Greetings all!
This post comes after a somewhat prolonged break
from my writing, due to a combination of technical difficulties and large
amounts of school work predating a brief break from school which I have just
begun. Because I am guilty of not finding enough time to write and now have
extra time, I will be making several posts this week to make up for my absence.
Tonight, I address the Cypriot financial crisis going on at this very moment,
along with the entire European debt and capitalism crisis. This week’s quote
comes from Néstor Kirchner, a
former Argentine president and renowned economic hero of said nation.
The current trouble
in Cyprus is one that is not new to the EU, but the proposed solution for it
certainly was. Cypriot banks, which had assets much larger than the entire
Cypriot economy, made some dangerous and risky investments in Greece. When the
Greek economy began to tear at the seams, Cypriot banks were found trapped in a
mire of financial burden and uncertainty. In order to ensure the liquidity and
stability of the Cypriot economy, the government was forced to seek a deal with
the troika, composed of the IMF (International Monetary Fund), the EC (European
Commission), and the ECB (European Central Bank). Because the Cypriot government
could not bail out the banks on its own and it was impeded by slow growth, it
was essentially forced to ask for international help. While the former
communist president, Demetris Christofias, was less willing to give in, the
country recently elected a more negotiable conservative leader, Nicos
Anastasiades. You read that right, Cyprus had a communist president. Too bad he
came in at the exact wrong moment. For a fuller description of the origins of
the crisis, see this.
The original deal
proposed by the troika was horrifying, and a close call. At first, a bank levy
on all deposits in Cypriot banks was suggested, starting at 6.75% for smaller
deposits and up to 10% for larger ones. This was the greatest breach of trust
yet in the European debt crisis; governments and organization had promised no
bank levies would occur. Citizens were ensured that their savings deposits
would not be endangered, no matter what. By making a bank levy on all Cypriots
the first option, the hopes of ensuring the safety of each person’s money were
broken and shattered. This was reflected by protests
across Cyprus. The very notion that this issue has made common Cypriots forget
the divide between Turks and Greeks proves how serious this has become. Luckily,
this deal was protested feverishly and struck down by the Cypriot parliament.
The new deal is not
very much better. Taxes on the average Cypriot will be coupled with
privatizations of state holdings. The second largest bank, Laiki Bank, will be
closed, and deposits over 100,000 euros will be moved. Deposits under that
level are being moved into the biggest bank, the Bank of Cyprus, which has to
undergo restructuring. Deposits over that limit will then be used to finance
the bailout. And while this does not target as many Cypriots as it does Russian
oligarchs (wealthy Russians enjoy investing in Cyprus), it stands as testament
that Europeans have been lied to and they are not safe. We now know for certain
that the troika does not see citizens as something worth protecting, they just
see them as assets to exploit to ensure capitalism doesn't break.
The most important
thing we should consider when looking at all this is that this is not a problem
for Cyprus alone. It should be clear to just about everyone that austerity
doesn't work, in all cases. These economic policies force severe damage to
those nations that pursue them, causing a shrinking economy, spiking inequality
of wealth and income, and inject structural flaws into systems that cannot
handle such problems. However, jam the idea of bank levies into austerity
packages and you have a full plan to sabotage any economy. Combined, an
austerity-oriented economic model with bank levies would surely speed any
afflicted nation towards plutocracy. While all common citizens will have their
jobs, their savings, their education, and their healthcare jeopardized, the
wealthy will suffer comparatively less and not be prosecuted afterwards. A more
dangerous system of capitalism will be left in the wake of these crises, a
system even more dependent on the rich and corporations and less willing to
fight against them.
We like to point
towards Germany as an example of why austerity should work. But while Germany
appears safe, the truth is murky. We forget that German austerity did
not work as intended, and was modest in comparison to those nations forced
to pursue it like Greece, Italy, and Spain. What we should know is that German
austerity has not justified itself in terms of economic output, and this is
reflected by nervous chattering among the Christian Democratic Party which
currently leads Germany and fears losses in coming elections due to austerity
failures.
What we must
realize is that austerity, while it appears like it should work, does not and
is counterintuitive to the best interests of any people. The French people
realized this, and attempted to rectify the problem by electing Francois
Hollande, an anti-austerity socialist. Instead, governments should focus on
preserving the social safety net by stimulating growth of the economy. Because
the poor and the middle class are the most vulnerable in crisis, it is the
programs which help them which must be protected first and foremost, not the
banks, the corporations, or the wealthy. They can handle themselves, and are
not in severe danger. We must not fall prey to them.
That is all for
tonight, and I hope I have provided sound reasoning behind my argument. If you
have comments or questions, please feel free to comment on this site. If you
would prefer other methods of contacting me, I can be reached at my email at zerospintop@live.com, my Facebook,
Twitter, Google+, Steam, DeviantArt, Tumblr, and Reddit accounts. Good night,
and this is KnoFear, signing off.
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