Nicosia, 29/04/2013 (Agence Europe) - The streets of Nicosia were quiet on Monday ahead of the crucial vote by the Cypriot parliament on the three-year bailout plan for the island. Cypriots are taking a stoical attitude to the tough crisis they are caught up in. The opening of the banks without any run on the banks and the figures published by the ECB at the weekend show that there have not been any significant losses of capital since the Eurogroup deal.
Ten months after asking for aid from its European partners, Cyprus is moving closer to the disbursement of the first batch of cash from the eurozone and the IMF. The unpopular raiding of private savings of over €100,000 took place at the Bank of Cyprus (BoC) at the weekend and the country's parliament is preparing to vote on the aid deal on Tuesday. “I think the package will be passed. What other option do we have?” said Kyriacos, a restaurant owner in Nicosia. The first agreement with the Eurogroup included a levy on all savings and all banks, but this was rejected outright by the country's parliament, but Michael, professor of economy at Nicosia University, said it would probably have been better than the current deal because the latter includes “the collapse of the two main banks, which account for 60-70% of the bank industry”.
Many people asked agree with the Cypriot president, Nicos Anastasiades, that Cyprus has been used as a guinea pig for new ways of dealing with bank crises, but are equally critical of Cyprus itself. Many regret the fact that the previous government sat on its hands and waited until June 2012 before calling for help, despite the fact that the problems were clear back in 2011. Marianna, a civil servant, talks about “cheese-paring savings”. Cyprus has been unable to borrow from the money markets for the past two years and got a loan from Russia in 2011, before dipping into pension funds to pay civil servants salaries in December 2012.
With financing needs as high as the country's annual wealth, it was a matter of great concern whether Cyprus would be able to pay back its loans, which led to the decision to only lend €10 billion of the €17 billion needed by the island's economy. To fill the funding shortfall, savings of above €100,000 at the BoC were raided by 37.5% at the weekend, and a further percentage will be raided in the future (the size of which is not yet known). Despite the tough approach, a recent opinion poll published by the Ekathimerini newspaper shows that 64% of Cypriots want to stay in the euro.
“People have not realised yet what's happening to them, it's a dramatic situation”, said Christina, a student at Nicosia University. Things could well get worse, warns Leonidas Paschalides, director of development at the Chamber of Commerce. “Towards the end of the year, we'll find out how many companies have gone bankrupt, they've lost millions” due to the raids and the capital restrictions that have prevented them from doing normal business. Michael said that the recession forecasts of the troika were too optimistic because the recession would be higher than 10% this year alone. He said the deficits would expand and this would mean greater austerity to remain on track: “The Cypriot people will pay a higher price”.
“The Cypriot people will rise up,” warned Demetris, a taxi-driver, who said his main aim now was to carry on. “Cypriots are hard workers”, agreed Marianna. Cyprus has good prospects for the future, which this newsletter will be returning to.
A vote on a knife's edge. The Socialist party EDEK and the Communist party AKEL have come out against the bailout plan, but exactly how they would vote on Tuesday was not clear on Monday afternoon. EDEK has 5 of the 56 seats in parliament and was meeting on Monday evening to decide how to vote. The party's president, who is also speaker at the parliament, opposes the deal, so the party's MPs may have a free vote. AKEL, which has 19 seats, may decide to abstain. EUROPE was unable to reach its spokesperson. The one Green MP has said he will be voting against the package. DIKO has eight MPs. DIKO spokesperson Angelos Votsis said it will vote against the deal. DISY (the president's party) and DIKO have 28 MPs between them. The majority needed for the vote to pass is 29 and the one vote needed will probably come from one of the two European Party MPs, so that the deal will get voted through in time for an initial payment in May. (EL/transl.fl)