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The historic "no" of the Cypriot parliament to the "bailout" and "haircut" of bank deposits prescribed by the EU has a historical precedent: Cyprus' rejection of the Annan Plan for "reunification" of the island in 2004.  Then, just as now, the pressure from the international community was intense, and the consequences of a rejection were said to be dire.  Then, just as now, Cyprus withstood the pressure and said "no."

By Michael Nevradakis

International pressure.  Threats of catastrophe in the event of non-compliance.  An ongoing crisis which desperately required a response.  These were some of the dilemmas facing Cyprus, as its government responded to the country's worsening economic situation by agreeing to a "bailout" from the European Union which involved a "haircut" of Cypriot bank deposits.  

It was less than a decade ago that Cyprus found itself in a similar position.  In 2004, after numerous rounds of negotiations, the Annan Plan for Cyprus, named after the then-Secretary General of the United Nations, Kofi Annan, was presented.  This plan purportedly provided a framework in which Cyprus, 37% of which has been illegally occupied by Turkey since 1974, would be "reunited" under a loose confederation of two states, one Greek Cypriot and one Turkish Cypriot.  Then, just as now, intense pressure was thrust on Cyprus by the international community, and the Greek Cypriot community in particular was threatened with the dire consequences that would follow if they did not approve the plan.  Referendums were held, first in the Turkish-occupied north, where it passed, and then in the internationally-recognized south, where it was overwhelmingly rejected.  Prior to the referendum in the south, the then-president of Cyprus, Tassos Papadopoulos, in an emotional televised address, stated his conviction that the plan should be rejected—a speech which, for many, made Papadopoulos a national hero.

This isn't the place to analyze the pros and cons of the Annan Plan.  It is worth highlighting, however, a few of the reasons why the Greek Cypriots rejected it.  Some of the foremost reasons included the disproportionate number of seats in the governmental structure that it provided to the Turkish Cypriot community compared to their percentage of the population, its provision for the immediate dissolution of the Greek Cypriot government (whereas the Turkish Cypriot regime would be phased out over two decades), and most significantly, the fact that the Turkish military, which occupies the northern third of the island, would be permitted to remain in Cyprus, with expanded intervention powers.  These are just a few of the reasons why the Annan Plan proved unacceptable to most Greek Cypriots.

It should be noted that the pressure on the Greek Cypriots to accept it came from all sides: from the UN, from the EU, from the United States, and even from Greece.  George Papandreou, the then-leader of PASOK, was strongly in favor of the Annan Plan, as was the party that now represents the "radical" opposition to austerity, Syriza.  Konstantinos Karamanlis, the prime minister at the time, was against the Annan Plan, but other members of his New Democracy party favored it.  This pressure was combined with threats of the dire consequences rejection would bring.  Cyprus would be barred from entry into the EU (it was a month away from accession) and it would be isolated from the international community.

Unlike their counterparts in Greece, the Greek Cypriots didn't cave, and incredibly, the sky didn't fall and the island's accession process into the EU remained intact, as did its international standing.  The threats turned out to be hollow words, bark with no bite.  The island was not "reunified," but the status quo was deemed preferable to a solution where the occupier would be the beneficiary.

Notably, Nikos Anastasiadis, the newly-elected president of Cyprus, had been, at the time, one of the strongest proponents of voting "yes" on the Annan Plan—a fact not lost on Turkey's foreign minister Ahmet Davutoğlu, in recent remarks he made on the the elections in Cyprus.  Which brings us back to the present.  Nine years later, Cyprus was faced with a very similar dilemma, with analogous pressures coming from the international community, and comparable threats about the consequences of non-compliance.  Why, Cyprus was just days away from a catastrophic bankruptcy, it was said, if it did not accept the "bailout" and all of its conditions.  Cyprus would be left to "fend for itself" if it refused this "help" from the EU!  Anastasiadis himself claimed that Cyprus was faced either with acceptance of the deal or immediate bankruptcy.  And then, the Cypriot parliament called the EU's bluff.

A funny thing happened: the "bailout" and the "haircut" were rejected, yet the lights stayed on, the island was still intact, and the banks didn't collapse into an ashen pile of IOUs.  Cypriots, who overwhelmingly opposed the hijacking of their savings, celebrated.  The Germans?  They weren't as pleased.  But the rhetoric following the historic "no" vote was that Cyprus now had until June to come up with a solution in order to stave off default.  So much for that "imminent" bankruptcy.

The parallels between 2004 and 2013 continue.  Now, just as then, the Greek Cypriots were openly betrayed by the politicians of Greece.  The ruling coalition of Greece was strongly in favor of the EU's "solution" and encouraged the Cypriots to accept it, just as they urged the Cypriots to support the Annan Plan in 2004.  What the politicians of Greece proved, once again, is how weak and spineless they are.  Not only did they not stand up for Cyprus, but they continued their pathetic tradition of unquestioningly accepting everything proposed by their EU counterparts.  "Yes to everything" has become a catch-phrase that follows these politicians wherever they go.  They have not only sold out the Cypriots, they've also repeatedly sold out the people they were elected to represent.  Indeed, it has been reported that, following Cyprus' "no," a high-level Greek minister called on German finance minister Wolfgang Schauble to "punish" Cyprus.

One final parallel: in the aftermath of the failed vote on the Annan Plan, officials from the United States, the EU, and elsewhere used this rejection as "evidence" that it was the Greeks, not the Turks, who did not desire peace.  This argument is still heard today.  In the aftermath of Cyprus' rejection of the EU-supported "bailout," Schauble announced that Cyprus should not except more "help" from Germany, the Swedish finance minister stated that only beaches will remain on Cyprus, while in an egregious journalistic faux pas, Slate Magazine recommended that Cyprus sell the occupied northern territories to the occupiers—Turkey—in order to raise money.

For everyone who has opposed austerity, the battle may have been won, but the war continues.  The EU surely will not take this lightly, and the Russians want to assert themselves in the region.  Surely the Turks are also closely following the developments.  But the "no" also represents the first instance in which a EU member-state has rejected the harsh "medicine" that was prescribed to it, following in the proud tradition of the rejection of the Annan Plan.

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Comment Preferences

  •  I don't get the whole thing. (5+ / 0-)

    If the problem is money laundering, fraud, tax evasion of large investors, why were small depositors targeted at all?  Was this just a way of tipping off the big investors, giving them the opportunity to get their money out?

    "To recognize error, to cut losses, to alter course, is the most repugnant option in government." Historian Barbara Tuchman

    by Publius2008 on Wed Mar 20, 2013 at 11:27:18 AM PDT

    •  From your source: (4+ / 0-)
      Recommended by:
      FG, Joieau, Just Bob, DRo

      Meanwhile Gazprom, the giant Russian energy company, has offered a private bailout plan, The New York Times reports. Rather than the hated tax on bank deposits, Cyprus could raise money to right its economy by selling Gazprom exploration rights to offshore gas deposits in the Mediterranean Sea.

      Gazprom refused to confirm it even made an offer. Gazprom already has vast gas deposits in Siberia. But the emergence of an independent gas industry in Cyprus could further undercut Gazprom’s monopoly pricing power in Europe, already threatened by the global gas glut from the American shale gas boom.

      Ownership of Cyprus’s promising though undeveloped reserves would keep potential competitors from obtaining them and ensure a supply of gas — and Gazprom’s continued power over Europe — for years.

      So this is better? Cyprus remains a cheap tax haven for the Russians and is completely subservient to them rather than the EU? It looks to me as if there are no good choices at this point.

      „Wer kämpft, kann verlieren. Wer nicht kämpft, hat schon verloren.“ - Bertolt Brecht

      by translatorpro on Wed Mar 20, 2013 at 11:33:18 AM PDT

      [ Parent ]

      •  Wrong (2+ / 0-)

        I'm not saying it's better or worse, but if the Russians come in with a deal that saves the island's banks, the depositors, and to exploit the island's gas and possible oil reserves with security against a Turkish threat, then please explain why Cyprus should decline and instead accept the austerity, haircuts, and suffering at the hands of the EU.

        If the Russians are making a better deal than the EU, it says a lot...not about the Russians, but about the "Europeans."

        As for money laundering and Cyprus, people need to stop their faux moralizing about the issue.  What do you think happens in Switzerland, Lichtenstein, Luxembourg, the Isle of Man, Gibraltar, the Cayman Islands, and the City of London Corporation?  If it's perfectly acceptable for those countries to accept dirty money, then I don't see where the double standard comes into play for Cyprus.

        •  And grabs all the island's natural resources. (0+ / 0-)

          I don't know what is better.

          •  Dilemma (0+ / 0-)

            If it wasn't Russia but some other country offering Cyprus the same deal, would you still be having this dilemma? Or is the problem just that it's the Russians?

            •  I don't have any problems with Russians. (0+ / 0-)

              So yeah, I would still have it.

              •  Well (2+ / 0-)
                Recommended by:
                FG, happymisanthropy

                I would think then that your issue is with the country bring under the thumb of one power or another, which I understand.  Ideally, Cyprus (or Greece or Portugal or anybody) won't be under anyone's thumb.

                But let's look at reality: Cyprus already has British military bases on the island, which are not really part of Cypriot territory.  Over a third of the island remains occupied by Turkey.  The island's oil and gas deposits have already attracted the attention of the United States, of the Germans, the Russians, and yes, the Turks.  

                In this reality, Cyprus needs to make the best deal that it can for itself, for its people, for its well-being and survival and security.  If the EU can't offer such a deal, it should not be a surprise if Cyprus goes to the party that can offer such a deal.

                •  It will really depend on the details of the deal (1+ / 0-)
                  Recommended by:

                  Gazprom may or may not offer. But oil and gas deposits are valuable. The question is not which company will develop them. Clearly, it will not be a local company. The question is what kind of terms this company will get. If Gazprom can use this situation to negotiate much more favorable terms than it would have been able to do otherwise, it will harm Cyprus in the long term.

                  I don't think it will really happen. I think Russia will offer better terms on the existing loan and maybe an additional loan in exchange for a promise not to tax bank deposits and possibly smth else. I doubt Cyprus will agree to let Gazprom get their gas without a tender.

        •  I wrote, and I quote (0+ / 0-)
          It looks to me as if there are no good choices at this point.
          I merely wanted to know what your reasoning was, as your euphoria about David (Cyprus) "beating back" Goliath (EU) seemed premature. Nothing has been solved yet, and the country is  between a rock and a hard place. Nothing more, nothing less. So what am I supposedly "wrong" about? I stated no opinion either way whatsoever. ::shrug::

          „Wer kämpft, kann verlieren. Wer nicht kämpft, hat schon verloren.“ - Bertolt Brecht

          by translatorpro on Wed Mar 20, 2013 at 03:36:03 PM PDT

          [ Parent ]

    •  Helps to understand tragic Cyprus modern (1+ / 0-)
      Recommended by:

      history.  Another failed US Kissinger policy.  

      This is the best vid I have found to explain how Cyprus got to where it is today.

      It all began in 1974

      It's difficult to be happy knowing so many suffer. We must unite.

      by War on Error on Thu Mar 21, 2013 at 09:04:52 AM PDT

      [ Parent ]

  •  Wow, well done (2+ / 0-)
    Recommended by:
    DRo, neo11

    I had forgotten about the 2004 situation.  Thanks for adding the (recent) historical perspective about Cyprus, I think even more highly of their actions now.

    a psychiatrist could..... "eliminate whether Geoffrey was having an affair, or had become gay, whether he had a social disease, or had become a Republican." - Invasion of the Body Snatchers (1978)

    by FlamingoGrrl on Wed Mar 20, 2013 at 12:21:29 PM PDT

  •  This just in: (5+ / 0-)

    Economists are now predicting that if Cyprus says "no" in June, an "imminent bankruptcy" for them will be declared by the EU every three months at least through 2025 or until they say "ok" whichever is later.

    Boehner Just Wants Wife To Listen, Not Come Up With Alternative Debt-Reduction Ideas

    by dov12348 on Wed Mar 20, 2013 at 12:44:27 PM PDT

  •  didn't Iceland tell the banksters to take a hike? (2+ / 0-)
    Recommended by:
    neo11, jalapenopopper

    and end up the better for it?

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