What is Going on in Cyprus?

Why is the banktruptcy of a tiny economy in the Mediterranean making headlines across Europe? The answer is that the Cyprus solution is what every saver across Europe fears might be coming their way soon. The awareness that money is not real and that countries are not good for the amounts of money they have guaranteed has been creeping into people's consciousness over the past five years. I know this because I speak to large groups of people about money and this fear is lurking behind their questions about gold and their decisions to put money into renewable energy schemes or socks under the mattress.

It was this fear that drove Alastair Darling to increase the savings guarantee in Britain at the start of the financial crisis: nothing is worse for a banking system than people feeling that their deposits are not safe and withdrawing their money. And nothing spreads this fear as rapidly as governments taking money out of their citizens' bank accounts as the Cypriot government has threatend to do. When the Argentinian government made a similar move in 2001 it precipitated a massive withdrawl of capital and the collapse of the national economy.

I am pleased to see that, although the levy on Cypriots' bank accounts is a policy made in Germany and to please German tax-payers, the Green Group in the European parliament, alhough it is dominated by German MEPs has made its opposition clear. Greens/EFA co-president Dany Cohn-Bendit is quoted stating that:

'The attack on ordinary depositors in the context of Cyprus' bail-out is outrageous and must be urgently corrected. Small depositors should be last in the line of fire in any bank restructuring. This is the guiding logic behind EU legislation providing for national deposit guarantee schemes, as well as draft legislation currently under consideration on an EU deposit guarantee scheme. While the proposed depositors' levy may be legally consistent with the existing legislation, it is a cynical ploy, which totally defies the spirit of the rules and their raison d'être.'

Merkel's decision to crush a tiny and vulnerable economy comes less than a month after the 60th anniversary of the cancellation of Germany's own war debt. By 1953 Germany was still carrying pre-war debts which had been massively increased by the costs of borrowing to fund the war itself. The country was in ruins and was incapable of borrowing to rebuild. Germany's former enemies agreed that for the sake of peace and humanity a significant portion of its huge debts should be written off, sums amounting to a value equivalent to 75% of Germany's exports in 1950. The remaining debt was restructured and interest rates reduced.

The Dublin based Ango: Not Our Debt campaign celebrated the anniversary, which is passing unmentioned in Germany. Its spokesman Andy Storey commented:‘The 53 Accord was signed initially by 22 creditor countries, including by Ireland and Greece.' Anglo: Not Our Debt point out that the amount of debt cancellation received by Germany in 1953 in today’s terms is worth nearly €37bn., similar to the amount of the principal of Anglo debt being paid by people in Ireland over the next 40 years. Indeed, the amount of debt cancellation received by Germany is all the more impressive, as Germany’s economy was far smaller then than today

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Laughing All the Way to the Bank Bailout

At last something has come out of Ireland that gives you a reason to smile, if only wryly. Campaign Group Debt Justice Action has made an application to the Guinness of Book of Records on behalf of the Irish government. The category: most expensive bank bailout per head of population. As the video tells, since Iceland refused to allow its citizens to carry the weight of private bank failure, 'plucky little Ireland' has enforced on its citizens more private debt than any other country - including Greece. The cost is €16,500 for every man, woman and child in the country.

According to the Irish Independent, Ireland is the only country currently suffering from a banking crisis so serious as to rank in the top ten worst banking crises of all time. The country has already won the dubious accolade from the International Monetary Fund of being the costliest since the Great Depression. The study by IMF researchers compares the severity of 147 banking crises between 1970 and 2011.

Debt Justice Action tells us that:

'It is estimated that at least €67.97 billion has been poured into Irish banks so far, representing 45% of GDP, which came to €156.4bn in 2011 though DJA argue that the nature of Ireland’s economy makes the figure of 56% of GNP, €123.9bn in the same year, more relevant.

Of the €70 billion, one single institution, the infamous Anglo Irish Bank, accounts for over €30 billion of socialised debt. When the interest is factored in, this will cost Ireland €47 billion, or the equivalent of €26,000 per person working for pay or profit in the country.'

Two conclusions seem worthy of note. First, and most obviously, a global financial system that is so crisis-prone, and whose costs are so immense, is clearly in need of major structural reform. But secondly, the loss of the Irish people is the gain of the financiers, hence the general paean of praise for Ireland's politicians while they beat up on their old, sick and vulnerable citizens to pay their corrupt bankers.
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Culture of the Shameless

I really am not a vindictive person. In fact, I am rather fearful that if any of my Quaker friends read this post I will drummed out of the meeting. Or perhaps breathed out with sad and consoling looks, or something appropriately friendly. Or maybe I will be just accepted in spite of my cruel thoughts and my inability to get a grip on my rage about bankers.

I am angry about the way that the clear link between banking bailout and bankrupt Britain is neatly overlooked in almost all media discussions. I am angry about the fact that nobody questions the capitalist system which cannot operate without these periodic and hugely destructive collapses. But most of all I am angry about the inability of what we might tritely call 'the banking community' to take any responsibility for what has happened.

My anger may be summed up in one simple question: where is the jumping man? The last time we had a crash on anything approaching this scale, the 1929 stock-market crash, the Wall Street traders who had been sucking in the savings of small investors and investing them in widly risky schemes were clearly identified as the guilty parties. When the bubble burst they felt ashamed of destroying the savings of the working poor, who had been lured into a game they didn't understand. This as much as their own personal losses, we were led to understood, was the cause of the high rate of suicides in October 1929.

Except there was actually a low rate of suicides in that month, according to Galbraith's account of the Crash. The story of the jumpers was largely an urban myth. And even those who did jump did so because of being unable to face a future without their own personal wealth, not because of concern for the little people their risky dealing had destroyed.

A decade ago, when the Japanese economy began to fall apart because of of the failure of capitalist finance, an executive at the Bridgestone tyre company in Tokyo, committed hara-kiri as his company's profits plummetted and thousands lost their jobs. I am not exactly recommending this to the higher echelons of Goldman Sachs or RBS, but the shameless way in which they ignore the suffering around them and carry on rewarding themselves cannot help but make one look towards other times and other places with a sense of nostalgia. Tweet

A Brief Word, Mr Cameron

The class war has been launched, and not by the Labour Party. Cameron's speech today sets the scene for a principled stand in favour of the interests of his owners rather than earners. This should be greeted with no surprise - why else was he elected in the bungled events of last month? Certainly not on the basis of his charisma or incisive intelligence. This speech will be followed up by attacks in the media on the plans for strike actionsby working people defending their living standards before these have even be discussed much less voted through.

The political implication is that the public sector has enjoyed massive investment during the Labour years and that it will now pay the price while the private sector and the interests of capital see their just returns. The problem is that this is an outrageous untruth. My argument rests on the two pictures that are included with this post. Between them they demonstrate how the need for the shocking levels of public borrowing arose and where that money was spent.


The first graph demonstrates perfectly how we got into this mess by tracing public-sector borrowing from February 2007 to December 2008. It shows the steep rise that followed the banking crisis when our money was extracted in various ways to prevent the collapse of global finance. We didn't cause this, we didn't benefit from it, and yet the graph shows clearly that we paid for it.

The second graph shows the same variable - public sector net borrowing - between February 2009 and April 2010. If you compare the graphs you can see that we are on a totally different axis here. Annual borrowing of £35bn. in Feburary 2007 had, by April 2010, been massively increased to £160bn. This is not the result of pointless spending on government bureaucracy, or the overpayment of nurses and teachers, its precise location in time makes clear its origin in the bank bailout.



Perhaps as some sort of weak demonstration of honesty to justify his claim to have introduced a new type of politics Cameron does, in a subtle way, identify where the money went:

'The global financial markets are no longer focussing simply on the financial position of the banks. They want to know that the governments that have supported the banks over the last eighteen months are taking the actions to bring their own finances under control.'

This implicit admission of the massive transfer of value from public to private, from us to them, and the corresponding transfer of their debts to our public balance-sheet is the real political issue here. It is vital that working people defend their interests, and most importantly do not follow the divide-and-rule strategy that the attacks on public-sector pay suggest will accompany the inevitable summer of discontent. Tweet

True Blue Never Fails

At last the Tories have come out of their policy closet and given some detail on what they actually plan to do after the next election. And we see that they are the same old party. Their response to a recession is to cut public spending and pick on the vulnerable. Cuts in the health budget and tax breaks for business: business as usual for the true blues.

The slogan for the first day of 'business' was peculiarly misplaced: getting Britain working. It is hard to see how forcing the sick and disabled from one form of social security benefit to another is going to create the millions of jobs that our economy is short of, according to the conventional economic paradigm, based as it is on wage slavery. Any attempt to resort to the traditional pasttime of threatening the marginal with starvation is more likely to get Britain robbing.

Why is it that those on the right are so desperate to force others into unpleasant, poorly paid jobs, that generate little of value and a great deal of carbon dioxide emissions? Could it be that they detest their own jobs and feel others should suffer alike? Light greens are much more likely to offer to share some of their work through reducing work hours, or their income through a citizens' income scheme. Darker greens would argue for freeing access to resources - especially land - so that people can provide for their own needs outside the market system.

And what of the Tories' promise to be the 'new green'? This fake and shallow veneer has rapidly peeled away. 'The environment' will barely feature at this week's conference as the planet's fair-weather friends revert to type and blow on the dog-whistle of oppressive Victorian policies that works so well within their electoral niche.

As Colin Hines argued back in the spring, within the conventional paradigm the obvious answer to the two-sided crisis of environment and economy is to send the quantitative easing money in the direction of real green jobs, with real green consequences: retrofitting Britains' tragically leaky housing stock would be a good place to start.

It's hard to know whether the reason this will not happen is that Boy George can't work out the economics - or whether he just can't resist his in-built propensity to beat up on the working people of this country. Or perhaps I should say the people who would be working if the money that might have enabled this had not all been spent on those who live from rents rather than wages. Tweet