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Democrat March-April 2013 (Number 134)

Cyprus, Banking Union
and Britain

Report by Dave Hawkins

Debt laden offshore banking & tax haven sunk by Eurozone! Does this set any bells ringing as in clues to our ruling elite’s shunning of the €uro and wanting no part of a Banking Union?

Events in Cyprus have been instructive. Trumpeted with trademark EU bombast the Banking Union promised to:
¨ Make the European Central Bank (ECB) the `single supervisor` of 6000 Eurozone(EZ) and EU `opt-in` banks, enforcing rules on leverage, liquidity and minimum capital requirements

¨ Provide a  common deposit guarantee for ordinary bank accounts up to a limit of  €100,000

¨  Become the common fund and resolution authority for bailing out (or letting go bust) failing banks with the power to bail in senior asset holders ending taxpayer bailouts.

Following months of inter-state wrangling Germany secured exemption for the majority of its banks. With any possibility  of a common resolution authority and fund or deposit guarantee scheme being openly dismissed by informed observers.

The dogs bark, the caravan moves on. Or in the EU’s case the austerity steamroller lurches forward - this time over Cyprus. No matter that the Cyprus `crisis` stemmed in large part from the Troika-Berlin 50% write down of Greek government bonds which comprised much of the Cypriot banking system’s assets, or the €sums required for an orderly transition for Cyprus relatively small.  As the Sundance Kid told Butch Cassidy `aint no rules in a knife fight `.

Does anyone believe the French or German States would give banking union a glance before  hurtling to the aid of a threatend  BNP Paribas or Deutch Bank?

For `Troika-Berlin` read web of rival capitalist interests, linked by a dysfunctional common currency, masquerading as a `Union of the Peoples of Europe`. Mounting contradictions are the source of its three card Monte political maneuvering and midnight diktats. However, its objectives are transparent enough. Prop up the banks of the PIIGS where Troika-Berlin big capital was exposed to losses and dump the debts onto the books of their sovereign states.

The twist in Cyprus losses was other peoples’ property! (OPP) - rival Russian oligarch money. Time to stand up for the taxpayer! Get tough with the speculators! Demand asset holder bail-ins! The consequences for Cypriot workers and SME's however will prove identical to the PIIGS, privatisations, bankruptcies, recession and mass unemployment.

The elephant in the ante-chamber

One off bail-ins, token banker’s bonus limits, financial transaction taxes and `€uro-bond solidarity` bluster all and serve to give the Euro-Parliament its moment in the sun and mislead the gullible.

Behind the Banking Union maneuvers and double talk lies a determination by Franco-German big capital to seize a larger share of the European financial services markets. In particular the 75% of European and 40% of the global €uro denominated share of the $640 trillion OTC derivative trades global market currently accounts for 50% of the City’s business.

Haunting our ruling elite is the fear that the EZ holds all the aces. `Going offshore` and exiting the EU, the so called `Hong Kong` option would trigger an onslaught of Euro regulations denying  access to the EU single market, driving  many of the City’s 250 banks and hedge funds to relocate to the EZ. Remain inside the EU and face an ongoing combined attrition of Euro regulations, `contagion` fears from the UK's mounting sovereign debt and balance of payments deficits and the pull of the hugely greater bail out resources of the ECB achieving the same end.

What the labour movement in Britain must do.

A reckless UK elite has gambled all on the City as part of the US-UK globalisation offensive in which UK- EU membership was key, destroying UK manufacturing in the process. A strategy rapidly unravelling with potentially disastrous consequences for the peoples of Britain.

Post 2007 crash the difference between the UK and PIIGS are financial services, for which our ruling elite appears willing to preside over an epochal societal decline in order to maintain `market confidence`: a situation being increasingly exploited by the right wing cranks of UKIP and worse.
In Britain the labour movement and its allies alone have the potential to intervene and take the country in a new direction as the heart of an anti-monopoly alliance prepared to act to:

¨ exit the EU and bring banking under democratic control

¨ initiate a green manufacturing, energy, infrastructure and housing programme

¨ transform social priorities investing in the NHS, education and welfare.

Governments across the European Union are putting austerity policies in place which include: massive cuts to welfare states, pressing down wages and pensions, and raising unemployment. The public sector is to be handed to privatisation with loss of accountability and no regard whatsoever for the social consequences.