Bailing out the Oligarchs

Nick Dearden, Jubilee Debt Campaign UK

greece meeting image

We are on a fact-finding mission to Greece with people from Spain, Italy, Belgium, Cyprus, Macedonia, Ireland, Portugal and Germany. We want to examine the depth of the debt crisis on the people of Greece and to learn more about the means people are using to rebuild their communities and resist the severe austerity measures which are ripping apart the social fabric of this country.

We are also meeting as the International Citizens debt Audit Network (ICAN) which brings together debt activists across Europe, and mobilises people to organise debt audits to publicly uncover where our debt came from, who benefited from it and whether and how it should be repaid.

First up is a public meeting with activists looking at the legitimacy of debts in their country. Cyprus has a new debt audit campaign responding to the rapidly emerging crisis in that country.

Cyprus’ debt crisis is the latest in a long line of inter-connected crises which threatens a domino effect across Europe. It’s particularly interesting because, although the size of the bailout is relativity small, the idea of bailing out the Russian oligarchs invested in Cyprus is proving particularly galling to governments that were less worried when bailing out their own oligarchs.

Like Iceland and Ireland, Cyprus’ economy boomed as it became a playground for over powerful banks. Those banks have 8 times the assets of the entire output of the economy. Industry accounts for a minute fraction of output. Significant growth is built on the tax haven status of the economy, with particularly huge amounts of capital flowing from the pockets of Russian billionaires.

Such an economy couldn’t weather Europe’s economic crisis, especially as Cyprus was so closely intertwined with the Greek economy, notably through the mass purchase of Greek bonds once Greece was already in crisis. As part of Greece’s bond write-down, Cyprus lost a fortune. Austerity measures have reduced public sector wages by 15% and state pensions by up to 10%, with VAT expected to rise. Nonetheless, without further funds or restructuring of its debts, Cyprus will be unable to make its debt payments in June.

At least half of any ‘bailout’ would go straight to the domestic banks. Unwilling to effectively ‘bail out’ the bondholders and depositors in Cyprus’ banks – suspected to be largely Russian oligarchs and gangsters – or to reward a footloose tax haven, there is now serious talk of ‘burning the bondholders’ – making them take the hit for the crisis and reducing debt.

Expectation is that this is unlikely to come about. Like it or not, European governments and institutions know they have invested too much in their project of forcing the public of peripheral Europe to pay for a crisis of finance. But the more countries that fall victim of these unjust policies, the more unsustainable the whole European economy becomes.