THE END OF CAPITALISM?

The list of Europe's "sick men" has been joined by Greek Cyprus. The prescribed methods of "treatment" threaten to create a precedent for the beginning of the collapse of the world capitalist system. But first things first.

Cyprian Iliad

The problems of the Cypriot economy began to be spoken about two years ago because of its attachment to the Greek financial system, which is not experiencing a time of hardship. The "oracles" of crises - Moody's and Fitch - downgraded the sovereign rating of the Republic of Cyprus, when Greek government bonds worth billions of euros bought by Cypriot banks became almost valueless.

In November last year, the German publication Spiegel published a report by special services saying that Cyprus is a "laundry" for "dirty" money and wondering whether the leadership of Germany should save the country's economy with German taxpayers' money.

The European troika, which includes the EU, the ECB and the IMF, insisted for more than half a year that the Republic of Cyprus must become the fifth country to ask them for salvation. But Cyprus tried by all means to avoid hard commitments to reform its economic policies, which it would have had to accept together with European money.

To reduce the risk of default (or delay it), about 17 billion euros were required. And on 16 March, the "European troika" agreed to provide 10 billion on condition that Cyprus imposes a one-off tax on bank deposits - 6.75 per cent on deposits of 1 to 100,000 euros and 9.9 per cent - on more than 100,000. Under these conditions the state budget would have received the remaining 7 billion. However, the Parliament of Cyprus refused to pass a law on the introduction of such a tax, calling it absurd. The thing is that the introduction of such a tax actually implies the seizure by the government of some of the investors' funds from Cypriot banks and a serious threat to the image of the country, which, in fact, lives on the offshore system.

The conditions set by the "European troika" literally caused a shock on the world market. But the most negative reaction came from Moscow. Russia takes second place by the amount of deposits in Cypriot banks. Back in 2011, Moscow gave Cyprus a loan of 2.5 billion euros in financial aid. After the refusal of the Cyprus Parliament to accept the offer of the European troika, Cypriot Finance Minister Michalis Sarris went to Moscow to find alternative sources of salvation and to extend the repayment of the debt to Russia. The main offer of Cypriots in return for Russia's funding was to provide Gazprom with access to Cypriot gas fields. However, the parties failed to reach agreement for a number of reasons.

While there is talk around the world about the development of shale gas and the possibility of reducing the price of natural gas, the Cypriot fields of "blue fuel", about which there is still no accurate information, cannot be attractive. On the other hand, there are political risks. The Cyprus shelf is disputed by Turkey, which recognizes the independence of the Turkish Republic of Northern Cyprus. Ankara rightly believes that the Turkish and Greek communities of the island must have access to the shelf. And since there are no agreements on the division of the Cyprus shelf, any attempt to develop this field can be seen as a threat to Turkey's interests. An example is Ankara's intention to freeze projects with the Italian company ENI because of the latter's attempts to engage in the development of the Cyprus shelf.

Gazprom's access to Cypriot fields would also be opposed by the EU, which is already suffering from energy dependence on Russia. Indirect confirmation of this was the statement by German Chancellor Angela Merkel that Cyprus must resolve its problems with European partners. The Russian leadership has an ambiguous attitude to the Cyprus problem.

Due to the crisis in Cyprus, there may be a question about the dubious origin of Russian money in Cypriot banks. It is no coincidence that Russian Prime Minister Dmitriy Medvedev first compared the actions of the EU, the European Commission and the government of Cyprus with the behaviour of an "elephant in a china shop", though after 5 days, he said that Cyprus is "stealing booty", thus admitting the dubious origin of Russian capital placed on the island.

In any case, the Cypriot leadership had to accept the European troika's conditions, which had become tighter by that time. In the end, a tax will be imposed only on large deposits of more than 100,000 euros, but with a higher rate (from 30 to 40 per cent). In addition, the two largest banks of the country - Bank of Cyprus and Laiki - will merge. According to the government plan, healthy Laiki assets will be handed over to the island's largest bank, while the rest of the bank will be closed. It remains to answer the question of who will benefit from these processes and what are the consequences?

World chaos

The situation around Cyprus can be interpreted in different ways. Was it possible to avoid the one-off tax on deposits, which cannot be called anything other than "confiscation of funds"? For example, Ireland, which asked the EU for help while in a critical condition in 2010, received record support to the tune of 85 billion euros without any conditions and loud accusations. As for Cyprus, the European troika forced it "to get" 7 billion from investors.

It is no secret that the decision of the Eurogroup was a result of unprecedented pressure from Germany. Berlin initially insisted on reducing the size of the banking system of Cyprus and on the participation of creditors in the recapitalization of banks. According to German Chancellor Angela Merkel, "Cyprus must realize that its business model is dead". Such a plan of "punishment" (the terms of the deal were tougher than originally proposed, which the leadership of Cyprus had refused) further boosts the role of Germany as first fiddle in the EU.

The well-known American economist William Engdahl believes that the questionable role of the IMF, which is an appendage to the US financial system, can be seen in the Cyprus issue. The major competitors of Cyprus in offshore areas - Virgin, Cayman Islands, etc. - are under the influence of the United States. That is why, according to Engdahl, the head of the US Federal Reserve, Ben Bernanke, watched what is going on not without pleasure and said that "the situation around Cyprus in no way threatens the American economy". In other words, the situation around Cyprus can also be called a "war of offshore zones". As for the prospects of the Cyprus crisis in the near future, it is worth noting several very important points.

First, it is a violation of the holy of holies - immunity of private property regardless of the source of its origin. The European troika actually encroached on the main pillar of the capitalist system - capital itself!

At the same time, it is a violation of the Bretton Woods system of international monetary relations and trade settlements established in 1944. It is noteworthy that the IMF, which is involved in today's decisions on Cyprus, was established at the same time. That is to say an organization that guarded private property for 70 years today supports the seizure of Cypriot investors' money. It turns out that international organizations recognize that it is impossible to keep capitalism in the classical notion and with all its foundations.

Cyprus is a trial balloon for debt relief. Back in October 2012, at another annual meeting of the "Bretton Woods systems", IMF Director Christine Lagarde said: "In the absence of growth, the future of the world economy is in danger, and perhaps the most serious problem will be the tremendous legacy of public debt, which currently stands at an average of 110 per cent (of GDP) in developed countries, which corresponds to the wartime level."

Given that the term "wartime" has become very amorphous and man-made, the world's centres of power get the opportunity to declare "wartime" for one reason or another and confiscate capital wherever they want. Eurogroup chief Jeroen Dijsselbloem said in an interview with Reuters and the Financial Times that the programme approved to save Cyprus from financial collapse represents a new model for resolving the banking problems of the eurozone.

Many countries of the eurozone, the myth about the equality of which has finally been dispelled, such as Italy, Spain, Portugal and others, may well share the fate of Cyprus. In other words, the Cyprus crisis makes it clear that it is not a financial but rather a systemic crisis.