As is well known, the "Troika" is the name given to the body which serves as the EU "enforcer" for countries which get into trouble financially and have to be "bailed out". There is much talk in the media about imposition of "fiscal consolidation" with rules about the size of government debt (60% of GDP is the limit) and deficit (3%). What I had not appreciated before was the sheer detail of the plans imposed in order to achieve that (leaving aside all argument about whether it is sensible in the first place)
So it is instructive to read this:
http://media.philenews.com/PDF/mnimonio_new.pdfWhich is the deal Cyprus eventually signed, so far as I can tell. If anyone is in any doubt as to whether Cyprus is a sovereign country I think this will dispel them. The Cypriot people are no longer able to make democratic decisions about their most fundamental interests, not even in terms of setting priorities within the broad constraints of the fiscal rules outlined above.
The Troika perceive a need to increase government revenue and cut expenditure: well that is no suprise. The memorandum linked specifies how this will be done:
1. Property will be revalued so as to reflect general inflation, and then tax on that property will be "restructured" . This is intended to raise 70 million euros in 2013. The population of Cyprus is about 1 million people.
2. Expenditure on government housing schemes is to be cut by 36 million euros: that includes help for first time buyers; all government loans and loan guarantees for construction of housing; and all spending by government to acquire houses.
3. Corporation tax will be increased, as will tax on interest and dividends: there will be an increase on the bank levy and some of that revenue will be put in a "Financial Stability Fund"
4. Taxes on motor vehicles and fuels will rise: the aim is to raise revenue though there is some nod in the direction of environmentally friendly measures as well
5. Cuts to health care expenditure and an introduction of "co-payments" for at least some medical services and drugs
6. An increase in the costs of all paid for public services of at least 17%
7. An increase in the statutory retirement age every 5 years to keep it in line with increased life expectancy.
8. An increase in the number of years you must pay into the system in order to benefit from it
9. Change the basis of indexation for public sector pensions from wages to prices.
10. Cap public sector pensions at 50% of final salary
11. Ensure that all public sector pensions are defined as income and subject to income tax
12. Abolish all exemptions from charges for health care except those that are income based (and a few speficied chronic and very severe conditions): reduce the thresholds for those income based exemptions
13. Increase medical fees by 30% for those who are not exempt
14. Create a co-pay formula so that it is quite cheap to visit the GP: but expensive to get any other kind of care. In t his connection GP's are to be constituted as "gate keepers" and there are to be "financial disincentives" for by passing them to use emergency services in non-urgent situations
15. Use the co-payment system to discourage unnecessary tests and precriptions
16. Restructure hospitals to the Troika's liking, including specifying not only the standard working week but when those hours are to be worked: they actually state that the start time is to be altered by half an hour, though they do not say why that is important.
17. Make an inventory of state owned assets and enterprises with the aim of selling them to private enterprise. Where the enterprise is a "natural monopoly" the government will, of course, regulate. But the privatisation itself will be done in conjunction with the Troika and they will set the time frame etc. The legislation to enable all this will be subject to Troika approval
18. Privatisation is to raise 1.4 billion euros in the period 2013-2016
I could go on: but the point is made. This is not a broad brush approach: it is detailed micromanagement of a sovereign state in line with a particular neoliberal analysis which is neither objective nor useful. Cyprus is no longer a democracy. I presume this is not special to that country but is typical of such arrangements where european bail outs are required.
Bear in mind that the debt is not really sovereign debt: it was incurred by the banks then turned into public debt because of how bail outs are structured. There is nothing in this which is for the benefit of cypriots in any way that I can see: it is for the benefit of bankers and the financial system alone
Again I ask myself why Cyprus has accepted this, because it condemns the people to abject misery for years with no prospect of gaining anything at all. Who are the cypriot politicians meant to represent?
