Cyprus and the Memorandum

 

The Cyprus economy faced structural problems and problems related to the distribution of wealth for decades. Public finances showed a transient and circumstantial improvement as a result of the “bubble” in the real estate sector, but subsequently due to the recession the general levels of long-standing deficits returned. Nevertheless, they did not represent the cause of the crisis, but were exacerbated by the crisis. The Cyprus crisis is fundamentally a crisis of the banking sector, the result of the absence of adequate and effective monitoring by the authorities responsible for supervision and erroneous decisions taken by executives and bank boards.

The banking crisis has in turn dragged with it the Cyprus economy as a whole, since it has created conditions of a complete lack of liquidity with a sharp increase in unemployment, the closure of many small and middle businesses and recession, which has deteriorated as a result of the Anastasiades government’s decisions agreed with the Eurogroup to cover the bank losses through the seizure of deposits with more than 100,000 Euros or deposits not covered by the deposits insurance scheme.

The prevailing phenomenon in today’s economic reality is the implementation of the Memorandum of Understanding agreed with the Troika by the Anastasiades Government. The Memorandum is based on the contradictory logic that the answer to the Cyprus economy’s problems is austerity. However more austerity in practice results in deeper recession and deeper recession demands, in line with the recipes and ideology of the Memorandum, more austerity.

The MoU in reality excludes growth, which would give an impetus to the economy to recover from the current recession. At the same time, the continuing decline in the incomes of working people and pensioners, the curbing of their rights and the dismantling of the welfare state do not correct the problems, but exacerbate the deepening of the crisis even further.