New Cypriot President Nicos Anastasiades of Cyprus, during a vist to Athens on March 11, will reportedly ask Greek Prime Minister Antonis Samaras to fork over 2 billion euros ($2.6 billion) from its bank recapitalization funds to help pay the cost of a bailout for the island.
Cypriot banks were brought to the edge of ruin last year when former Finance Minister Evangelos Venizelos, now the head of the PASOK Socialists, which is one of the government’s coalition partners, imposed 74 percent losses on investors and banks holding Greek bonds.
That has forced Cyprus to seek its own bailout from the same Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that is putting up $325 billion in two rescue packages to save the Greek economy.
According to Kathimerini and The Financial Times, officials in Nicosia said Cyprus is desperately trying to avoid imposing losses on its own bank depositors as it seeks a bailout of up to 17 billion euros ($22 billion) to keep its economy from collapsing.
“We’re doing everything we possibly can to pull Cyprus out of crisis as quickly as possible but the road ahead is not strewn with roses,” Anastasiades said before meeting Samaras.
Greece is going to set aside 48 billion euros ($62.4 billion) from incoming Troika loans to inject into its own banking system, which also has been teetering because of the so-called Private Sector Involvement (PSI) scheme that Venizelos implemented in a bid to write down Greece’s staggering $460 billion debt.
Anastasiades said his government would “never” agree to a haircut of bank deposits, despite pressure on the deputy leader of his Democratic Rally party to accept such a move during meetings with IMF officials in Washington last week.
Greek finance ministry officials could not be reached for comment on the Cypriot request, The Financial Times said. A senior Greek banker who declined to be identified told the newspaper that, “This transfer would be hard to justify, given that there’s barely enough funding available for the Greek banks, while the economy is still deteriorating, with more non-performing loans in the system than predicted by adverse scenarios.”
Bank of Cyprus and Popular Bank, the largest Cypriot lenders, converted their Greek operations from subsidiaries to branch networks after the crisis erupted in 2009, making the parent bank responsible for supporting foreign operations under EU regulations.
Archbishop Chrysostomos of Cyprus, suggested that the island would return to the Cypriot pound if it cannot reach agreement with the Troika. “If they want to destroy us [through harsh demands], then we say goodbye to the euro … We can survive with the Cyprus pound,” he said.
Anastasiades is also due to meet the leaders of PASOK, the other coalition partner, Democratic Left (DIMAR,) the major opposition party Coalition of the Radical Left (SYRIZA) and the Communist Party as well as President Karolos Papoulias. He will be accompanied by Finance Minister Michalis Sarris.