YESTERDAY’S ‘solution’ to the economic crisis of Cyprus is simply the decision of the EU bankers and the IMF to completely bankrupt the country and plunge it into economic collapse.
The ‘rescue deal’ imposed on the Cypriot government involves the closure of the country’s second largest bank, Laiki, which will entail the loss of billions of euros by the banks’ bondholders and those with deposits over £100,000 euros (£85,000).
Those savers with deposits under 100,000 euros will have their accounts transferred to the Bank of Cyprus which will be restructured, this will involve larger depositors bearing the cost of restructuring to the tune of billions of euros.
While no tears will be shed at the losses incurred by the billionaires and Russian oligarchs who have used the Cypriot banking system as an off-shore haven for their wealth, the real cost will be borne by the Cypriot working class and small farmers.
The billionaires will flee the island as soon as they are able to lay hands on their money leaving the banks completely bust, unable to make loans and unable to get any credit on the international money markets.
With virtually the entire economy of Cyprus based on financial services, it spells complete ruin for the Cypriot people, who face mass unemployment and poverty as any remaining industry is forced to close down as credit ceases completely.
This disaster was not approved by a vote of elected MPs. This plan was not put to the Cypriot parliament. Inevitably, it will lead to revolution in Cyprus and elsewhere as the masses hit back at the ruling classes that imposed this debacle on them.
The immediate cause of the Cypriot crisis has nothing to do with the country being a ‘unique’ case, in that its economic model consisted entirely of being an off-shore haven for dodgy money – this was precisely the model the Cypriot bankers adopted from their ex-colonial rulers, the British.
It was, after all, Margaret Thatcher who famously proclaimed that manufacturing industry was old fashioned and that whole capitalist economies could thrive on the backs of the financial industry.
The immediate cause was the huge losses racked up by the Cypriot banks which had bought up large amounts of Greek government bonds as part of the EU rescue package to bail out Greece – something they were encouraged to do by the EU central bank.
All the time they relied on the pledge given by the eurozone leaders that their banks had the backing of the whole European banking system, that they would be bailed out in the same way that the Spanish, Italian and Irish banks had been.
The reality is that this pledge is impossible to fulfil.
While the Cypriot economy is tiny and the amount required to prop up its banks is comparatively small – ‘only’ 10 billion euros – the eurozone banks, along with the IMF, have been forced to end the fiction that the banking system can be rescued, and have openly proclaimed that banking salvation can only be achieved through the destitution of workers, the middle class and small farmers across Europe.
Banks are no longer guaranteed to pay out the money they are holding. Every wage packet or pension paid into the banks can be seized at will.
The only immediate answer to this threat, that presents itself to depositors all over the world, is to withdraw their money while they are still allowed to do so, bringing down the whole financial system.
The entire banking system is now living on borrowed time, that will lead onto the destruction of fictitious paper values all over the planet, on a scale much greater than the 1930s.
The collapse of the eurozone and the plunging of the entire world banking and economic system into chaos is the immediate future.
The response to this worldwide capitalist crisis, which is in reality the death agony of an out-of date social system which thoroughly deserves to perish, will be the socialist revolution of the working people of the world, who will replace bankrupt capitalism with world socialism.