr Draghi, the crisis is not over.
Yet Mr Sarris made a fundamentally correct point. Under this – capitalist – system there is no other option. Many will now raise the issue of leaving the euro (and the Eurozone) as a solution but this policy, without the nationalisation of the banking and insurance system, is just calling for a huge reduction in wages, even bigger than that proposed by the Troika. In fact, what the Cypriot bourgeois politicians that rejected or abstained on the deal actually want is not an end to austerity but a re-negotiation as they play Europe off against Russia. The problem here is not about what type of capitalism we want. It is the whole rotten system that is at fault! The masses in Cyprus are starting to understand this. As they see this crisis unfold it is time to be bold and explain that under the current system only austerity cuts and making the workers pay for the excesses of capitalism is possible.
AKEL made a mistake by not tackling this issue at all. Thinking that first it had to solve the “border problem” with Turkey and then it would be able to carry out its socialist aspirations was a pipedream. The arrogant Turkish ruling elite will never agree to completely remove this question because the border problem is a festering wound that is useful to the Turkish ruling class to be used as an issue to divert attention from their own internal problems whenever they need to.
The masses in Cyprus, on both sides of the borders, have common class interest that can only be defended by taking over the commanding heights of the economy under workers’ control. Such a prospect would have a dramatic effect throughout the entire region (including Greece) and this is the only way forward. The AKEL leaders should learn from their mistakes. Their approach has always been to “solve” the national issue first and then at a later stage pose the question of socialism. They have always failed to understand that the national question in Cyprus can only be solved on the basis of the socialist transformation of the island.
It seems, however, that none of these lessons have been learnt by the AKEL leadership. Although they correctly voted against the deal, they then advocated a referendum on the country’s euro membership. The solution is not a referendum! They should issue a call to take over the banks under workers’ control!
The workers, pensioners, labourers and youth of this tiny island have mobilised massively to stop the arrogance of the “Brussels bureaucrats”, as people call them, and this shows what would be possible if the organisations of the working class decided to stand and fight against the bail-out and against capitalism. It is time to do so! There is no time to waste. The masses of Cyprus with their mobilisations have thus far managed to stop the bail-out. But this is not enough. So long as Cyprus is ruled by the laws of the market, of capitalism, the capitalists will seek a way of making the working people pay for the crisis. This is what the AKEL leaders should be explaining to the workers. The opportunity is there to pose concretely the socialist alternative. There is no other road.
