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Cyprus: What Every Occupier Needs to Know

Image of people holding a sign that reads, "Hands off Cyprus"

The government of tiny Cyprus just rejected a proposed 10 billion European Union bank bailout that would have required all depositors to take a "haircut" by paying a mandatory onetime levy of 7-10 percent on their bank savings. This unprecedented plan to make the people sacrifice on behalf of the banks threw the financially-troubled nation into turmoil. The situation is still quite fluid, with banks closed until next week. Nicholas Levis from the Alternative Banking Working Group weighs in on the crisis.

There’s a good primer on the situation in Cyprus from Alternet, “7 Things You Need to Know About the Shocking Cyprus Bailout Crisis That Has Everyone Freaked Out.” I also liked the analysis in the Michael Roberts Blog. But it’s all dating fast as the situation unfolds. The people took to the streets, cabinet members resigned, and condemnations are coming from Russia (where many of the depositors actually live). Yesterday, with the bank holiday in its second day, the Parliament rejected the bailout plan with no one voting for it. Now what? With Intrade no longer operating, where can I bet on a surprise Russian bailout?

I had an interesting dinner conversation with some City University scholars (of the radical set) last night about how this case is more complicated than it looks. Cyprus, the latest EU crisis and Troika austerity victim, is also a haven for tax evasion and money laundering. Most of the deposits affected may be Russian, although as always in Cyprus there is also British capital. The island (or the recognized Greek part of it) is relatively wealthy compared to other periphery targets like the SPIGI or GIPSI (slang for Spain, Portugal, Ireland,  Greece and Italy – please call them that – not PIIGS) and the financial haven plays no small role in that.

One professor for whom I have developed great intellectual respect despite certain differences between us argued that the case of Cyprus isn’t comparable to the SPIGI because (for the sake of argument) to keep the two Cypriot banks from going under there is no one else to hit besides the depositors. He also asked: How is this worse than hitting pensioners and cutting social welfare benefits that are needed more desperately, with far worse human consequences? To the fact that people around the SPIGI and EU are now inspired by the example of so-far successful Cypriot popular resistance to the proposed measures, he said that, they were getting their analysis wrong. This case is not driven by quite the same power constellation as when the Troika imposes austerity on the SPIGI, because with the SPIGI you have a united front of EU and national elite interests carrying out the policy, with uninvolved elites at best indifferent. With Cyprus you have Russia and England pissed off about the EU plan. He pointed out that Putin never issued a statement damning the EU for the human price of austerity in, say, Portugal. He does so with Cyprus only because Russian elite interests are affected.

My answer was, first, that going after depositors (especially below the 100,000 euro level of guaranteed deposits) crosses a red line in capitalism’s own rules, and thus damages the ideology in a shocking way that’s cannibalistic to the powers that be. At the same time it is also an experiment in total exercise of class power, to see how far a people can be pushed and what might be learned for future cases. So this is the same forces, doing the same thing, with different means, in a different situation. At least, it is so if you understand that the key point is not in the measures imposed (deposits seized instead of pension and health care cuts) but in the sheer unconditionality of class power and the demand it never be questioned. Thus, while my professor friend’s analysis is true in terms of conflicts in elite interests and in the economic picture as can be seen by scholars and experts, the social movement response is another thing altogether. If there is inspiration among peoples in the SPIGI or EU at the Cypriot example of turning back that class power (for now, and perhaps with ugly consequences), and if this helps to spark upheavals against that power elsewhere, it wouldn’t be the first time a justified revolution (so to speak) was fired up by a rumor that turned out to be false after the train had already left the station.

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