One of the major problems facing Cyprus is the dominance of the banking sector in its economy. A key measure of this relationship is the size of the bank assets of a country compared to its Gross Domestic Product (GDP). Cyprus has bank assets 7.8 times larger than its GDP. This proportion is equaled by Ireland and exceeded by Malta which has a multiple of 8, which was also the multiple which Iceland had in 2008, when its banking system collapsed. The Icelandic people decided not to try and save it, but to let it collapse and start again, with a healthier banking sector which would serve their economy rather than dominate it.
The next highest multiple in the EU is the UK’s, at 5.4. To put this into context the EU average for 27 counties is 3.5, with Germany, Austria, Sweden and Belgium on 3.0 and Greece on 2.2.
During the Thatcher period of manufacturing closures, her economists and ideologues spread the idea that manufacturing was characteristic of less developed economies and the UK could thrive on the service sector, particularly finance and best of all the speculative part. The ‘Big Bang’ deregulation of finance was lauded as a great success, as was the destruction of much of manufacturing.
Blairites continued that philosophy which still holds sway in the current Tory-LibDem coalition. Despite their talk of ‘re-balancing the economy’, a serious plan to re-build Britain’s manufacturing does not exist. Instead there is blind faith in ‘the market’ and the hope that the finance sector will recover. The warning for British workers is clear; don’t trust the government, the banks or the EU. The plan must come from us.