News Analysis

Wednesday 1 October 2014

Padraic Cradock: EU stands for 'Europe's Undoing'

A decision by one member state to decimate the economy of another is the reality today.

Padraic Craddock

Published 24/03/2013 | 05:00

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THERE is no end in sight of the economic depression ordained for Greece by the Troika. But living in Athens has certain advantages in spite of this.

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At this time of the year there is a good deal of sun and a cappuccino or a glass of chipouro, the local grappa, on a cafe terrace is still affordable. The TV news shows snow chaos at German airports and traffic problems on the autobahn. It is a small comfort to see that the oppressors are suffering some discomfort. There's nothing like a bit of schadenfreude to keep you going.

Here, the height of Carnival coincided with St Patrick's Day. It is consoling to see that people can still celebrate in spite of the crisis. Without such consolations, we would get more angry at the increasing arbitrariness of our governments and the overlords in Brussels and Frankfurt.

Up to now, they have tried to bamboozle the citizens with jargon and to conceal simple facts. The object was to give them the impression that they were paying more tax and sustaining pay cuts for the good of the country. Instead they were funding the banks. Last weekend all pretence was dropped when the euro ministers decreed the raiding of the deposits in the banks in Cyprus, pure and simple.

Have you noticed that political entities often give themselves names when there is some doubt about the validity of the claim embodied in their title? So two countries whose claim to statehood has been the subject of debate describe themselves as the State of Israel and the State of Kuwait. There are the People's Democracies, now largely defunct. And there is the European People's Party – where most of the euro ministers belong, including Michael Noonan. This has a similar aspirational quality. It sounds better than the European Bankers' Party, I suppose.

It is clear that the German finance minister Wolfgang Schaeuble was the driving force behind the decision of the euro ministers in the early hours of last Saturday morning. He insisted on the figure to be raised from the Cypriots, €6bn, one-third of the overall bailout. This was higher than what the commission would have been prepared to accept.

The Cypriots were subjected to blackmail by the enforcer on the European Central Bank board, Joerg Asmussen, who threatened that the ECB would cut off all funding to the Cypriot banks resulting in their failure. Sounds familiar, doesn't it?

So the Cypriot minister reluctantly agreed to the terms of the bailout. But the bank raid was a eurozone decision, which makes the other ministers – including our own – accomplices.

They assumed that Cyprus could be bullied with impunity. No one seems to have envisaged that the Cypriots would have the temerity to reject the deal. Angela Merkel's strategy of maintaining calm on the euro front in the run-up to her election in the autumn has gone by the board. She and her allies have blackened Cyprus for months as a refuge for hot money. Once again, she is a prisoner of her own propaganda, which makes getting parliamentary approval that much more difficult.

In addition to making the deal more saleable at home, Schaeuble's objective in setting the Cypriot contribution so high is to ensure that Cyprus can no longer function like a large offshore financial centre while being at the same time in the eurozone. Cyprus had either to screw the small depositors or to set the level for big investors so high that they would pull out. So one member state decides to decimate the economy of another. Economic warfare – this is the reality of the EU today. European 'Union', another aspirational moniker?

Greece has said that it supports Cyprus but verbal support is all it can offer.

The government here is a shaky coalition and the dramatic rejection of the bailout proposal by Cyprus makes their task of squeezing more money out of a shrinking economy to satisfy the Troika that much more difficult.

Under the terms of the decision, Cyprus is also compelled to raise its corporate tax rate. One would have thought that this should have been enough to get our man down off the fence to support Cyprus. Incidentally, German views on the Irish financial services sector are similar to their views on Cyprus. Which is why I won't believe that there will be an EU solution to our debt problem until I see it.

What are the implications of the ministers' decision beyond the Cyprus context? It is clear that German policy is still dominant. They got their way and were not restrained by France or anybody else. As the austerity policy that they are enforcing fails to produce results and public debt continues to rise, governments will become more and more desperate for money. If they get away with the Cyprus grab, it will inevitably be tried elsewhere.

What does this mean for citizens? On a practical level, it might be prudent to look for a welcoming bank in a place like Newry. On a philosophical level, the question must be if we want to be part of this increasingly autocratic and arbitrary club. One speaker in the debate in the Cypriot parliament stated: "If this is Europe, then we are not part of Europe."

These days, this sentiment is not going to be confined to the Cypriots.

Padraic Cradock is a retired Ambassador of Ireland now living in Greece. One of the countries in which he represented Ireland was Cyprus

Irish Independent

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