So why is it that tiny little Cyprus and the their banks are causing such consternation and high blood pressure over in Europe and why should we care ? Richard Wolff gives a good explanation with this audio clip from an interview on KPFA that I grabbed and uploaded to my web site. You can hear the whole program here if you like.
The European Economic Community (EEC) was an international organisation created by the Treaty of Rome of 1957. aIts aim was to bring about economic integration, including a common market, among its six founding members: Belgium, France, Italy, Luxembourg, the Netherlands and West Germany. The EEC was also known as the Common Market in the English-speaking world and sometimes referred to as the European Community even before it was officially renamed as such in 1993.
It gained a common set of institutions along with the European Coal and Steel Community (ECSC) and the European Atomic Energy Community (EURATOM) as one of the European Communities under the 1965 Merger Treaty (Treaty of Brussels).
Upon the entry into force of the Maastricht Treaty in 1993, the EEC was renamed the European Community (EC) to reflect that it covered a wider range of policy. This was also when the three European Communities, including the EC, were collectively made to constitute the first of the three pillars of the European Union (EU), which the treaty also founded. The EC existed in this form until it was abolished by the 2009 Treaty of Lisbon, which merged the EU’s former pillars and provided that the EU would “replace and succeed the European Community.”
Whew. That’s is essentially how it began. To allow trade between the various countries that made it up to proceed with few hindrances and eventually to have a common currency. Sounds good in theory but it has a number of flaws. For one there is a central bank but no central government behind it. It has no real power except to print money. It cannot set policy of the member states. Nor can it set the policies of theses states banks. The states themselves remain autonomous. When the single currency was brought forth, it was – more or less – to replace each states currency on a one for one basis, even if the exchange rate at the times was wildly different.
All of this was in and of itself a prescription for disaster. As we all know the exuberance and risk taking by the banks both here and in Europe built up mounds of debt. Debt that eventually came due and the debtors could not pay.
So why all this fuss over Cyprus banks ? They could not be THAT big…or could they. Well as a matter of fact and as Richard Wolff explains in the interview they are. Far bigger that this tiny country with only tourism and some maritime shipping would ever generate on it’s own.