Cyprus’ Shock Doctrine
Interesting findings are unveiled by exploring the recent crisis in Cyprus through the notion of Naomi Klein’s Shock Doctrine. It should not be mistaken for a theoretical preposition but rather a narrative tying torture to economic theory. The contrive outlines how economic prescriptions are implemented undemocratically upon exhausted economies with predatory behaviour. Whereby, global (IMF) and European “part- time lenders” of last resort (ECB), relish on the prospects of exploiting resource rich disaster-shocked nations. Under extreme stress, intimidation and th reats the Cypriot people have experienced techniques that draw surprising resemblance to the Kubark counterintelligence interrogation manual. The modus operandi of such methods make use of “shock and awe” approaches to economic warfare. First applied to mentally ill patients in covert CIA and US army funded experiments, sensory deprivation was then passed on to torture manuals. Used in a different context by the “new Chicago boys and girls” in Cyprus the similarities between the original shock therapy and economic shock doctrine are startlingly identic. Following the paradigms of 1973 Pinochet’s Chile, the Falklands War in 1982, the Tiananmen Square Massacre in 1989, the collapse of the Soviet Union in 1991, the 1997 Asian Financial crisis and 2007 Iraqi Civil war, Cyprus now becomes a new experiment in the list. The application of these ideas in the contemporary economic history of Cyprus renders it another tragic persona in the global theatres of economic subjugation. It has become the latest victim of neo-liberal political economics of the eurocrats. The scheme of undermining the foundations of the Cypriot economy, serving the appetites of unelected career politicians, with dubious interests has been in place for the past year. The Cypriot economic construction has been torpedoed in a systematic manner creating multiple shocks to the establishment. All these were nothing more than a manmade crisis to justify predetermined prescriptions in an effort to avoid “disasters” or “upheavals”.
Multiple shock stages
Kneeling the banks
Cyprus got knee-capped twice in 2011 under a private sector involvement (PSI) plan where the largest banks in Cyprus have been effectively bankrupt ever since. This was widely received by analysts as a eurocratic euphemism for kneeling the Cypriot banking sector and promoting a Greek debt default that would only hit private sector creditors, but not the ECB or other public sector creditors; a position strongly supported by Mr. Schäuble at the time. One would not be surprised to find out that the eurocratcs went for an exclusion of public and private sector involvement in bond restructuring for Cyprus considering the 5.4 billion exposure of German banks. Coupled with money laundering accusations and dirty blackmailing to abandon an attractive investment environment through higher corporate tax levels (a matter of national sovereignty falling outside EU’s exclusive competencies) destroyed the trust to the Cypriot banking sector. This has successfully deflected in early 2013 foreign capital to other offshore destinations. What is more, the unwillingness of the ESM to directly recapitalise Cypriot banks (regarded as the most orthodox way to resolve the banking issue) raises questions on what were the true intentions of the troika.
Insisting on huge confiscations from wealthy savers and common depositors the Eurogroup representatives and ECB, have triggered a mass capital flight and shaken the Cypriot banks. This has been the toughest line over more than three years of the eurozone crisis as Angela Merkel was keen to avoid footing too much of the bailout bill just before running for a third term. The European Commission alongside its gang of undemocratically appointed technocrats prescribed a medicine that would kill rather than cure the patient. Olli Rehn overpowered by the Germans and their allies, the Finns, Dutch and Slovaks took on board this idea. This procrustean method has emphatically fractured the vital organs of the Cypriot financial system; trust and security. It resulted in an unstructured deflation of the Cypriot banking system by exerting extensive stress to bring the system to its limits precluding at the same time any possible revival. The ECB’s role to this was also striking. It threatened to bring down the Cypriot banking system if a deal was not reached by doing “whatever it takes” to this end, while preserving the eurozone’s integrity (a pledge that accounts for much of the subsequent support of the euro by the ECB). Furthermore the ECB knuckled under the pressure of German interests taking a much harder stance compared to the cases of Ireland and Greece. Where before deliberate “constructive ambiguity” was preferred it became clear that Cyprus was put under more stress left instead with the option of “destructive assurance” of a no-deal. Although an EU member, its calamitous situation and stressful position left Cyprus with no negotiating power by eliminating the Russian factor. This left Cyprus with no meaningful voice with EU finance ministers.
The position of the ECB through the mouth of Jörg Asmussen, member of the ECB executive board and Schäuble's former deputy at the German finance ministry acted as the executioner that put the rope around the neck. The pressure to Cypriot banks reached a turning point when he warned that the ECB will withdraw emergency liquidity support within days to Cypriot banks if no deal was struck. This translated to asphyxiation of the economy triggering the collapse of the Cypriot system with unforeseeable impacts. It turned into a high-stakes game to see who blinks first. The Cypriot government blinked. The economic devastation makes Cyprus lose a card game with marked cards. What is at stake here is in fact more than just the economy.