“The contradictions in the era of the Memorandum” By Haris Polycarpou, member of the Economic and Social Research Department of the C.C. of AKEL

 

9th May 2014

The problem with the recent interview given by Mr. Pissarides (Note: government-appointed Chairman of the National Advisory Economic Council to the President of the Republic, Nobel Prize Winner) on the economy is not the ease with which it refuted the many myths cultivated by the Right-wing in Cyprus in recent years, nor of course the fact that he then proceeds to draw conclusions which as head of the National Advisory Economic Council one would have expected that he would seek fervently and passionately to address and propose solutions. The most problematic of all is the conflict of his admittedly specialised scientific knowledge with the attempt to formulate political positions, more than likely alien to him.

Whilst he argues that the State’s responsibility in the period before the signing of the Memorandum “(the previous government) lies in the fact that it spent the money on social benefits and did not have enough money to subsequently cover the vacuum created by the errors of the banking sector”, hethen makes sure to reply to himself by saying that he considers “Cyprus’ current unemployment rate of 20% terribly high and causing social problems. Unfortunately we do not know how to change that. For this specific “illness”, which is part of the wider “illness” of capitalism that is inequality, there is no cure at present. We can say that it is the cancer of capitalism. All that can be done is the provision of social benefits. We all share the burden of the crisis through taxes in order to help the unemployed.” Consequently Mr. Pissarides cannot accuse the previous government that it was generously giving social benefits, whilst at the same time proposing social benefits as a solution to the “illness” of capitalism (namely, unemployment) and the crises in general. We certainly do not need to add here that the baseless talk about generous social benefits leading to the economy’s destruction is captured in a single number: the €19 billion damage left by the banking sector according to the recent investigation by the House of Representatives Ethics Committee Report on the collapse of the Cyprus economy and banking system. And of course, one truly wonders – how would cuts in social benefits have covered such an enormous amount?

Furthermore, it also provokes questions that when he is claiming that “what change with the reforms and the program we have implemented now is that we can enter as an independent unit in the international markets and borrow at reasonable interest rates in order to pay previous loans. We cannot do this now and this is why we are borrowing from the Troika which lends us with very favourable terms, at a much lower interest rate, but it has demands.” At the same time, the Anastasiades Government insists that the interest rate of 6.5% given for the issuing of the recent bond issuance is not a scandal but a very beneficial solution for the Republic of Cyprus…

Finally, one cannot ignore the fact that while he supports during the entire interview with fervour the austerity policy and expenditure restraint followed in Cyprus and in Greece and considering it as lifesaving, he closes the interview with a disarming truth: “the EU must start cutting money and not be afraid of inflation. The Eurozone must be afraid of deflation (note: austerity policies and constraints on public spending) and not inflation. This is my fear for Europe at this stage.”

These contradictions are not accidental. Indeed they reveal the philosophy by which all this period the government has been applying on economic issues. Although they are aware that the policy they are implementing leads to a dead-end, although they know where the problems are today, they continue to stay faithful to their own political decisions. These are the same policies which whilst they have led us to the crisis, globally are today becoming the tool to exit from it. This is perhaps the biggest contradiction in the current era.

Note: All references are from the recent interview given by Mr. Pissarides to “SigmaLIve” on 8th May 2014.