President Demetris Christofias on Tuesday blamed “criminal” action by Greek-exposed banks for Cyprus having to accept painful bailout terms for EU aid.
In a move to calm growing unrest over job losses and pay cuts, Christofias addressed the nation on Tuesday to say he did his best to negotiate a palatable deal with the troika of international lenders.
“If there was no problem with the banks, Cyprus would not need to turn to any mechanism,” said Christofias in his televised speech.
He said Cyprus was in a “dire” situation of its own making.
“Many citizens are asking themselves: ‘Why should we pay for the criminal mistakes, oversights, perhaps even the abuses of some high level administrators of the banks?'”
“It is true that the decisions by the administration of the banks and the poor control of the Central Bank of Cyprus have cost Cyprus many billions of euros,” he added.
He said the troubled banking system will need up to 10 billion euros ($12.9 billion) in EU bailout funds to recapitalise but only 1.5 billion is required to cover public finances over the next four years.
“These numbers show that the great crisis has been caused by the banking system.”
But Christofias said the government could not allow the banking system to collapse because it would have destroyed the economy.
He said a current investigation into how the banks behaved during the crisis — such as purchasing high risk Greek bonds — should be “vigorously pursued”.
The troika of the European Commission, European Central Bank and International Monetary Fund say good progress has been made in bailout talks but that some adjustments are needed.
The level and final terms of a bailout deal depend on how much the Greek-exposed banking sector actually needs to improve liquidity.
An independent due-diligence exercise is being carried out by Pimco, which is expected to report early this month.
The finance ministry says a bailout deal could be agreed by eurozone ministers in mid-December with a first tranche of fund to support the banks expected by February.
Cyprus requested a bailout in June when its two largest Greek-exposed banks asked for assistance after failing to meet EU capital buffer criteria.
The money needed by Cyprus has been widely reported to total 17.5 billion euros — 10 billion euros for the banks, 6 billion for maturing state debt and 1.5 billion for public finances.
Christofias said the government had succeeded in preventing the privatisation of state-owned utilities, saved 13th salaries and index-linked wages while protecting its hydrocarbon wealth.
But 5,000 jobs must go in the public sector, while pensions and salaries will be reduced along with a raft of higher taxes.
(source: eubusiness)
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