(Report by Elodie Lamer in Nicosia and Brussels)
1. Aid plan negotiations - Scylla to Charybdis in 280 days
In early May 2013, the eurozone and the International Monetary Fund (IMF) signed their first cheques for Cyprus, for a total of nearly three billion euros - almost eleven months after the island lodged its request for aid. In January 2013, a high-ranking official commented sarcastically that he had the impression that Nicosia didn't have a telephone number. After nine months of intense talks, Eurogroup reached the initial agreement, an agreement that was still-born. The eurozone rapidly changed tack, but the little island is still reeling from the tough medicine imposed on it. Here is an overview of the tumultuous talks that are still causing shock waves.
On 25 June 2012, a few days before taking over the rotating presidency of the Council of the EU from Denmark, Cyprus calls on its European partners for help. The island accounts for barely 0.2% of eurozone GDP and is finding it difficult to keep its head above water. The Cypriot crisis is predominantly a bank problem, for the country's banks have recapitalisation needs that are out of all proportion to the economic weight of the counter. It rapidly emerges that Nicosia cannot afford to bail them out, for its debt already stands at around 86% of GDP.
In June 2012, the EU heads of state decide that it is time to sever the connection between bank crises and sovereign debt. The European Stability Mechanism (ESM), the eurozone's permanent bailout fund, is supposed to become able to directly bail out struggling banks without worsening the debt of the countries requesting the aid. Extra controls, however, are set as a prerequisite and major banks will have to be supervised by a common body covering at least the eurozone. In the months that it piloted the talks at Council level, Cyprus was particularly active on the supervision side of Banking Union, a new power to be given to the European Central Bank (ECB). In December, the first agreement is reached at the ECOFIN Council.
In parallel, talks with the troika (European Commission, ECB and IMF) were in the doldrums. The lenders were awaiting alternatives to the structural adjustment measures they had suggested. Cyprus does not comply until October, although the talks broke off in the summer. The troika also clashes with the refusal on ideological grounds by the Cypriot president, Demetris Christofias, to use privatisation to raise cash. In November, the parties agree on a preliminary draft agreement. Several adjustment measures are introduced into Cypriot legislation.
Pimco consultants are commissioned to assess the country's banks. A preliminary report is examined by Eurogroup in December 2012, with the eurozone expecting to receive the final report in January so the aid programme can be agreed upon shortly afterwards, but publication of the report is postponed several times because the Cypriot government disagrees with Pimco's assessment methods.
In January 2013, Christofias asks the European Commission in writing for direct recapitalisation by the ESM to cover at least some of the capital requirements of Cypriot banks. He said this would be a question of natural justice, because the banks lost billions in the writedown of Greek bonds. But the details of bank recapitalisation have not yet been decided upon and the ECB will not take office as bank supervisor until the spring of 2014. All the same, argues Christofias, bank recapitalisations should be retroactive.
An article in the Financial Times sets the cat amongst the pigeons, talking of the possibility of savings being raided to reduce the amount of aid required. Cyprus reacts by saying that would not be allowed under its constitution.
This isn't our idea, says the European Commission. French minister Pierre Moscovici says that the idea isn't 'carried' by the institutions or the member states. However, on several occasions, the newly appointed chair of Eurogroup, Dutch finance minister Jeroen Dijsselbloem, refuses to rule out the idea.
Concerns focus on accusations of money-laundering in Cyprus, which lead the eurozone to ensure before anything else is done that Cyprus is doing enough to counter it. Berlin expresses doubts too about whether Nicosia's collapse would in fact endanger the monetary stability of the eurozone, which is a prerequisite for intervention by the ESM.
On 21 February 2013, conservative Nicos Anastasiades is elected as the new president of Cyprus. On 5 March, Cypriot finance minister Michalis Sarris travels to Brussels to get talks going again with his European counterparts. On arriving at the meeting, Dijsselbloem sweeps aside any idea of major progress being made that day on the Cypriot question and a eurozone source says that there were no real talks that evening on the Cypriot aid plan, Luc Frieden of Luxembourg being the only one to demand that the matter be discussed. The same day, Dijsselbloem's predecessor Jean-Claude Juncker said in an interview with EUROPE that one shouldn't go into the question of the aid plan raiding bank deposits 'with one's eyes closed.'
In mid-March, after the European Summit, Anastasiades decides to remain in Brussels for a Eurogroup meeting on Friday evening. That same day, he is reported to have discovered with surprise that the eurozone, backed by the IMF, had decided to restrict their loan to EUR 10 billion. A European source, however, says that Cypriots had known for a while that they would be required to contribute themselves to the aid plan.
A Cypriot government source says Nicosia then tried to negotiate an extra two or three billion euros, convinced that its aid requirements would be less than EUR 17.5 billion. The eurozone refuses to budge - the loan would be for ten billion and not a euro more, because of the question of the sustainability of the debt. Nicosia is asked to come up with practical details of how it will finance its own contribution.
As instructed by the Cypriot president, Sarris arrives at Eurogroup with a raft of proposals to raise EUR 2.68 billion through cuts in pay and public spending and increases in taxes. The IMF and Berlin are reported to have said that this was the wrong type of measure because immediate results are needed rather than these longer-term savings. A European source explains that the cash was needed fast and it is difficult to know exactly how much will be reached with this type of measure. In addition, the amount of money that would be raised in this way was seen as too small by Germany, backed by Finland and Dijsselbloem. More than three billion more euros are demanded.
This means that raiding banks' deposits through a 'bail-in' will be necessary. Bank shareholders and lenders would be asked to contribute most of the sum. Cypriot banks are financed largely though deposits, rather than bonds, hence a traditional bail-in would not raise enough cash so savings would need to be raided. Several combinations are discussed, but there is no meeting of minds.
Finally, at around two o' clock in the morning, Anastasiades is invited to the fifth floor of the Council of the EU building, for a meeting with the IMF, the German and French finance ministers, member of the ECB Executive Board, Jörg Asmussen, the head of Eurogroup, Jeroen Dijsselbloem, and Euro Commissioner Olli Rehn. The meeting lasts for an hour. In a corner, the Cypriot president leaves the room, telling his delegation: 'That's it, let's go!.' In an attempt to protect small savings, the eurozone wants a double-figure levy on large savings, but Anastasiades rejects this. Asmussen is reported to have warned that if agreement is not reached, then he would recommend to the governor of the Cypriot Central Bank that he immediately shut down failing bank Laiki, explains the same Cypriot government source. The same European source tones this down, saying that following a consultation with the president of the ECB, Mario Draghi, it became clear that on Monday, the ECB would refuse to provide any more emergency cash to Laiki, because its mandate is to lend money only to solvent banks.
In the end, a 6.75% bank levy on savings of up to EUR 100,000 and 9.9% on savings above EUR 100,000 is decided upon. Anastasiades asks his partners for two days to negotiate with political parties back in Nicosia, but his colleagues refuse. He is reported to have told them that it wouldn't be possible (without this breathing space) to get the Cypriot parliament to endorse the deal. Events later prove him right.
In the small hours of Saturday 16 March 2013, the president of Eurogroup asks to be the only source of details about the agreement and Moscovici cancels his usual press briefing. The Cypriot finance minister, at a press conference, admits that the outcome was not very pleasant, but there was no alternative. Monday is a bank holiday, so that should leave enough time for the Cypriot parliament to rubberstamp the deal and the levy be taken from bank accounts before banks reopen on Tuesday. The holders of bank accounts in Cyprus wake up in shock at what has happened to their savings.
There follows a week of cacophony. The eurozone refuses to take responsibility for the deal. There is bitterness in Nicosia, and the vote is postponed several times as the island seek an alternative. The troika experts feel very isolated in the Cypriot capital, where they are reported to have been only contacted sporadically by the Cypriot authorities. Nicosia describes its negotiating partners as stubborn and demanding. The banks are still closed and Eurogroup meets by videoconference on Monday and Thursday.
Rushed off his feet and preferring to avoid questions, Commissioner Rehn cancels the planned press conference on Tuesday on eurozone economic governance. The Cypriot parliament rejects the aid plan, or rather the slightly watered down version that exempts deposits of less than EUR 20,000. That same day, the Cypriot finance minister flies off to Moscow, escaping from the eurozone radar screen. On Thursday morning, Jeroen Dijsselbloem boldly decides to attend a meeting with MEPs in Brussels who do not hold back with their questions and criticisms. Dijsselbloem says he regrets the 'confusion' in which the news had emerged and regrets not 'communicating' more about the bank levy. That same day, the ECB announces that if agreement were not reached, then on Monday it would stop lending to Cypriot banks. On Friday, it is Berlin's turn to lose patience. Sarris returns empty-handed, not managing to convince the Russians to restructure the EUR 2.5 billion loan they granted the island in 2011 or to drum up new investment.
On Sunday 24 March, another emergency Eurogroup meeting takes place. Things look serious and the president of the European Council, Herman Van Rompuy, sends a Belgian military plane to fetch the Cypriot delegation, which includes Anastasiades. At a breakfast meeting with Van Rompuy, Barroso and Dijsselbloem, President Anastasiades digs in his heels several times. A government source and a Eurogroup source say that he told them that their proposals would force him to resign. The government source says that Dijsselbloem answered this by saying he didn't care, being more concerned about the integrity of the eurozone than about the Cypriot's political career. Offended, Anastasiades is reported to have replied that he is an elected president of a member state and must be respected. Van Rompuy tries to defuse the situation.
That evening, Eurogroup would be left slightly to one side for it is over dinner that Anastasiades, Barroso and Van Rompuy reach agreement. Laiki will fold and non-guaranteed savings at the Bank of Cyprus raided by at least 37.5%, although the exact figure is not known. To avoid a run on the banks, restrictions on the movement of capital will be introduced.
On Thursday 28 March, banks re-open in Cyprus in an atmosphere of calm although all foreign media have sent teams of reporters to the island. On 30 April, the loan agreement is voted through by a slender majority at the Cypriot parliament. 'Stop complaining!' the new finance minister, Harris Georgiades, tells them, saying the sob stories must cease. The eurozone admits that it has made mistakes but does not give in. It says that the main reason from the solution being tough is that Nicosia kept on delaying matters. Still smarting, the Cypriot president, in Brussels for a summit on 22 May, says after a meeting with the president of the European Parliament, Martin Schulz, that there hasn't been any European solidarity for Cyprus, but later says he has received assurances from his partners about this.
The eurozone continually repeats that the Cypriot aid plan is not a model, but bail-ins will nevertheless become the rule for bank crises. Direct bank recapitalisation by the ESM will only occur as a last resort.
2. The Cypriot economy is determined to rise from the ashes
Reeling from the crisis imposed on its banks, the Cypriot economy may see its situation worsen later this year. In a report published on Friday 17 May, the International Monetary Fund forecasts that the island will see slight shoots of economic recovery in 2015 (to the tune of 1.1% of GDP) after a total contraction of 12.6% in 2013 and 2014, but the IMF adds that the recession could well be worse than forecast because the effect on GDP of the bank crisis and fiscal consolidation is “highly uncertain”. Unemployment is expected to rise to 15.5% of the working population in 2013, nearly double the level of 2011.
Some observers say the bail-in imposed on bank depositors, together with the dropping of the most attractive fiscal policy in Europe, have sounded the death knell for the Cypriot economic model of the past. Aware of the hard work needed to pull itself up again, Nicosia is careful about using terminology like 'economic transition'. Irena Georgiades, director of the Cypriot finance minister's office, told EUROPE: “We'll still try to use our financial services and banking sector as a facilitator for the development”. Georgiades recognises that the island's economic model “was no longer sustainable”. When asked if that meant starting from zero, she said she hoped not.
Leonidas Pashalides, director of the Chamber of Commerce in Nicosia, says that he is not sure that the model was no longer sustainable and added it is a highly subjective matter. If it were, in fact, true that the model was no longer sustainable, then changes should have come over a period of time, he said, rather than overnight.
From the outset, the eurozone made its aid conditional upon a slashing back of the bloated financial industry in Cyprus (given the size of its economy) to the European average. Although the European Commission favoured a gradual adjustment over years, the rapid deterioration of the situation meant “it was not on the cards any more”, said Euro Commissioner Olli Rehn.
Prodomos Prodromou, a Cypriot parliamentarian from the ruling DISY party, says Cyprus cannot invent a manufacturing industry overnight. Michael Michael, from the economics department at Nicosia University, says it would not be possible for Nicosia to do “many things” over the next two or three years, because a transition of this scale takes time.
The semi-arid climate of Cyprus means that farming only generated some 2.3% of annual GDP in 2011 and the island has to import much of what it needs on a daily basis. This is why Cyprus decided to base its prosperity on the service sector (which accounted for 81.3% of GDP in 2010 and 82% of jobs in 2012). The island rapidly became a highly desirable international business centre, with finance and insurance accounting for 5% of jobs and 9.2% of GDP in 2012.
Pashalides explains that the financial sector has not disappeared, but will not be as strong in the future as it used to be. He says that banks have to be distinguished from business in general, not fearing the flight of offshore companies. He says that given the uncertainty around the banks, companies may decide not to have their bank account in Cyprus, in the near future at least, but that doesn't mean that they will actually shift their operations base. He says that Cyprus has not lost any of its attraction for international companies. Although its company tax rate is no longer the lowest in the EU, having been raised from 10% to 12.5%, it remains highly accommodating.
Pashalides adds that Cyprus has not changed its geographical situation one inch and remains a bridge between three continents. Its infrastructure remains intact as well. He explains that foreign companies do not actually do business with Cyprus itself, meaning that in the worst case scenario (the country going bust), the effect on these companies would be zero as they are not interested in the Cypriot market. Cyprus has a population of just 800,000, he adds.
Michael admits that things are difficult. He stresses that tourism is another healthy part of the Cypriot economy. Prodromou describes the tourist industry as the economy's leitmotif, which has not been affected by the aid plan. He talks of big projects in the tourist industry in the future, mentioning the lifting of the ban on casinos (announced recently by President Anastasiades). According to the official figures, tourism accounted for 10% of GDP in 2012 and 9.4% of employment in 2011. With sunshine levels that are the envy of the world (340 days of sunshine a year), the island received nearly 340,000 tourists between January and April 2013, the equivalent of nearly half its population. In 2012, some 2.4 million tourists visited the island.
In order to boost the competitiveness of the tourist industry, the Cypriot aid programme says that the Cypriot government is to carry out a study on how to improve the business model. The Cypriot energy, commerce, industry and tourism minister, Yiorgos Lakkotrypis, has already said he is expecting this year to be “exceptional” for tourism.
A stricter economic diet?
The European Commission and European Central Bank both say that a healthy, recapitalised bank sector will be beneficial to the Cypriot economy and enable it to return to growth in 2015. They point out, however, that this recovery is still subject to many risks, related to loan conditions, potential company and household bankruptcies, bigger losses for banks and the deteriorating labour market. The transition to a more varied model for growth will be difficult in the years to come as well, and will require a re-allocation of economic resources across different sectors, which might take time and will require a degree of flexibility, they explain. If necessary, say the Commission and ECB, the memorandum of understanding could be adjusted, as long as the fundamentals of the programme are left in place.
It is also possible that Cypriot GDP will shrink to a greater extent than expected. Prodromou fears that when the figures are calculated at the end of the year in the light of recent developments, the state's budget performance will reveal shortcomings that will have to be addressed by further austerity. A European source underlines that the aid provided by the European Stability Mechanism (ESM) and IMF, based on “plausible budget and growth forecasts”, includes “buffers” in case the macroeconomic and financial sector results are worse than forecast.
The ECB and Commission point out that in the event of under-performance of revenue or greater welfare spending needs, the government will have to be prepared to take additional measures to preserve the programme's objectives.
The memorandum of understanding already states, based on the European Commission's Spring Economic Forecasts, that in order to achieve its budget objectives in 2015 and 2016, Nicosia will have to take additional measures to the tune of 2.5% of GDP. Moreover, in order to achieve a primary surplus of 4% in 2018, yet more measures will be needed at the end of the programming period, which runs from 2013 to 2016.
Prodromou says he can't see a way out of this vicious circle (austerity-recession-austerity). A fear shared by Michael, who is only reassured by the fact that the scale of the writedown on deposits and shareholders to bail out the banks means that the banks won't need any more money from the government “at least for the next three or four years”.
With or without the euro?
Some Cypriots wonder whether the price to be paid for remaining in the eurozone is too high. A recent poll published by the Ekathimerini newspaper, however, shows that 64% of Cypriots want to stay in the single currency. A figure that Prodromou finds far from reassuring. He explains that a few months ago, the figure was more like 90% and in the past, the question was never even raised.
Is the euro actually needed, given that the island's main trading partners are the United Kingdom, Russia and Israel?
The euro is needed for the certainty it generates, explains Michael, adding that it is a very stable currency. Pashalides takes a similar view. He says the impact of leaving the eurozone would be much worse than staying in it because the Cypriot pound would be highly devalued. We can't leave the euro now, he says, stressing the high level of imports compared with exports. The aid programme drawn up by the European Commission notes that the island is highly dependent on foreign trade. Cyprus imports oil to cover more than 95% of its energy needs, to the tune of 5% of GDP between 2007 and 2010. Pashalides hints that if the island were able to cover its own energy supplies, it would be easier for it to turn its nose up at the euro.
Gas to the rescue?
The discovery of natural gas reserves in the Mediterranean off the coast of Cyprus has given the country something to be cheerful about. Georgiades says that the island has a promising energy sector. Prodromou says that if it weren't for the prospect of gas revenue, then he couldn't see Cyprus managing to keep its head above water. Lakkotrypis says that Cyprus could become an important player on the gas market in the future, and even become a major gas supplier to Asia and Europe. Michael does not want the Cypriot economy to become dependent solely on gas and puts the stress on prospects for the medical, educational and high tech industries. Gas revenue was not taken into account in the aid plan. A European source put it very simply. The estimates of potential future income are still “uncertain” and it could be a decade before any money starts to come in.
Cyprus has already signed some gas prospecting agreements with energy companies. The gas supplies might generate total revenue of some €600 billion. Hardly surprising therefore that Turkey has entered the equation. Prodromou says Cypriots are entitled to what is found under their own waters and that despite the division of the island, profits from the gas will be of benefit to “all Cypriots”.
3. Eurogroup bailout deal, a bitter aftertaste for Nicosia
Cypriots know for certain that cannot be rewritten history: the medicine prescribed by the eurozone to the problems of the island still seems hard to swallow. As well as the solution chosen by the Eurogroup, critics challenge the method used as well. Three Cypriot MEPs gave their reaction to this newsletter. Antigoni Papadopoulou (S&D), is a member of DIKO, supporting the actual government. Eleni Theocharous (EPP) is a member of the governing party DISY. Kyriacos Triantaphyllires (GUE/NGL) is part of AKEL, the previous government party, which called the eurozone to the rescue. The interviews were conducted separately.
Agence Europe: After the first agreement on Cyprus' bailout, former Finance minister Michalis Sarris said that it was the best alternative as it enabled the banks to be saved. With the second agreement, Laiki was shut down. Which agreement was the best, according to you?
Antigoni Papadopoulou: Neither of the deals was good for my country. Both meetings of the Eurogroup were undertake blackmail for Cyprus. Cyprus should be given the time to see how to implement the measures, and to do the reforms which are necessary to downsize the banking sector. This time was not given. Where was the European solidarity?
Eleni Theocharous: I consider that all the decisions are painful for the economy of Cyprus and particularly for the ordinary people experiencing a new catastrophe. I believe that the first decision would have led sooner or later to the second one and that we 'lost the game' because the previous government did not take measures in order to effectively manage the crisis from the beginning, before the escalation.
Kyriacos: I feel betrayed by the Europe that I trusted. The way that Europeans have treated Cyprus betrayed the basic principles of the EU which are solidarity and the rule of law. The new elected president, between the day he took office on the 1st of March and the Eurogroup meeting on the 15th of March, was given assurances that whatever measures would be needed to be taken, there would be no haircut on deposits. He left Cyprus for Brussels and was humiliated because he was blackmailed. The Eurogroup president Jeroen Dijsselbloem said investors had to pay for the risks they took. But the Eurogroup made the decision that the haircut should be on the deposits, not only of investors, but of poor people who were saving their whole life. I was saving since I was 16 years old and they took half of it, and M. Dijsselbloem was saying 'you took a risk'. I didn't, I put my money in the safest place I could, in a bank.
AE: The second agreement is supposed to allow a 'fair sharing of burden'. Do you think that second agreement really protects the Cypriot people?
AP: Where is the fairness? I don't see any fairness. My country showed solidarity to Greece and that cost Cyprus € 4.5 billion for which we didn't get any solidarity by any Member state.
ET: I do not want to distinguish the depositors between Cypriots and foreigners. They are all people who deposited their savings in the Cyprus Banks or they planned to invest in my country or elsewhere through my country. What the second agreement protects is the guaranteed depositors (below € 100,000). This is not a good development for the depositors of the Cyprus Banks nor for the eurozone as such and the credibility of the European Banking System.
KT: The problem is the way they did it. You should not do it behind people's back, you should not reassure them that everything will be okay and then stage the drama that we had over the weekend of the 15th of March.
AE: Do you think it was the best choice to ensure debt sustainability even if it meant that one of the banks had to be shut down, with the consequences of that on the recession?
AP: They care about numbers and do not care about the repercussions on the Cypriot people. They should give time to Cyprus to build an alternative plan.
ET: The sustainability of the Cyprus economy does not depend only on the shut down of one Bank, namely Laiki. The plan is more complicated and I am not sure whether our partners suggested the remedy or whether we run the risk of getting into a vicious circle.
KT: Until the evening of March 15th, what came out of the discussions with the troika was that the amount needed was € 17.5 billion and that figure was the basis of the negotiations. And then overnight the Eurogroup decided that they would give only ten billion and we had to find the rest. So the government had to take whatever measures it could in order to raise that money.
AE: Do you think the Eurogroup rushed into a solution, as it was decided in only one night? How is the situation now in Cyprus?
AP: It's strange when you need a10-hour talk to discuss overnight such important issues. And to destroy the life of a small population from one day to the other, there is no excuse for this behaviour.
ET: We can not take such a serious decision over one night. The shock therapy did not and does not work. The situation in Cyprus is terrible, both the public and the private sectors are suffering. They do not effectively function. The market has been strangled and most of the people are still unpaid and they run the risk of being included in the long list of unemployed.
KT: The effects of the decision taken have not been felt yet. The situation is going to get much worse when small businesses close down; some of them have already done so.
AE: Since the banking sector was one of the pillars of the economy, how is Cyprus going to rebuild its economy now?
AP: You cannot expect a small country like Cyprus which was severely based on the tourist sector, the services it provides and the banking system which has collapsed, to establish a new economic model as quickly as possible from one day to the next. I expect Jeroen Dijsselbloem and Olli Rehn and Wolfgang Schaeuble to come back with ideas to overcome the austerity measures and help countries from the south to have growth. Also, Europe has underestimated what the benefits of the natural gas are.
ET: We need an action plan. We are in fact in a state of emergency and therefore we must elaborate a new model of development based also on the exploitation of the gas resources lying within the Exclusive Economic Zone of Cyprus. Certainly, the service sector still works and there are other banks in Cyprus which can shoulder the economic burden and thus help the country to escape from the crisis. There is no doubt that the Banking Sector has been seriously injured but we have the experience and we will fight for our survival. Furthermore, the tourist industry is still working and we are also looking for investment from China and elsewhere in order to restore the sector of Real Estate.
KT: Without its banks it's impossible so the attempt is to restructure the BoC as soon as possible and the Finance minister said yesterday the whole procedure had to be finished in the next few days. This bank is supposed to be the generator of help for new SMEs.
AE: President Nicos Anastasiades asked for an investigation to find who's responsible for the current situation. The government of Demetris Christofias waited until June 2012 to ask for a loan, and the negotiations lasted nine months. Do you think the previous government has a responsibility?
AP: There was already an MoU in December and the bills were passed almost with a majority. That shows that political parties have the will to proceed, but we were not given the time. I support that investigation. I have a lot of questions.
ET: It is obvious that the previous government has a responsibility; a huge responsibility. The economic crisis is like a tsunami that the previous government did almost nothing to prevent and save the country and the people. We are waiting for the results of the investigation as public opinion wishes to see those who are legally responsible for the tragedy to be punished.
KT: Yes, it's obvious but what kind of responsibility? Those who are first responsible are the bankers, they knew what was happening and that they were taking risks that they shouldn't. But at the same time the government has a responsibility because they had to take some measures to stop the economy going down. Some say the negotiations lasted nine months because the troika wanted to wait for the new government to come, they thought they would have better results. I don't know what to believe. The government in power said they were ready to sign a memorandum and one proof of this is that they passed the measures through the parliament
AE: What about the Cypriot central bank (CBC), which let Laiki borrow € 9 billion from the ECB?
AP: The CBC works in close agreement with the ECB. So why did the ECB continue to provide Laiki if they knew it was going to collapse? Why didn't they stop? And now they have transferred this debt to the BoC which is trying to survive.
ET: I believe that the Cypriot Central Bank has its own responsibility for what happened. It is an independent institution which did not manage the crisis successfully and thus it contributed to the creation of volatile situation, leading also to the Banking sector being out of control and in decline.
KT: The ECB knew years ago that Laiki was on the wrong road. Instead of foreseeing the crisis and preventing it, they were giving money illegally to a bank that was not trustworthy. Also, the governor of the Central bank was supposed to supervise the Cypriot banks. What I read in the press is that he was not on good terms with the government but that doesn't mean he should not have supervised the banks.
AE: Do you think Cyprus should leave the euro?
AP: No. I think we should stay there and fight for our rights. But we expect a 'Marshall plan'.
ET: No. Especially for the time being a Cypriot exit from the eurozone would be disastrous leading the country to default and bankruptcy. In fact nobody has get tabled a well grounded proposal showing that a Cypriot exit from the euro would be a proposal for rescue.
KT: I've heard economists supporting that idea but personally I think that would be disastrous right now. I'm not an economist and some political parties say it could be possible, but I'm a bit sceptical about this.