From Friday 23 November Cyprus is officially subject to a European Union/ European Central Bank/ IMF (Troika) Memorandum.
This version of the article is longer than in the printed paper.
The decision did not take anybody by surprise. The question was about the timing. Cyprus's presidential elections are due in February. AKEL, the Cypriot Communist Party, which currently governs (Greek) Cyprus, is expected to lose and the right wing Democratic Rally is expected to win.
The question was whether president Dimitris Christofias would dare to go down in history as the leader of the first "communist" government to place its country under the boot of the Troika. In a fight against the time, Christofias was trying to borrow 5 billion euros from Vladimir Putin's supposedly "anti-imperialist" Russia. The answer from Russia this time was a big "Nyet".
The AKEL government spokesman said it was a very difficult negotiation but the government "has achieved a bearable Memorandum... under those financial circumstances we are satisfied with the end result".
According to Reuters, the "financial aid" provided by the memorandum will be around 17.5 billion euros. Up to 10 billion will be allocated for the recapitalisation of the banks, 6 billion for debt refinancing, and just 1.5 billion to cover Cypriot government spending.
The memorandum will be submitted to the Eurogroup around 12 December, and Cypriot finance minister Vassos Shiarly estimates that Cyprus will receive the first bail-out funds in late January. He assured bondholders that there is absolutely no chance of Cyprus defaulting.
A poll published on the website of the newspaper "Kathimerini" claims that 58% of Greek Cypriots approve the Memorandum. There is more support for it from the voters of the Democratic Rally (80%) than from those of AKEL, 61% of whom reject the memorandum.
AKEL has been implementing cuts since 2010. But the historic move to put Cyprus under long-term Troika supervision - placing in hock even the natural gas resources which represent hoped-for future wealth - has sent shock waves through the left in both Cyprus and Greece.
The symbolism of an allegedly communist president signing the Memorandum, when virtually all anti-Memorandum movements are connected with the resurgence of left wing politics, is potent. Lessons should be drawn urgently, since Syriza makes AKEL one of its reference points alongside the "Bolivarian revolutions" in Latin America and Allende's government in Chile.
In spring of 2010, then Greek prime minister George Papandreou came up with a "grand strategic" plan to threaten the European leaders with Greece appealing to the IMF if EU did not come up with a rescue package for Greece. The results are well known.
Two years later AKEL leader Christofias came up with another grand plan: to gain time by requesting a big loan from Russia. Last year he did gain some time with a 2.5 billion euros loan from Russia. This time Russia said no because AKEL refused Russia's demand to be Cyprus's "priority creditor".
Then AKEL, acting in the interests of the Cypriot capitalist class, decided to give the Troika the status of "priority creditor".
The social-liberal Papandreou overestimated Greece's negotiating powers, thinking that he could play with the contradictions between IMF and EU. The "leftist" Christofias relied on an "anti-imperialist alliance" with the imperialist Russia of Putin.
The fate of Cyprus is a lesson to all those in Greece (led by LAOS,but also including sections of the left) who claimed that the Greek crisis could have been resolved with the help of low-interest loans from Russia or China. It is living proof that Russia and China are imperialist powers too.
The problem in Cyprus is not high deficit and public debt, like Greece. According to the official figures, Cypriot debt is 73% of GDP, much lower than the European average of 88%, and the deficit is 4.5%, lower than the UK or France.
Cyprus's case resembles that of Ireland. The state has been brought down by the collapse of a banking sector puffed up on speculation.
In 2010 AKEL handed over 3 billions euros to the banks of Cyprus. The banks bet the money on Greek bonds and other Greek loans, hoping to make easy and quick profits. The Greek debt "haircut" caused massive losses to the Cypriot banks.
In June the Marfin Popular Bank announced an enormous shortfall of 1.8 billion (relative to the size of the Cyprus economy: GDP of 18 billion). AKEL decided to rescue the bank, nationalising the losses and making the Cypriots working class and poor pay for Marfin' debt. The economy of Cyprus is very small and a collapse of the swollen banking sector (six times bigger than Cyprus GDP) will lead to the collapse of the whole economy.
The Troika estimates the amount required to recapitalise the banks at 10 billion euros, while the AKEL government says it is 7 billion. At 10 billion, the rescue package will sky rocket Cyprus's public debt from 72% of GDP to above 130%, by turning bank debt into public debt. Since the revenues from natural gas will not arrive for some years, this debt figure means Cyprus being trapped under long term international financial supervision, with repeated austerity packages.
The big dispute in the negotiations between AKEL and the Troika was not the amount of the cuts, but that the Troika demanded the majority of austerity measures be taken during 2012-3, whereas AKEL tried to shift them towards 2015-6. Actually for 2016 the austerity package proposed by AKEL is bigger than the one proposed by the Troika. The only battle from AKEL was to try to postpone the cuts until after the end of Christofias's presidency!
The austerity measures follow the well-known Greek recipe, including dismantling of labour laws, union rights, and collective bargaining agreements.
The AKEL government wanted to limit the cutbacks in wages, to maintain the "13th month" extra payment on wages, to restructure and not to cancel inflation-protection for wages, and to increase taxation of higher incomes. However, all AKEL's "red lines" have already begun to fade.
The right-wing opposition parties have been criticising AKEL for tardiness; the main trade union bureaucrats, from SEK (linked to Democratic Rally), PEO (AKEL), and DEOK (EDEK), all agreed to the Memorandum provided that AKEL "did tough negotiations with the Troika".
In 2008 Cyprus had a budget surplus of 0.9% and an accumulated debt of 48.9% of GDP. Now it has a deficit of 4.5% and a debt of 72%. During these years the AKEL government of AKEL has handed over 9.8 billion to banks and businesses, but only 1.0 billion to the working class.
Unemployment is already officially at 11% and 25% for people under 25 years old, and 23.6% of the population is already threatened by poverty and social exclusion.
There was another way.
A government of the Left should have never signed the memorandum, because it leads Cypriot society into mass poverty, unemployment, and misery.
The left should have fought for the development and escalation of industrial and social struggles, reinvigoration of the rank and file trade union movement, rolling strikes, occupations, stoppages, demonstrations, in order to force AKEL to refuse the Memorandum.
To the dilemma about whether to pay wages or debt, the response from the side of the workers should be clear: to pay wages. The debt is not created by the workers and should not be paid by the workers.
The left should fight for a program of transitional demands, based upon workers' self management and control and the social planning of the economy to meet the needs of the people and not for the profits of a handful of capitalist parasites.
The forces to the left of AKEL are still relatively small. ERAS was established in 2011 with the aim of bringing together people of the radical Left for more systematic, extensive and effective political action.
When the Troika arrived in Cyprus on 8 November, ERAS organised the first anti-Memorandum protest outside the House of Representatives. About 50 people responded to the call, despite steady rain.
Members and friends of ERAS are also involved in the newly formed Syriza Cyprus, inspired by the upsurge in Greece.
In a sense, the election of Christofias was historic. For the first time a president in Cyprus spoke in the name of communism and the left, in the name of the working class. But it was always clear that AKEL's victory would not open the way for socialism in Cyprus.
Dimitris Christofias repeated several times that AKEL's "ideology is Cyprus". Before the election, he had repeated contacts with industrialists and bankers to reassure them that a government of AKEL would pose no threat to their class interests.
Since 2010, AKEL has been implementing memorandum austerity policies in Cyprus with the threat that otherwise Cyprus would be placed under a Memorandum
AKEL has reduced the wages of public sector workers by 10%; frozen the inflation-protection of wages for two years; increased VAT from 15 to 17%; reduced welfare spending by 10%; and planned to make redundant 5000 public sector workers.
Earlier in 2012, police entered the camp set up in Cyprus by the Occupy movement and violently broke it up, arresting 29 and injuring seven. The Occupy movement included both Greek and Turkish Cypriots and had as a slogan "One united Cyprus". According to AKEL, reunification of Cyprus cannot take place via occupations but only from diplomatic action.
It all shows that if a left government does not take control of the economy through expropriation and workers' control, it will be at the mercy of the capitalists.
It shows the consequences if a government of the left comes to power lacking a political plan of confrontation with the capitalist system and without being dialectically linked to massive working-class mobilisations from below.
Syriza must learn to avoid the road of AKEL. Syriza should remain focused on the aim of overthrowing the memorandum and the Troika and the coalition government, via the mobilisation of the working class, as a first step to the overthrow of the capitalist system. There is no "realistic" governmental program of "resolving" the crisis that will reconcile working-class interests and social needs with the needs of the Greek ruling class and the national and international bondholders.
During the "14th international meeting of communist parties in Lebanon (22-25 November), KKE secretary Aleka Papariga described KKE as resilient against the "sirens of Syriza's plan of a government of the left". "We reject every political force that supports governing within the constraints of the capitalist system".
She defined the major task of KKE was defined as former a front against Syriza.
Yet the new presidential candidate of AKEL, Stavro Malas, met Papariga a couple of weeks ago, and KKE declared its support for him.
At the end of the meeting Papariga declared: "I do not know and I cannot predict what is going to happen in Cyprus. It is in fashion to form an anti-memorandum and anti-Merkel front. KKE says that this front falls far below the needs of an anti-monopoly front... Cyprus is close to a Memorandum. Hopefully this will not be enforced through measures as hard as the ones in Greece".
Stavros Malas took the hint immediately: "As has been said extensively, this crisis is a systemic crisis, and a short sighted anti memorandum approach is not the answer".
KKE's "all or nothing" sectarian approach, considering Syriza as its main enemy, has mutated to offering tacit support to the Memorandum government of AKEL: "The anti-memorandum front cannot respond to the needs of the working class movement and most importantly conceals the underlying cause of the crisis"...