How angry will Cyprus be over the Eurozone bailout?

Would you say that the Cypriot politicians will face some real backlash from people or not, and why?

Kalliope Agapiou-Josephides, Assistant Professor, Department of Social and Political Sciences, University of Cyprus

The people are very discontent about the decision. Politicians will face real backlash from people for the following reasons:

People feel that what happened:

is ‘an unfair treatment’, as this treatment has been inflicted only to Cypriots,

It is a decision that suffers ‘a solidarity deficit’ on behalf of partner member states,

This decision suffers legitimacy, as it was rather a ‘fait accompli’ and ‘there was no consultation to reach this decisions

Some voiced also ‘non-combatibility’ with EU law

Taking money from any deposit below 100.000 Euros seems not acceptable to people.

Of course one should not limit her/himself to a short and medium term implications. In a longer perspective this could have serious implications for the Eurozone and also seriously affect people’s trust in the European process.

George KyrisResearch Fellow, Hellenic Observatory, London School of Economics and Political Science

Unlike Greece, Cyprus does not have a long history of public protest. However, the terms of the bailout mark a departure from previous measures and the symbolism that they carry might trigger significant unrest within the country. Indeed, as soon as the bailout agreement was know, the Presidential Palace in Nicosia became the centre of public protests. To what extend this public opposition will continue or be translated into loss of popularity of certain political parties, is left to be seen. However, as the experience of Greece or indeed other crisis-hit countries has shown, public remains particularly opposed to extensive austerity measures as well as the involvement of the EU in domestic affairs and the parties that are regarded responsible for the crisis or its mismanagement have seen a significant decrease in their popularity. Someone can expect that Cyprus will follow the same path, even if public unrest remains comparatively limited.

Nikos Skoutaris, Senior Research Fellow, Hellenic Observatory, European Institute, London School of Economics and Political Science

It is certain that there will be backlash from people and I see three reasons:

1. Anastasiades has promised a couple of weeks ago (before elected) that he will not accept such a savings levy.

2. The fact that the levy is imposed also to savings less than EUR100,000, in a way questions the Cypriot Government’s pledge (a similar pledge has been given by almost all EU governments) to guarantee deposits up to EUR 100,000 even in the most extreme circumstances.

3. Most importantly, it introduces a huge insecurity to people. Despite the pledges and declarations that this is a ‘unique one-off measure’, people feel that the threat of a ‘bank run’ is imminent. In particular, the fact that the ATMs only give up to EUR600 and the rumour that the banks will remain closed until Tuesday or Wednesday make people feel that their life savings are under attack.

Having said that, one has also to point out that the Cypriot society is a conservative, small and peaceful community where radical politics have almost no position. It is true that after the ‘Mari disaster’ last summer there was a small ‘indignados’ movement but the figures of the participants always remained very low. So, I would be very surprised if we see images similar to those in Argentina in the beginning of the 90’s. At the same time, it is an unprecedented situation for the island and nobody really knows how the society will react. Apparently, the government and the Police are in an ‘alarm’ situation.

Alexander Apostolides, Lecturer of Economics and Economic History, European University of Cyprus

The answer is yes. The current president, elected only a fortnight ago, had stated as a candidate that he would never accept a deposit haircut. Then we all woke up on Saturday morning to find out that we lost 6.75% of our deposits. if you had more than 100,000 you lost 9.9%. Unlike what is said this took all accounts, from charities to pension funds to unemployed people, regardless if they were receiving interest. My 11 month baby lost money! We heard that we will get shares on the failed banks, but we are not sure what that means.

These things rankle here:

1) that all citizens are affected but Greek depositors in Greece of Cypriot banks are excluded, while Greek losses of the Cypriot banks were what brought us into this banking mess

2) that It is found out that you could have raised the deposit haircut in 17% for those deposits above 100,000 and not hurt the small depositors. no protection on current accounts or those with less than 10,000

3) depositors on good banks that were run well will also loose money and take shares of a bank they did not want

4) that it is rumored that some knew and moved their money abroad. in fact those who did not save or who took their money out are rewarded

Giorgos Charalambous, Associate Teaching Staff, University of Cyprus, Visiting Lecturer, Frederick University, Cyprus

Given that the whole of the population is affected negatively by the measure – both in terms of their real wealth and standard of living, and in terms of their pride – I think that a certain degree of backlash is inevitable. What is more, the bank deposits levy, if passed by parliament tomorrow, is unlikely to be the last word by the troika. Other measures will follow suit, as usually happens, unemployment will shoot up and so on and so forth. Under these circumstances the situation in Cyprus is going to start looking more like Spain and Greece and the backlash may indeed be real for the first time in the island’s democratic history. Already, there is considerable upheaval in social network sites and blogs.

However, not much can be said at this point in time, as only one day has passed from the time that the ‘haircut’ was announced by the Eurogroup, and a vote in the Cypriot parliament is pending. Therefore, whether there is going to be considerable backlash against politicians still depends on politicians’ actions – not least on what they do tomorrow.

Adonis Pegasiou, Research Associate, European University Cyprus Research Centre

First of all, let me point me out that all EU bailouts have been painful and arduous procedures for the affected people and have essentially managed to cause unprecedented social unrest, as the case of Greece clearly highlights. Whether Cyprus can be a different story (a success story) is the big question!

Cyprus is not a conventional South European state since it has managed to enjoy positive growth rates and relative low national debt levels. What has jeopardized Cyprus’s economic development has been the recklessness of certain bankers whose decisions have brought the main commercial banks to the brink of collapse. Importantly, the size of the banking of the sector in Cyprus relative to the GDP of the country (comparable only to Luxembourg, Malta and Ireland) has left the government with no option but to run to their rescue and essentially increase its debt levels to unprecedented levels.

Now back to your question. Cyprus has a tradition of consensus among political and social actors when it comes to decisions of the utmost national importance. This unity was evident in the post-1974 period following the tragic events that took place on the island at the time; in the accession negotiations leading to both EU and EMU entry; and more recently when all political parties in parliament, as a sign of good faith, decided, a few months ago, to vote unilaterally in favour of fiscal cuts and taxes (targeting salaries, pensions, benefits, etc), as part of the initial agreement with Troika. Even the unions, acknowledging the tough times ahead, avoided any major strikes and industrial unrest in response to these measures.

However, the latest prescribed solution from Cyprus’s European partners, targeting among other the otherwise sacrosanct depositors (even those having deposits not exceeding 100,000), may have been the final blow that has pushed the people out on the streets in a state of panic, fear and anger. Though nothing has yet been voted in the National Parliament, the initial reactions from the opposition parties point out to a disagreement and, consequently, a possible failure to pass the proposed measures that may lead to a chaotic default for Cyprus. Furthermore, the current President’s opposing candidates for the Presidential elections that took place in February have been tempted to come out and make populist statements emphasizing Anastasiades’s previous public commitment that he would not sign a memorandum that included a depositors’ haircut.

In a nutshell, given the unfair treatment of Cyprus at the EU level and the initial lack of consensus among political elites, I am worried that the people may lose hope in all politicians and institutions (both at the European and the National level) and one cannot easily predict how this will materialize in an otherwise peaceful society.

James Ker-LindsaySenior Research Fellow on the Politics of South East Europe, The London School of Economics and Political Science

It would have been clear to anyone and everyone in Brussels on Friday night that the terms of the bailout would be massively unpopular. In almost all other EU states, which are predominantly parliamentary systems, the government may have been able to resist such harsh terms on the grounds that the measure would be extremely likely to be defeated in parliament. (Even many ruling MPs might prefer to be able to go back to their constituents and show how they rejected the measure.) This would almost certainly trigger a confidence vote and, possible, new elections. This would naturally inject further instability into the situation. This is why I wondered if in other cases steps that are so politically explosive have been avoided.

In Cyprus this ‘defence’ could not be used. As a presidential system, and because if the peculiarities of the Cyprus system, which makes removing a president extremely difficult, the government cannot be brought down by a parliamentary no confidence vote. The president and government are safe. As there is no possibility of early parliamentary elections, it also means that there is more reason for the ruling coalition MPs to vote for the measure as there is time for popular anger to subside.

All this said, if the measure is defeated in parliament we would be entering rather strange and uncharted political territory.

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