Cyprus: New Law Opens Way for More Foreclosures

CollagePublished: 16 May 2015.
Author: Soteris Vlachos (Socialist Expression, Cyprus).

Having as their main argument the urgency to give to the banks “a tool?to collect large debts which would enable them to improve their balance sheets,? the right wing government of Greek Cyprus has passed through Parliament legislation that opens the way to mass evictions.

“All money lent has to be returned? said the leader of the main right wing party. But he was not applying this prescription to the banks by requesting repayment of the 10 billion euros taken from the bank accounts of thousands of people in the last ?bail in?. Nor was he asking back the more than ?5 billion through which the State has guaranteed bank liquidity. No, he was demanding return of money only from those of our compatriots that have been rendered economically broken and unemployed by the banking system.

By issuing such a demand, the right wing leader is exhibiting incredible audacity towards those whom the private banking system has condemned to poverty and unemployment. Thus the poor and the unemployed are expected to lose their homes in order to ?rescue? those who bear the basic responsibility for the chaos that has been created.

The right wing government is following the directives of ?the Troika? (the International Monetary Fund, EU Commission & European Central bank) blindly despite the fact that these directives are absolutely unfair. Indeed, there is not a single piece of evidence that these economic policies are in any way effective or have produced positive results elsewhere.

Of course, such considerations do not inhibit the capitalist strategists who only seek to increase the rate of profit and to create a narrative to undermine the new SYRIZA-led government in Greece. According to this narrative, Greece was on the verge of reversing the economic fall but SYRIZA interrupted the process with its irresponsible policies. Meanwhile Portugal, Spain and Ireland which have loyally stuck to the austerity programme, are now on the eve of success. What such a narrative doesn?t explain is how such countries can be on the brink of success at the same time as coping with dramatically reduced levels of investment; a debt level much higher as a percentage of GNP now than at the beginning of the crisis; and with record numbers of people unemployed and even more living below the poverty line.

Opposition Within the Capitalist Intelligentsia
The Troika Memorandum camp is fast losing the support of the best representatives of the capitalist intelligentsia. Among these we must include Nobel laureate Joseph Stiglitz, who could be described as the specialist of the Keynesian capitalist camp for around two decades now. Then there is Paul Krugman, another American Keynesian economist and Nobel laureate. And now we have the French economist Thomas Piketty who?s best-selling book on inequality ?Capital in the Twenty-First Century? has pushed him into first place in the most recent list of leading thinkers in the world.

Stiglitz, more than two years ago characterized the Troika?s pro-Austerity policies followed in Greece as “suicide recipes” and said that the results of these policies do not correspond to their own Memorandum camp theory. Rather than change the theory, however, it appears easier for them to change the facts. “This seems to be what the German Chancellor Angela Merkel and other European leaders who are in favor of austerity believe.” (Stiglitz)

Going further last autumn Stiglitz openly argued that ?they have to abandon austerity?. Then just a few days ago he contradicted the claim of Wolfgang Schaeuble, Germany?s Finance Minister and heavy gun of the austerity camp that those following the Austerity programme .are benefiting from “moderate but sustainable growth”. Instead, Stiglitz described the European economic situation in a completely different way arguing that “I see many countries still mired in recession …”.

Krugman takes the same line as Stiglitz and Piketty, all of them trying to ?save capitalism from the capitalists?. After a very recent visit to Athens, Klugman wrote a short report saying that the Memorandum policies in Greece ?included spending cuts and tax hikes that, if imposed on the United States, would amount to $3 trillion a year. There were also wage cuts on a scale that?s hard to fathom, with average wages down 25 percent from their peak. These immense sacrifices were supposed to produce recovery. Instead, the destruction of purchasing power deepened the slump, creating Great Depression-level suffering and a huge humanitarian crisis. … It has been an endless nightmare.?

Preparing for Mass Evictions in Cyprus
With this background, the right wing government in Cyprus has passed new legislation providing for express procedures for mass evictions. They argue that this is the only way forward, that there is nothing with which to even question the Troika?s wisdom.

Immediately after passing the new legislation, the government received the congratulations of the International lenders for having behaved “responsibly” on the issue. Passing this law ?opens the way for the next assessment,” said Jeroen Dijsselbloem, Chair of the Euro Finance Ministers, welcoming the adoption of the insolvency framework and noting that Cyprus is performing better than projected. Immediately afterwards the Eurogroup inserted in the agenda to be discussed with the Cypriots the issue of new cuts in wages and pensions.

According to these brilliant capitalist strategists – selling the houses of ordinary people is the way to restart the economy. They assert this absolute truth without feeling it necessary in any way to explain to the rest of us, two years after the banking collapse in Cyprus, how it was that the banks suddenly changed from profitable institutions to dramatically bankrupt ones, and in a period when there were no ?red loans? at least at the level home and small business loans? Red loans in these categories were created only after the banking collapse. They were created after the state rescued the banking system, leading the rest of the economy towards havoc, and producing business bankruptcies and mass unemployment.

That is why demanding from ordinary folks, the victims of the crisis, to stay homeless in order to restart the economy, is vastly immoral and hides the real reasons that led to the crisis. Worse still, it leaves wide open the path for another collapse in the period that lies ahead.

The Creation of a Banking Monster
The various experts of the capitalist camp have started gradually speaking about the existence of a ?hypertrophic banking sector? before the 2013 banking collapse. But a “hypertrophic banking sector is a time bomb in the foundations of the economic system which sooner or later will explode.” None of the ?experts? that now support foreclosures and austerity measures had said even one warning word when the Cypriot banking system was built up into a over-inflated monster ready to fall. Not a word. And instead of now being accused of complicity in crimes against the economy, they have the audacity to present themselves as the holders of the absolute truth.

The formation of the banking ?monster? though, touches something much deeper to do with the weakness of the rest of the private sector to contribute to development. This weakness was disguised for a while by the ballooning of the banking system which increasingly invested in non-productive, illegitimate functions until the disaster could not be avoided any longer.

The creation of an unsustainable banking system is the clearest indication of fundamental problems in the actual operation of the free market. But it is exactly at this point that things become difficult. The free market is the “altar” of the capitalist class, which they will defend until the end, even if they have to rip apart the rest of society.

This reality has been exhibited by their actions time and again. After 2009, the bonds issued by the Greek state were first bought in the secondary market where these bonds were sold massively by those possessing them, after realizing what kind of trash they were.

The political representatives of the capitalists move blindly with their only motive being to rescue the banks and big business for the benefit of their class, irrelevant to the cost incurred to the rest of the society. To this end they falsify reality, accusing as irresponsible all who do not get in line with them. They exclude the state from any possibility of intervention in favour of society and leave to the state only the role of saving the private banks even if this means driving the rest of society into bankruptcy.

Soteris Vlachos can be reached by email at:

?/ to be continued?


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