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Cyprus: Savage Austerity Measures and Economic Dictatorship

depression

By Jordan Shilton and Chris Marsden

Global Research, March 24, 2013

Cyprus’ fate illustrates how the European Union imposes the dictatorship of the global speculators, banks and corporations on the working class. The EU yesterday continued to demand massive austerity in Cyprus to raise €6 billion ($7.8 billion) in return for a €10 billion bank bailout.

The island country has been the centre of an escalating financial crisis, with its parliament voting Wednesday to reject proposals to raise the necessary funds by taking money from anyone with deposits in Cypriot banks.

A new vote on whether to impose a “haircut” on depositors was delayed until today. The EU and European Central Bank (ECB) dismissed proposals by Cypriot politicians—themselves wholly reactionary—to create a “solidarity fund” to raise the six billion demanded.

Cyprus’s aim was to preserve its financial relations with Russia and force workers to pay the price by nationalising pension funds to pay the debts of the super-rich. Other proposals included seeking contributions from the church and selling gold reserves—all in order to avoid levying a significant one-off levy on major depositors.

However, the EU bluntly dismissed these measures as insufficient. German Chancellor Angela Merkel declared baldly after a parliamentary meeting of the Christian Democratic Union (CDU), “We want Cyprus to remain in the euro zone”, but insisted that its “current business model is dead.”

The ECB has insisted that the levy on investors should be re-imposed—this time with a widely-anticipated penalty of 15 percent on depositors with balances over €100,000, as initially rejected by Nicosia. If not, it was made clear that proposals had been discussed to prepare for and limit the impact of a Cypriot exit from the euro zone. (more…)

Euro, Bruxelles confirm: they are cheating us!

Twitter @francescofilini

Finally comes the reply to the parliamentary inquiry submitted by MEP Marco Scurria on the legal nature of ‘€ uro, and finally comes the confirmation: we are cheating. There have always cheated. First things first.

Marco Scurria asked for clarification on the answer given by the European Commission to the first parliamentary inquiry on the legal ownership of the euro presented by MP. Mario Borghezio, which said that during the issuing bank notes belong to the Eurosystem, while in the phase of the movement belong to the owner of the account on which they are charged.

Be careful because the words in official acts and in the techno-eurocratic  language must be well weighed. So the commissioner Olli Rehn answered Borghezio that  the ownership of paper notes (which are well imprinted in every language of EU the initials of the European Central Bank) is the Eurosystem.

But what is this Eurosystem?
“The Eurosystem comprises the ECB and the NCBs of those countries that have adopted the single currency. The Eurosystem and the ESCB will co-exist as long as there are EU Member States outside the euro area.” This is the definition that you read on the official website of the ECB.

So the national central banks print notes and take possession of their nominal value (eg whether to print a business card 100 has a physical cost for who coined by 0.20 cents – intrinsic value – NCBs are also appropriating of the value printed on the ticket).

Scurria asked what were the legal grounds on which it rested the statement of the Commissioner Olli Rehn:

Inquiry with written answer E-000302/2012
the Commission
Rule 117
Marco Scurria (EPP)

Subject: Legal status of ownership of the euro

In response to a written question on the same subject submitted by Mr. Borghezio provided June 16, 2011, the Commission informs his colleague that “on issue euro banknotes belongs to the Eurosystem and, once issued, both banknotes and euro coins belongs to the owner of the account on which are charged as a result. “
Can the Commission clarify the legal basis upon which is based this statement?

Comes the answer: (more…)

Cyprus rejects bailout deal leaving eurozone facing fresh crisis

Cash-strapped nation expected to seek funding lifeline from Russia after dramatic no vote in country’s parliament

 in Nicosia and 
The GuardianTuesday 19 March 2013 21.09 GMT

Protesters outside Cypriot parliament

A Cypriot protester outside the country’s parliament after hearing news that MPs had rejected the bailout deal. Photograph: Filip Singer/EPA
 

The Cypriot parliament has thrown out a controversial plan to skim €5.8bn from savers’ bank accounts, in a move that risks plunging the eurozone into a fresh crisis and heightens expectations that the cash-strapped nation will seek a funding lifeline from Russia.

Cyprus has just 24 hours to find a solution to its funding gap before its banks are due to reopen following the dramatic no vote on Tuesday night, which failed to support a hastily renegotiated change to the original deal.

With the crisis escalating, an RAF flight carrying €1m (£850,000) in low denomination notes set off for Cyprus to provide cash for 3,000 British service personnel based on the Mediterranean island.

The banks have been shut since Friday and electronic transactions halted, although cash machines are still working and the Ministry of Defence said the euros were being flown in as “contingency measure”.

About 2,000 of the military staff, who typically serve out 18- to 24-month postings to the island, have their salaries paid into local accounts. The MoD said it was “approaching personnel to ask if they want their March, and future months’ salaries paid into UK bank accounts, rather than Cypriot accounts”.

Even before the no vote was announced, the euro had already slumped to its lowest level in four months after speculation that the Cypriot finance minister, Michalis Sarris, had resigned.

Sarris, who was in Moscow ahead of his meeting with his Russian counterpart on Wednesday, was forced to text-message Reuters to deny the quick-spreading rumours that he had quit.

There were also reports that the banking arm of the Russian energy company Gazprom might pump cash into Laiki, Cyprus’s second largest bank, which is in urgent need of a capital injection. Gazprom officials insisted this was not being planned. (more…)

Cyprus Banking Crisis for Dummies

Posted on March 18, 2013 by WashingtonsBlog


Bank Customer Trying to Get His Honey Out of His Bank During Cyprus Bank Holiday

Ground Zero of Financial Repression

You’ve heard that the tiny European country Cyprus is threatening to grab between 3 and 13% of bank depositors’ funds in return for a bailout of the country by the European Union.

Zero Hedge reports that Germany’s Finance Minister and the IMF originally demanded that 40% of bank deposits be looted.

Sajiyat Das notes:

Irrespective of the fate of Cyprus, the solution adopted will exacerbate the European debt crisis.

Many commentators note that the deposit grab may cause panic among bank depositors in Spain and other vulnerable countries as well. Indeed, many are asking whether this could be a modern Creditanstalt situation. Another common analogy is that this could be “worse than Lehman” failing.

On the other hand – given that the entire economy of Cyprus is smaller than that of Shreveport, Louisiana, and that Cyprus is mainly a parking spot for hot money from Russian oligarchs and mafia – some say that the whole crisis will quickly blow over.

What’s the bigger picture? Bank deposit grabs may spread to other vulnerable European countries. The New York Times reports:

Jeroen Dijsselbloem, the president of the group of euro area ministers, declined early Saturday to rule out taxes on depositors in countries beyond Cyprus.

And the chief economist of the German Commerzbank has called for private savings accounts in Italyto be similarly plundered:

A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product.

Indeed, Zero Hedge has been warning about this kind of scenario for years.

Why are they doing it? (more…)

Privatising Europe

Using the crisis to entrench neoliberalism

13 March 2013
Joseph Zacune

This working paper and infographic provide an overview of  a great ‘fire sale’ of public services and national assets across Europe that is providing profits for a few transnational companies but is often fiercely opposed by its citizens.

Contents of briefing

  • Root causes of the crisis
  • Bad medicine for ailing economies
  • Using the crisis as cover to deepen neoliberalism
  • The Troika & the sacrifice of sovereignty
  • Privatisation as a key component
  • Greece – an El Dorado for investors?
  • Ireland – taking unpopular steps towards privatisation
  • Italian citizens reject the privatisation of public utilities
  • Portugal’s privatisation push
  • Spain – ‘citizen waves’ against privatisation
  • Britain as a testing ground for privatisation
  • Local democratic alternatives

The Great European Fire Sale The Great European Fire Sale

A visual overview of privatisation of public services and assets enforced on crisis countries by the European Commission and European Central Bank. And the popular resistance movements to defend public services that have emerged as a result.
> Download image | See image in interactive format

 

“The drive for austerity was about using the crisis, not solving it. It still is.”
Nobel prize-winning economist, Paul Krugman

(more…)

The EU Crisis Pocket Guide

2012 edition

6 November 2012

A useful pocket guide on how a crisis made in Wall Street was made worse by EU policies, how it has enriched the 1% to the detriment of the 99%, and outlining some possible solutions that prioritise people and the environment above corporate profits.

The EU Crisis Pocket Guide has been updated in English (November 2012)

Now also in Italian!

Click here for the Spanish version

Contents

  • How a private debt crisis was turned into a public debt crisis and an excuse for austerity
  • The way the rich and bankers benefited while the vast majority lost out
  • The devastating social consequences of austerity
  • The European Union’s response to the crisis: more austerity, more privatisation, less democracy
  • Map of resistance across the EU in 2012
  • Ten alternatives put forward by civil society groups to put people and the environment before corporate greed
  • Resources for further information

  (more…)

Leonidas Chrysanthopoulos Open Letter to the Vice President of the European Commission 14 February 2013

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H.E. Mr. Olli Rehn

Vice – President of the European Commission                                              Athens, 14 February 2013

OPEN LETTER

Your Excellency,

I read in today’s Greek Press the letter dated February 13, 2013 that you sent to the members of the ECOFIN. Allow me, as a citizen of Greece, to make some remarks.

Your letter is an excellent document that analyzes the effects of fiscal multipliers and the mistake admitted by the IMF. I can partially agree with you, when you say that:”Recent studies on fiscal multipliers are of particular limited use when it comes to the specific case of Greece…” I can agree that they are of limited use, since the whole program for Greece is wrong, the Memoranda are wrong and not being implemented, because the people of Greece cannot cope any more with the measures imposed upon them. On the other hand, if the IMF mistake resulted in damaging the Greek economy by, let’s say. 40 billion euros, then why not deduct this amount from the total Greek debt.

That the whole program for Greece is wrong and ineffective was obvious from the outset, when it was first adopted in 2010. And in spite of the warnings of the economic indicators, increase of unemployment from around 16% in 2009 to 28% today, increase of the debt, increase of poverty, creation of food lines, increased suicides, unburied dead etc, nothing was done by the EU, IMF and the European Central Bank to correct the situation. Austerity can no longer work on a population that can no longer afford to pay taxes to a State that cannot give anything in exchange. And we are speaking about a Member-State of the EU, that is being destroyed in order to be saved.

Must I remind you that the program for Greece violates article 2 of the Lisbon Treaty, ”The EU is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights belonging to minorities.” Article 3,p.1 is also violated : ”The Union’s aim is to promote peace, its values and the well being of its peoples.” In Greece, Portugal and Spain, human dignity and the well being of their peoples are no longer respected as a result of the austerity measures.

In your letter to ECOFIN you mention many times the word confidence, return of confidence, erode the confidence, to support confidence etc. Yes, but whose confidence? The EU has lost the confidence of the people. The confidence of the markets is implied?  No mention even once of the word “people”. Mention, however, is made of percentages of GDP, yet we are not percentages of GDP, but human beings.

So you may ask me what can we do to help Greece? The solution can only be one. That is to zero the Greek debt which is about 3% of the EU’s GDP, and allow Greece, through a program of reform to achieve growth. Only in this way will Greece be able, perhaps, to remain in the Eurozone, and the euro to be saved. It will also cost less to the EU.

I hope that my observations may be of assistance to you in your very difficult work for which I wish you every success for the benefit of the people of Europe.

Please accept, Your Excellency, the assurances of my highest consideration,

Leonidas Chrysanthopoulos

Ambassador a.H.