The Cypriot government and the European Union (EU) arrived at an agreement early yesterday morning to secure a bailout of Cypriot banks and avert state bankruptcy in Cyprus.

The terms set by the bailout amount to the economic devastation of the island country in the interests of Europe’s financial elite. Cyprus’s financial sector, accounting for around half of economic output, will immediately be reduced by up to half. Laiki bank, the second largest, is to be wound up with its debts to the ECB taken on by the Bank of Cyprus. Further losses are inevitable, as banking done in Cyprus is shifted to other euro zone countries’ banks.

The dictates of the EU and the criminal financial practices of Cyprus’s ruling elite alike have paved the way for massive attacks on working people. With unemployment at more than 14 percent, there will inevitably be thousands of job losses in banking, Cyprus’s main employer, and from restructured companies and privatised services.

The bailout, which is massively opposed by the Cypriot population, is to be imposed without a vote in the Cypriot parliament. To this end, the original proposal to impose a levy on bank deposits, which had been rejected by the Cypriot parliament, was removed from the final agreement. The new plan provides for the freezing of all deposits over €100,000 to cover the bailout. Depositors and shareholders in Laiki will see their assets transferred to a “bad bank” and could lose everything.

These measures, together with a privatisation programme and tax increases, are projected to raise the €7 billion Cyprus has been ask to contribute to the €17 billion bailout from the EU, ECB and International Monetary Fund.


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