Wednesday, 5 December 2012

Cyprus prepares for elections under the shadow of a bankrupt economy

An update on what’s happening in Cyprus. Two issues are dominating: the bailout deal the government has agreed with the EU, European Central Bank and the IMF to shore up Cyprus’ bankrupt economy and the presidential elections due in February next year.

Despite his proclivity for dithering and pathological predisposition to denial, President Demetris Christofias – under pressure from his finance minister and the chairman of the Cyprus Central Bank (and the threat made by opposition leader Nikos Anastasiades to bring charges of criminal negligence against him, should he not sign a bailout deal) – eventually capitulated to the Troika and agreed to the austerity measures demanded of his government in exchange for an estimated €17.5bn for the recapitalisation of Cyprus’ banks and to cover the government deficit.

Already experiencing recession and unprecedented levels of unemployment at 12 percent, the new measures involving increased taxes, cuts to pensions and public sector pay, as well as privatisations and economic liberalisation, will disconcert a society that has, for 30 years, become used to a buoyant economy characterised by full employment, steady growth and ever-increasing levels of disposable income.

Now, why Cyprus has not been able to withstand the shocks to its economy is a matter of debate, with the island’s communist president insisting that global capitalism and the island’s greedy and over-ambitious banks are to blame, with the latter being accused of negligently exposing the Cypriot economy to Greece’s debt.

On the other hand, Christofias’ critics argue that he has been too slow to react to the looming crisis; unwilling, for ideological reasons, to pre-empt the Troika by reforming the economy or constrain soaring public expenditure, choosing instead to maintain the pretence that the Cypriot economy could withstand the buffeting it was taking, by pursuing loans from Russia and China. Charges of economic illiteracy and incompetence have also been levelled at Christofias and his government by Athanasios Orphanides, former Cyprus Central Bank chairman, who has repeatedly accused Christofias of ignoring his advice in October 2011 to argue against a haircut of Greek bonds for fear of the massive losses such a markdown would have on Cypriot banks holding Greek debt. (The fact that Christofias has decided against standing for re-election in February tells you who Cypriots blame for the country’s economic crisis).

Naturally, there have been rumblings of discontent from trade unions about the austerity and reform package, and although we can never underestimate people’s reactions to losing pay, privileges and, indeed, their jobs, I doubt these will amount to much. The main trade unions in Cyprus are not only affiliated to the ruling communist AKEL party, and thus will be discouraged by their political masters from making the government look even more ridiculous by, essentially, calling for strikes against itself; but, also, the strength of the Cypriot economy has meant there is no recent tradition on the island of significant labour unrest. Similarly, although we shouldn’t ignore AKEL’s natural inclination to exploit fear and stoke class resentment, Cyprus does not suffer from the vicious political and ideological discord, which we associate with Greece, while, to continue the Greece analogy and suggest why Cyprus’ difficulties will not lead to a Greece-style social collapse, the Cypriot state continues to function and command the respect of its citizens. It’s also apparent that the discourse that the post-1974 economic model Cyprus has become stale and unsustainable is widely articulated and accepted on the island.

Another factor that will help avert the turning of economic disaster into political crisis is the presidential election due in February, campaigning for which is well underway. The election will have a cathartic effect, since there is a sense that once the ridiculed and despised Christofias leaves office, the island will breathe a sigh of relief and get a fresh start.

It seems to me a foregone conclusion that Nikos Anastasiades, of centre-right DISY, will be Cyprus’ next president. Anastasiades is an unconvincing figure who inspires skepticism and mistrust, forever tainted by his vehement support for the Annan plan in 2004. However, it is an indication of the priorities in Cypriot society at the moment that his views on the Cyprus problem appear less important than his commitment to managing and reforming the economy. Indeed, even DIKO – former premier Tassos Papadopoulos’ centrist party, many of whose supporters regard Anastasiades as a hate figure – is now backing Anastasiades’ candidacy.

Anastasiades’ support for Annan in 2004 does not mean he will, as president, be more amenable to Turkish demands on the Cyprus issue. For a start, Turkey’s policy since 2004 has hardened and its vision for a ‘solution’ is now way beyond what Anastasiades is prepared to accept. Indeed, because Turkey is not, and never has been, prepared to countenance a solution that isn’t, in one way or another, partition, and because Turkey’s neo-Ottoman, ‘no problems with neighbours’, foreign policy is collapsing all around it, it’s hard to imagine that the Turkish government will do further harm to its imperial aspirations and fantasies by loosening its grip on Cyprus. Having DIKO as governing partner – and the more nationalist Antonis Samaras as prime minister in Greece – will also ensure Anastasiades’ perception that Cyprus needs a solution as a matter of urgency to prevent de jure partition and the irreversible Turkification of the occupied areas, will not lead him to make concessions that will achieve precisely what he says he wants to avoid.

With a Cyprus solution not on the horizon, Anastasiades has been talking in his campaign less about what the nitty-gritty of a settlement might look like, and more about the changes to Cypriot foreign policy he envisages – increasing the involvement of the EU in the UN-sponsored negotiations on a settlement; improving relations with Israel and the USA; applying for membership of Nato’s Partnership for Peace programme – all of which Anastasiades anticipates will bolster Cyprus’ international credibility, thwart Ankara’s efforts to upgrade the pseudo-state and make sure Turkey continues having to expend valuable diplomatic capital to maintain its occupation of 37 percent of the island.

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