Brussels, 23/04/2014 (Agence Europe) - In a speech on Monday evening to the conference of speakers of national parliaments that was taking place in Cyprus, the Cypriot president, Nicos Anastasiades, said: “Regrettably, the fundamental EU principle of solidarity was not respected for Cyprus”.
Cyprus regularly argues that it was the repercussions of exposure to the crisis in Greece that had caused problems for its own economy and forced it to ask for aid from the EU. Anastasiades said: “Cyprus is not asking for special treatment, but expects just and fair treatment, based on the same terms and conditions applied to all other EU partners in need, and we are requesting simply what we are entitled to: solidarity.” He slammed the fact that “decisions reached in advance by interested parties were coercively imposed,” and “Cyprus was treated as a guinea pig for testing the economic theory of enforcing a haircut on bank deposits and the consequent repercussions which were to follow.”
Under the deal with the eurozone, anyone with more than €100,000 in the bank suffered huge losses when their accounts were raided to bail out the country's biggest bank, Bank of Cyprus (BoC). The second-biggest bank, Laiki, has been dissolved, with any solvent assets being transferred to BoC.
Last week, Euro Commissioner Olli Rehn justified the eurozone's behaviour in a hearing at the European Parliament (see EUROPE 10829). He said: “As the time was running out, the scenario of the more gradual economic adjustment was not on the cards anymore. The state of banks deteriorated rapidly. Soon it became clear that the second biggest bank, Laiki, had to be resolved immediately. The risk of a complete collapse of the entire banking system - and thus a sweeping loss of deposits and savings and a disorderly default of the sovereign - was indeed very real. That would have been a disaster to Cyprus and to the Cypriots. (...) Having said this, I sincerely hope that this precedent in relation to Cyprus is not going to be applied elsewhere in Europe, although, as it is well known, the main raison d'être of a precedent is that it can serve the purpose of establishing norms and guidelines to be repeatedly and universally applied”.
On Monday, the Cypriot Central Bank announced that BoC bank accounts of charities, private schools and insurance companies would be raided by 27.5%. New capital restrictions were introduced because there was the fear that these unprecedented measures would lead to a run on the banks. Cypriot Finance Minister Harris Georgiades said in an interview with Reuters on Tuesday: “I am pretty confident these necessary but temporary measures will not be needed (meaning: no longer needed) in the next days or weeks”.
In order to reduce the negative impact of the eurozone deal on the most vulnerable sections of the population, Anastasiades has promised measures to stimulate growth and foster job creation. After a meeting on Monday between Anastrasiades and the president of the EP, Martin Schulz, the latter stressed the importance of short-term measures to boost the economy and promised to see what aid might be able from the EIB for the large number of Cypriot small businesses.
National ratification of the Cypriot deal is continuing. After Germany and Finland last week (see EUROPE 10830), Austria gave the go-ahead on Monday and the Netherlands is to vote on Tuesday. The Cypriot parliament also needs to give the go-ahead to the deal. “I think parliament will acknowledge there is no alternative at this point,” said Georgiades. Cypriot opposition parties oppose the deal, but the government has a narrow majority in parliament. The first aid payment from the European stability mechanism (ESM) is expected in a month's time. (EL/transl.fl)