Another shockwave hit the world economy as the International Monetary Fund (IMF) attempted to negotiate a “bailout” deal for bankrupt Cyprus. The deal would have involved taking money from bank accounts to pay for the bailout of the two biggest banks—10 per cent out of accounts containing over $123,000 and almost 7 per cent for those with less.
Russian oligarchs have left their money in Cypriot bank accounts to avoid taxes. But it would have been ordinary people paying the worst price. People in Cyprus were ropeable about the attempted robbery on their savings.
Now the Cypriot parliament has rejected the deal and entered another round of negotiations with the IMF. But this is only a delay on the attempt to impose the bailout measures.
Cyprus is a small economy and required a modest bailout of $20 billion but the crisis spread quickly to international markets because of the international connections of the banks. They have invested heavily in south Eastern Europe, especially the crisis-ridden Greek banks.
Despite half a decade of austerity measures, like wage cuts, job losses and attacks on public services, the debt crisis has not gone away—in fact it is only getting worse. But the resistance continues, and has now spread to Cyprus. Commenting on the attempted bailout in Cyprus, economic writer Wolfgang Manchau noted, “If one wanted to feed the political mood of insurrection in southern Europe, this was the way to do it.”