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ECB's silent coups - Next victim: Cyprus

After ECB's silent coups against Ireland and Italy, Frankfurt will keep sending ultimatums to the eurozone governments. If they don't bailout the banks, or impose austerity, it threatens to sink the economy into chaos by cutting liquidity. The pretext is always the huge public debt. But when Cyprus' turn comes, there is a 'slight' problem: Cyprus did not have a significant debt.


The real problem of Cyprus was not the public debt, but the speculation of its private banks. In collaboration with Greek bankers and thanks to ECB's tolerance, they were burdened with Greek bonds - which was worse than trash. According to Pampos Papageorgiou, a Cypriot politician with the Progressive Party of Working People (AKEL), Deutsche Bank and other foreign banks were trying to get rid of them. They offered them with discount and Cypriot banks bought them. Papageorgiou concludes that, it is surprising that the supervising authorities, primarily the Cypriot supervising authority, and the ECB, did not react to that.

Demetris Christofias, former President of Cyprus, says that the governor of the Cypriot central bank instead of supervising the banks, was trying - by violating statutes as well as his own role - to impose the neoliberal policy on the Cypriot government.

Speculation will end with a clack and a whimper, with the infamous PSI, Greece's bankruptcy, the big haircut.

In 2012, the EU and Greece's creditors decide to reduce the Greek debt with the famous haircut. Anyone with Greek bonds would exchange them with new ones with a nominal value reduced by 53%. Greek and other European banks had bonds, but they were recapitalized. Therefore, taxpayers paid the price. The ECB also had bonds, but they were excluded from the haircut. 15,000 families had also invested in those bonds and thought they had chosen a safe investment. With the haircut, they lost most of their savings. Seventeen people committed suicide for this reason.

At the same time, the Greek government suddenly turned the deposits of public bodies and of social security funds into bonds that were automatically cut. The funds alone lost 16.2 billion euros this way. In order to save the banks, the EU forced Greece to get yet another loan and its public debt skyrocketed.

At the same time, Cypriot banks that were gathering Greek bonds through speculative transactions, felt like the rug was pulled from under their feet.

After the haircut, Cyprus depends on ECB's liquidity and the bank comes to impose its terms: a new memorandum. Pampos Papageorgiou states that, there is a moment in the Cypriot crisis where Asmussen, a member of the executive board of the ECB, got up and said that 'if there is no solution, if you do not accept, the funding of Cyprus Popular Bank stops as of tomorrow'. Therefore, a bank would have shut down and this would have a domino effect on the rest of the banking system. It was a blackmail that was possible due to ELA (Emergency Liquidity Assistance).

Stavros Tombazos, associate professor at the Department of Social and Political Sciences of the University of Cyprus, says that the way the EU institutions have treated Cyprus is undemocratic. The Parliament was forced to vote the laws that the memorandums prescribe, under the threat of a greater disaster. That's why we are talking about debt colonies, as in the case of Greece. It's a new form of dictatorship.

Christofias administration accepts the memorandum, but now, the EU asks for more.

As Tombazos says, they waited for the government to change in February 2013, and renegotiate the memorandum on extortionate terms with the new Right-Wing government.

The EU will experiment with a new weapon in Cyprus, the bail-in, the confiscation of citizens' deposits. This time, Brussels and Frankfurt are involved in a geopolitical game, as well. Berlin uses the EU mechanisms to hit the Russian capital in Cyprus. Christofias says that, when this harm was done, they used the crisis, in order to attack the Russian capital because the haircut cost billions to the Russians.

As Papageorgiou says, before the enforcement of the bail-in, a report by the German intelligence was published, saying that Cyprus was a place of money laundering. It was a kind of propaganda because Cyprus was neither better, nor worse than the other financial centers. Almost three years later, they announce with great fanfare, the exit of Cyprus from the memorandum. But again, the truth is 'slightly' different. This experiment has condemned Cyprus in a state of deflation, of zero development, of an abrupt transfer of wealth from the bottom up, of nonstop immigration and of a misery, in general, that is not only financial but social, as well.

Finally, Tombazos concludes that, all these years of crisis, the profits of businesses in Cyprus have not decreased at all. Salaries drop in Cyprus, but profits don't. In this way, there is a rise of the degree of exploitation of labor force.


Information taken from the new documentary This Is Not A Coup by Aris Chatzistefanou

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